Chapter 1: Management€¦ · Web viewThree levels of organizational culture are: 1) the surface,...

Chapter 2: Organizational Environments and Cultures

Pedagogy MapThis chapter begins with the learning outcome summaries and terms covered in the chapter, followed by a set of lesson plans for you to use to deliver the content in Chapter 2.

Lesson Plan for Lecture (for large sections) Lesson Plan for Group Work (for smaller classes) Assignments with Teaching Tips and Solutions

What Would You Do Case Assignment – Wal-Mart

Self-Assessment – Tolerance for Ambiguity

Management Decision – Creating an Organizational Culture

Management Team Decision – Making a New Culture

Practice Being a Manager – Navigating Different Organization Cultures

Develop Your Career Potential – Dealing with the Press

Reel to Real Video Assignment – Biz Flix clip on Charlie Wilson’s War

Reel to Real Video Assignment – Management Workplace on Preserve

Review Questions

Additional Activities and Assignments

Highlighted Assignments Key PointsWhat Would You Do? With annual revenue of $430 billion, 2 million employees,

and 7,300 stores worldwide, Wal-Mart is the largest company in the world. But, Wal-Mart is also one of the world’s largest targets for anti-corporate groups and lawsuits.

Self-Assessment Students gain insights into their own tolerance for ambiguity (or lack thereof).

Management Team Decision The team must decide how to create a new organizational culture focused on delivering superior quality service.

Reel to Real Video Assignment – Biz Flix

In Charlie Wilson’s War, a Texas Congressman becomes the unlikely champion of the Afghan cause through his role in two major congressional committees that deal with foreign policy and covert operations.

Reel to Real Video Assignment – Management Workplace

Eric Hudson started his company Preserve when he saw an opportunity that others were missing – a “green” one. Hudson and his employees discuss the challenges of marketing recycled products, how they practice what they preach about environmental consciousness, and ways they think the “green industry” might be different in the future.

Additional Assignments Key PointsManagement Decision Students decide how to establish an organizational culture

that supports a restaurateur’s vision for an organic fast-food establishment.


Develop Your Career Potential Dealing with the press is an important skill for managers to have. Students are confronted with a reporter doing a story on unsanitary conditions in a fast-food restaurant.

Supplemental Resources Where to Find ThemCourse Pre-Assessment IRCDPowerPoint slides with lecture notes IRCD and onlinePower Point slides with video IRCD onlyWho Wants to Be a Manager game IRCD and onlineTest Bank IRCD and online

Learning Outcomes

1 Discuss how changing environments affect organizations.

Environmental change, complexity, and resource scarcity are the basic components of external environments. Environmental change is the rate at which conditions or events that affect a business change. Environmental complexity is the number of external factors in an external environment. Resource scarcity is the scarcity or abundance of resources available in the external environment. The greater the rate of environmental change, environmental complexity, and resource scarcity, the less confident managers are that they can understand, predict, and effectively react to the trends affecting their businesses. According to punctuated equilibrium theory, companies experience periods of stability followed by short periods of dynamic, fundamental change, followed by a return to periods of stability.

2 Describe the four components of the general environment.

The general environment consists of events and trends that affect all organizations. Because the economy influences basic business decisions, managers often use economic statistics and business confidence indices to predict future economic activity. Changes in technology, which transforms inputs into outputs, can be a benefit or a threat to a business. Sociocultural trends like changing demographic characteristics affect how companies run their businesses. Similarly, sociocultural changes in behavior, attitudes, and beliefs affect the demand for a business’ products and services. Court decisions and new federal and state laws have imposed much greater political/legal responsibilities on companies. The best way to manage legal responsibilities is to educate managers and employees about laws and regulations and potential lawsuits that could affect a business.

3 Explain the five components of the specific environment.

The specific environment is made up of the five components shown here. Companies can monitor customers’ needs by identifying customer problems after they occur or by anticipating problems before they occur. Because they tend to focus on well-known competitors, managers often underestimate their competition or do a poor job of identifying future competitors. Suppliers and buyers are very dependent on each other, and that dependence sometimes leads to opportunistic behavior, where either the supplier or the buyer benefits at the expense of the other. Regulatory agencies affect businesses by creating rules and then enforcing them. Advocacy groups cannot regulate organizations’ practices. Nevertheless, through public communications, media advocacy, and product boycotts, they try to convince companies to change their practices.


4 Describe the process that companies use to make sense of their changing environments.

Managers use a three-step process to make sense of external environments: environmental scanning, interpreting information, and acting on it. Managers scan their environments based on their organizational strategies, their need for up-to-date information, and their need to reduce uncertainty. When managers identify environmental events as threats, they take steps to protect the company from harm. When managers identify environmental events as opportunities, they formulate alternatives for taking advantage of them to improve company performance.

5 Explain how organizational cultures are created and how they can help companies be successful.

Organizational culture is the set of key values, beliefs, and attitudes shared by organizational members. Organizational cultures are often created by company founders and then sustained through the telling of organizational stories and the celebration of organizational heroes. Adaptable cultures that promote employee involvement, make clear the organization’s strategic purpose and direction, and actively define and teach organizational values and beliefs can help companies achieve higher sales growth, return on assets, profits, quality, and employee satisfaction. Organizational cultures exist on three levels: the surface level, where cultural artifacts and behaviors can be observed; just below the surface, where values and beliefs are expressed; and deep below the surface, where unconsciously held assumptions and beliefs exist. Managers can begin to change company cultures by focusing on the top two levels and by using behavioral substitution and behavioral addition, changing visible artifacts, and selecting job applicants with values and beliefs consistent with the desired company culture.

Termsadvocacy groups behavioral additionbehavioral substitutionbusiness confidence indicesbuyer dependencecompany visioncompetitive analysiscompetitorscomplex environmentconsistent organizational culturedynamic environmentenvironmental changeenvironmental complexityenvironmental scanningexternal environmentsgeneral environmentindustry regulationinternal environment

media advocacyopportunistic behaviororganizational cultureorganizational heroesorganizational storiesproduct boycottpublic communicationspunctuated equilibrium theoryrelationship behaviorresource scarcitysimple environmentspecific environmentstable environmentsupplier dependence supplierstechnologyuncertainty visible artifact

Lesson Plan for LecturePre-Class Prep for You Pre-Class Prep for Your Students Review chapter and determine what points to Bring book.


cover. Bring PPT slides.

Warm Up Begin chapter 2 by asking students: “How would you describe the business environment?” (If you have a blackboard, begin to write their ideas on it so that a composite picture can be derived.) Depending on their responses, you may need to rephrase the question into something along these lines:

“What does a manager need to think about when doing business?” or “What forces determine how a company conducts its business?”

Content Delivery

Lecture slides: Make note of where you stop so you can pick up at the next class meeting. Slides have teaching notes on them to help you as you lecture.

Topics PowerPoint Slides ActivitiesExternal Environments1 Changing

Environments1.1 Environmental

Change1.2 Environmental

Complexity1.3 Resource Scarcity1.4 Uncertainty

1: Organizational Environ. & Cultures2: What Would You Do?3: External Environments4: Changing Environments5: Environmental Change6: Punctuated Equilibrium Theory7: Punctuated Equilibrium Theory: U.S. Airline Industry8: Environmental Complexity9: Environmental Complexity10: Resource Scarcity11: Uncertainty 12: Environmental Change, Environmental Complexity, and Resource Scarcity13: General and Specific Environments

2 General Environment2.1 Economy2.2 Technology 2.3 Sociocultural2.4 Political Legal

14: General Environments 15: Economy16: Technological Component17: Sociocultural Component18: Political/Legal Component

3 Specific Environment3.1 Customer

19: Specific Environment

Have students discuss how each component of the


3.2 Competitor3.3 Supplier3.4 Industry

Regulation3.5 Advocacy Group

20: Customer Component21: Competitor Component22: Mistakes Managers Make…23: Supplier Component24: Supplier Component25: Industry Regulation Component 26: Federal Regulation Agencies27: Doing the Right Thing28: Advocacy Groups29: Advocacy Techniques

specific environment might affect Wendy’s. Then select companies in different industries and have students repeat the exercise. This will give them an idea of the variability of specific environments.

4 Making Sense of Changing Environments4.1 Environmental

Scanning4.2 Interpreting

Environmental Factors

4.3 Acting on Threats & Opportunities

30: Making Sense of Changing Environments31: Environmental Scanning32: Interpreting Environmental Factors33: Management Trend

Explain the three-step process of “making sense of changing environments.”

Internal Environment5 Organizational

Cultures: Creation, Success, and Change5.1 Creation and

Maintenance5.2 Successful

Cultures5.3 Changing

Organizational Cultures

34: Internal Environments35: Organizational Cultures36: Internal Environments37: Organizational Cultures38: Creation and Maintenance of Organizational Cultures39: Successful Organizational Cultures 40:Levels of Organizational Culture41: Changing Organizational Cultures42: Changing Organizational Cultures

Define organizational cultures.

Ask students to describe the culture of the places where they work (or have worked).

Biz Flix 43: Charlie Wilson’s War

Launch video in slide 43. Questions on slide can guide discussion.

44: Preserve Launch video in slide 44. Questions on slide can guide


discussion.

Adjust lecture to include the activities in the right column. *Some activities should be done before introducing the concept, some after.

Conclusion and Preview

Assignments: 1. Tell students to be ready at the next class to answer questions regarding the

Management Team Decision “Making a New Culture.”2. If you have finished covering Chapter 2, assign students to review Chapter 2 and

read the next chapter on your syllabus.

Remind students about any upcoming events.

Lesson Plan for Group Work

Pre-Class Prep for You Pre-Class Prep for Your Students Review material to cover and modify

the lesson plan to meet your needs. Set up the classroom so that small

groups of 4-5 students can sit together.

Bring book.

Warm Up Begin Chapter 2 by asking students to describe the business environment. If you have a blackboard, begin to write their ideas on it so that a composite picture can be derived. Depending on their responses, you may need to rephrase the question into something along these lines:

“What does a manager need to think about when doing business?” or “What forces determine how a company conducts its business?”

Content Delivery

Lecture on Changing Environments (Section 1)Break for group activity:

“Changing Environments” Divide the class into small groups of 4 to 5 students. Have each group propose one to two industries that operate in each of the following environments: stable, dynamic, simple, and complex. Students will need to justify their choices. Have groups share their ideas with the whole class. Keep in mind that students may be way off base. The important thing is to push them to think about what makes an environment stable, dynamic, simple, or complex. They will probably be able to identify numerous examples of “dynamic” but may struggle with the others.

Before lecturing on the next section, refer to the composite of the business environment that students built at the beginning of the class session. Use it to segue into your lecture on General Environment and Specific Environment (Sections 2 and 3).

Ask students, “How can managers manage in the face of ever-changing external environments?”

Lecture on Making Sense of Changing Environments (Section 4).

Break for the following activity:


“Crisis Management”Divide the class into even-numbered groups of students. Further divide each group evenly in to two subgroups: managers and reporters. Give students at most 3 minutes to review the Develop Your Career Potential exercise on “Dealing with the Press.” When the 3 minutes is up, have the reporters begin quizzing the mangers using the questions in the exercise. When the exercise is over, ask students if they can think of some general guidelines to follow when dealing with the press. Further teaching notes for this exercise are below.

Segue into presenting the content on Internal Environments (Section 5).

Conclusion and Preview

Assignments: Have students work as individuals or as groups to complete the Management Team Decision “Making a New Culture” about how companies can go about changing their organizational culture. You can also ask students to identify ways that the external environment will potentially affect the culture of the company in the case, MicroTek. If you have finished covering Chapter 2, assign students to review Chapter 2 and read the next chapter on your syllabus.

Remind students about any upcoming events.

Additional Activity

Out-of-Class Activity: “Environmental Scanning.” Have students research the most recent annual report of a well-known company and list all the factors in the external environment that have affected the company. Students should focus on both the general and specific environments. Inform students that most companies post their annual reports online in the “Investor Relations” section of their Web pages. Require either a few paragraphs explaining what they found or an oral summary a few-sentences long at the beginning of the next class session.

Assignment Teaching Tips and Solutions

Case Assignment - What Would You Do?

What Really Happened? Solution

WAL-MARTIn the opening case, you learned that Wal-Mart, the world’s largest company, is a frequent target for protests and criticism. Wal-Mart antagonists have criticized its pay practices as unfair and stingy, the lack and level of health benefits for most employees, and the negative effect that Wal-Mart supercenters are alleged to have on the environment. Wal-Mart’s reputation has clearly been tarnished by the unrelenting negative publicity over the last decade. Let’s find out what really happened and see what steps Wal-Mart is taking to address these issues.

Indeed, Wal-Mart’s internal research shows that less than 0.1 percent of the people who are familiar with these criticisms would not shop or have stopped shopping at Wal-Mart. So, with almost no impact on its sales and little concern among its customers, should Wal-Mart take on its critics and fight back, or should it focus on its business and let its results speak for themselves?

External environments are the forces and events outside a company that have the potential to influence or affect it. Organizations are influenced by two kinds of external environments: the general environment,


which consists of economic, technological, sociocultural, and political/legal events and trends, and the specific environment, which consists of customers, competitors, suppliers, industry regulators, and advocacy groups. In Wal-Mart’s case, advocacy groups in its specific environment, such as unions, the Sierra Club, and anti–Wal-Mart websites, have been extraordinarily aggressive in attempting to influence and change Wal-Mart’s business practices.

Because the unrelenting attacks and criticism on Wal-Mart’s reputation have yet to significantly affect its financial results, it would appear that Wal-Mart had little reason or incentive to take on its critics and fight back. In the short term, that made a lot of sense. Indeed, this was the initial strategy that Wal-Mart selected. Lee Scott, Wal-Mart’s former CEO, said, “In the late 1990s, when it [the criticism] started and our board said you all have to do something about this, we said, well, we really don’t. Our sales are still good and earnings are very good, [we have] record sales and record earnings. The board would complain about it [that we weren’t responding to the criticism]. My thoughts were always, well, that’s because the board is going to cocktail parties with people who aren’t shopping at Wal-Mart.”

Scott admits, however, that it was ineffective for Wal-Mart to not respond to its critics. He said, “In the end, the board was right. They were sensing, I think, getting into their group earlier than we were.” Former Wal-Mart vice chairman Jack Shewmaker agreed, saying, “The board wanted to be more proactive about getting our story out, but management stuck to Sam Walton’s philosophy of ‘Do the right thing and let your actions speak for themselves.’ As a result, we waited five years too long [before responding].”

While it had not yet shown up in Wal-Mart’s financial results, the long-term concern was that general attitudes toward large companies (i.e., a sociocultural component of the general environment) were changing and that future customers, discouraged by what they heard from Wal-Mart’s critics, would form strongly negative views of the company. The more immediate concern was that changing attitudes toward Wal-Mart would affect the company’s ability to open new stores. In other words, sociocultural changes in behavior, attitudes, and beliefs toward Wal-Mart could begin to affect demand. Wal-Mart has already begun to see this in California. Former Wal-Mart CEO Lee Scott said, “Every store we put in there takes three years. We get the approval and the lawsuit is [then] filed. I forget what the name of that lawsuit is, but it’s always the same one. It takes three years, but we get almost all of them [handled]. At the end of three years, we open the stores and the stores do well. It just takes longer.”

What should Wal-Mart do, if anything, in regard to highly publicized criticisms about the pay and benefits it awards to its employees? Should it ignore them or address them?

On the issue of employee pay, Wal-Mart has been accused of forcing employees to work off the clock (working overtime and during breaks without pay) and of paying its employees wages that fall below the poverty line. In terms of health-care benefits, critics such as http://www.wake-upWalMart.com complain that Wal-Mart provides health insurance for only 43 percent of its employees compared to 66 percent for most other companies; that while there is no waiting period for managers who receive health benefits their first day on the job, full-time and part-time employees must wait 6 months and 12 months, respectively, before enrolling in Wal-Mart’s health insurance program; and finally, that average Wal-Mart employees must spend a disproportionate share of their income, approximately 22 to 40 percent, to cover their health insurance premiums and medical deductibles. Wal-Mart, of course, disputes these facts and allegations, and argues that many of these critical organizations and websites are financed by unions who have tried for two decades to unsuccessfully organize Wal-Mart’s employees, which represent the largest work force in the world.

While complaints about Wal-Mart employees’ pay and benefits emanate from anti–Wal-Mart advocates in Wal-Mart’s specific environment, decisions about how to address those complaints are linked to the political/legal component of Wal-Mart’s general environment. The political/legal component of the general environment includes the legislation, regulations, and court decisions that govern and regulate business behavior. As the largest corporation and employer in the world, Wal-Mart is sued nearly 2,000 times a year. Many of those lawsuits are dismissed, some are settled quietly with financial payments and nondisclosure agreements (so you never hear about them), and some turn into large class-action cases involving thousands of people. The question, of course, is what to do about them.

For years, Wal-Mart has fought and won many of these lawsuits. For example, Wal-Mart is the target of the largest class-action lawsuit of all time, which involves 1.6 million women who claim that Wal-Mart


http://www.wake-upWalMart.com/

systematically discriminated against them by paying them less than men in equivalent jobs and by promoting them at a much slower rate than it promoted men. Wal-Mart has been fighting this case, which is still in court at this writing, for over 5 years. Recently, though, Wal-Mart has begun to settle a number of these cases, deciding that it would be cheaper in the long run to be done with them, and that getting them out of the press and the public eye would also help its battered public image. For instance, Wal-Mart settled 63 wage and hour class-action lawsuits (working overtime and during breaks without pay) at an estimated cost of between $352 and $640 million. That is in addition to a $54.25 million settlement in Minnesota to settle a class-action lawsuit that accused Wal-Mart of forcing employees to work during breaks without pay and a $33 million settlement with the U.S. Department of Labor for under compensating employees for overtime hours. Professor Paul Secunda at Marquette University’s Law School said, “This is part of their overall strategy to get their labor house in order, and compared to what unionization might cost them, I think they probably realized it was a small price to pay.” Tom Mars, executive vice president and general counsel for Wal-Mart, said, “Many of these lawsuits were filed years ago, and the allegations are not representative of the company we are today.”

In addition to settling many of these lawsuits, Wal-Mart is being more aggressive in communicating the progress it has made on pay and health benefits. For example, on the issue of pay levels, Wal-Mart executives now tout that 70 percent of Wal-Mart’s employees work full-time compared to 20 percent, for example, at Starbucks, and that its employees on average make double the U.S. minimum wage (i.e., over $16 an hour). And on health benefits, Wal-Mart spokesperson David Tovar says, “Unlike other retail employees, every Wal-Mart associate, both full- and part-time, can become eligible for health coverage. And that coverage is available for just $23 per month anywhere in the country, and only $11 per month in some areas.” As a result, the number of uninsured Wal-Mart employees has dropped 40 percent to 78,186 from 129,252 in 2007.

Finally, should Wal-Mart view environmentalists’ complaints as a threat or an opportunity for the company?

Managers use a three-step process to make sense of external environments: environmental scanning, interpreting information, and acting on threats and opportunities. Managers scan their environments based on their organizational strategies, their need for up-to-date information, and their need to reduce uncertainty. When managers identify environmental events as threats, they take steps to protect the company from harm. When managers identify environmental events as opportunities, they formulate alternatives for taking advantage of them to improve company performance. Using cognitive maps can help managers visually summarize the relationships between environmental factors and the actions they might take to deal with them.

As you’ve already learned, Wal-Mart’s first reaction to frequent attacks on its reputation and business practices was to bury its head in the sand and not respond. Though aggressive in responding to lawsuits, Wal-Mart initially chose to ignore its critics. It could even be argued that Wal-Mart executives were so naïve as to not see these attacks as a threat to the company. That changed, however, with input from Wal-Mart’s board of directors and the eventual realization by then-CEO Lee Scott that Wal-Mart needed to respond and, more importantly, address some of the concerns raised by those critics. Said Scott, “At one time in my career, if somebody criticized us, my first thought was, ‘Why don’t they like us?’ Or, ‘What could we do to them?’ vs. now, when I think, ‘Could the criticism have some truth?’”

It was at this point, sometime in 2005, that Scott and Wal-Mart’s executive team began to look at broad criticism of the company as opportunities and began formulating alternatives for taking advantage of them to improve company performance. Some of the first steps were to hire a Washington D.C.–based public relations firm and set up a “war room” to track attacks, criticisms, and negative news stories on the company.

Another step was to create the new position of “senior director of stakeholder engagement,” “An innovative, out-of-the-box thinker” to “help pioneer a new model of how Wal-Mart works with outside stakeholders, resulting in fundamental changes in how the company does business.” The person holding this position “will play a critical role in helping the company … create a new model of business engagement that uses market-based changes to create societal value.” In other words, rather than ignore criticisms of its business practices, Wal-Mart would (1) tackle them head on and assign that responsibility to a newly created top-level executive and (2) view those criticisms as an opportunity to promote changes


at Wal-Mart that directly countered allegations that Wal-Mart’s business practices were irresponsible or unethical.

One area in which Wal-Mart sought to directly counter widespread criticism was in the area of environmental impact. For instance, Wal-Mart asked its suppliers to reduce packaging waste by 5 percent, calculating that doing so would, because of lighter, more compact shipments requiring fewer trucks, shrink diesel fuel usage by 67 million gallons a year. So far, 3,000 of Wal-Mart’s 60,000 suppliers have signed up for the program. More will sign up, especially since Wal-Mart has indicated that it will give preference to suppliers who do. When fully implemented, Wal-Mart also expects to save $3 billion a year in costs.

It began requiring the miners who supply the gold used in the jewelry sold in its stores to adopt “strict environmental and social standards, verified by independent third parties.” Why? Because mining enough gold for an 18-carat wedding ring results in 20 tons of waste. Because metal mining produces 30 percent of all toxic waste in the United States. If you think that Wal-Mart is only doing this to be socially responsible and to silence its critics, you’d be wrong. Wal-Mart is doing this to silence its critics and sell more jewelry, which it hopes to do with its new line of environmentally friendly gold and silver called “Love, Earth.”

Wal-Mart has also begun to aggressively find ways to build new stores that are much more energy efficient. For instance, by using LED lighting, which last 3 to 4 times longer than fluorescents, motion sensors that turn lighting on only when people are nearby, sensor-controlled skylights—as many as 210 per store—to increase natural lighting, freezers with sliding doors rather than open-air access, radiant floors to heat and cool stores, and recycled products in construction, Wal-Mart is building stores that are 25 to 45 percent more energy efficient than the standard Wal-Mart supercenter.

Does Wal-Mart’s new eco-friendliness mean that is has abandoned its low-cost roots? Not at all. Former CEO Lee Scott said, “Some people’s primary concern will be what will this do to cost? But when we rolled out our sustainability initiative at Wal-Mart we found that eliminating waste, downsizing packaging and improving transportation fuel efficiency led to a whole lot of savings.” Said Scott, “People in general are living paycheck to paycheck for a broad amount of American society. It’s not that they don’t care about sustainability; it’s that they can’t afford to pay more. They can’t pay a dollar more for the cleaning supply. They can’t pay $3 more for a T-shirt.” So naturally, one of the questions was whether Wal-Mart’s focus on the environment would mean that customers would have to pay more. Scott’s view was, “…why should they have to? If you can take the waste out, if you can take the cost out, and you can provide people who are working people living paycheck to paycheck with an opportunity to be more sustainable, we think they will react to that, and they do.”

Sources: “Stop Sprawl: How Big Box Stores like Wal-Mart Effect the Environment and Communities,” The Sierra Club, available online at http://www.SierraClub.com [accessed 13 May 2009]; A. Bernstein, “A Social Strategist for Wal-Mart,” BusinessWeek, 6 February 2006, 11; M. Garry, “Cool Running,” Supermarket News, 1 December 2008, 39; P. Gogoi, “Wal-Mart: A ‘Reputation Crisis,’” BusinessWeek, 31 October 2006, available online at http://www.businessweek.com [accessed 13 May 2009]; M. Gunther, “Green Gold?” Fortune, 15 September 2008, 106; M. Hamstra, “Wal-Mart to Settle Labor Lawsuits,” Supermarket News, 5 January 2009; C. Hymowitz, “Big Companies Become Big Targets Unless They Guard Images Carefully,” The Wall Street Journal, 12 December 2005, B1; S. Kapner, “Changing of the Guard at Wal-Mart,” Fortune, 2 March 2009, 68–76; A. Murray, “Environment (A Special Report); Waste Not: Wal-Mart’s H. Lee Scott Jr. on What the Company Is Doing to Reduce Its Carbon Footprint—and Those of Its Customers,” The Wall Street Journal, 24 March, 2008, R3; C. Palmeri, “For Exiting Wal-Mart, CEO Victory Lap,” BusinessWeek, 24 November 2008, 11; J. Wells, “Wal-Mart,” Supermarket News, 16 July 2007, 24.

Self-Assessment

CHECK YOUR TOLERANCE FOR AMBIGUITY

This assessment is meant to establish your students’ tolerance for ambiguity. Even though many strategists liken business to chess, in that game, both players can see all the pieces and anticipate an opponent’s moves. In reality, business is more like poker, where no player really knows what cards the other players are holding; they can only assume and make decisions based on internal information and assumptions or interpretations about their opponents’ behavior.


http://www.businessweek.com/

http://www.SierraClub.com/

In-Class Use Have students open their books to page 109 of the text and give them 5 to 7 minutes to complete the inventory. Use the Self-Assessment PowerPoint slides and have students raise their hands as you read off the scoring ranges. Tell students to keep their hand up until you have counted the responses for each item and entered the count into the spreadsheet embedded in the PowerPoint presentation. Display the distribution to the class so students can see where they fit.

Remind your students that the business environment is complex and uncertain, and managers must learn to adapt to environmental shifts and new developments – sometimes on a daily basis. For some managers, however, this can be a challenging task because everyone’s comfort level is different when it comes to ambiguity. For some, not knowing all the details can be a source of significant stress, whereas for others uncertainty is not a source of anxiety. As a manager, your students will need to develop an appropriate tolerance for ambiguity. For example, being stressed out every time interest rates change can be counterproductive, but completely ignoring the economic environment can be detrimental to a company’s performance.

Scoring Scoring instructions are included in the Self-Assessment Appendix at the end of the book. But students will want to know what their raw score means. Here’s what you can tell them:

There are three ways to understand your tolerance of ambiguity. First, think of ambiguity as novelty, or the extent to which you are tolerant of new, unfamiliar information or situations. You can also think of your response to ambiguity as a function of complexity, or the extent to which you are tolerant of multiple, distinctive, or unrelated information. Lastly, ambiguity can be thought of as insolubility, or the extent to which you are tolerant of problems that are difficult to solve because alternative solutions are not evident. Scores range from 16 to 112, and a score from 40 to 48 is average. Higher scores indicate a higher tolerance for ambiguity; lower scores indicate a low tolerance for ambiguity, or the desire to have everything clearly, simply, and easily mapped out. If your score is low, it does not necessarily mean that you will have an unsuccessful management career. Examine your results more closely. Was your score driven lower by certain questions? Which ones? What do those particular questions reveal about your tolerance for ambiguity? Are you more daunted by difficult tasks, or by forging new territory? Conversely, an extraordinarily high tolerance for ambiguity can also be detrimental to a manager because it may indicate an overdeveloped propensity toward risk.

Management Decision

CREATING AN ORGANIZATIONAL CULTURE

Purpose The purpose of this exercise is for students to think about how managers and business owners create organizational cultures that reflect the ethos of the firm. For this exercise, students are put in the position of a restaurateur starting an organic fast-food business and have to think of purposeful ways to transmit the philosophy underpinning the restaurant’s position of fast, healthy food.

Setting It Up This works well as an individual assignment. As preparation, you can assign your students to make a list of restaurants they frequent and write a one-sentence description of the culture of each.

Questions1. What things are you already doing and what things do you already have in place to create a consistent

organizational culture?


The creation of a consistent organizational culture requires a thorough understanding of the external and internal environment of an organization. The external environment consists of the forces and events outside of a company that have the potential to influence or affect it, while the internal environment refers to the trends and events within an organization.

To understand the external environment, the manager must look at environmental change by examining the question of what is happening within the general business world and within the specific industry that the company is involved in. This is done by environmental scanning, which involves searching the external environment for important events or issues that might affect an organization. Environmental scanning allows managers to pay close attention to trends and events that are directly related to their company’s ability to compete in the market. In this case, the manager scans the external environment of the food service industry and notices several trends – the growing popularity of local, sustainable agriculture, consumer’s dissatisfaction with fast food and their desire for a healthy alternative, and the business practices of In-N-Out, which emphasizes quality food and quality workers.

These factors show that our restaurant manager is considering two components of the organization’s specific environment – customers and competitors. The manager includes customers’ needs by ruminating on the increasing dissatisfaction with fast food and the increasing demand for local, sustainable, and healthy options. In considering the merits of replicating In-N-Out’s approach, the managers considers the strengths, weaknesses and capabilities of the competition. After environmental scanning, the manager must decide what the events and issues in the environment will mean for the organization. Are they threats or opportunities? How will they affect the organization’s future? In this case, it is clear that the manager considers the various changes in the food industry as opportunities to sustain growth. This is evidenced by our manager’s desire to consider strategic alternatives for taking advantage of external changes to improve the company’s performance.

The managers also needs to take into consideration the organization’s internal environment, that is, the trends and events within an organization that affect organizational culture. As described in this case, many of the employees came to the restaurant specifically because they share the manager’s concern for sustainable food production and gourmet cooking. Therefore, these common values will be essential to, and already form a strong foundation for, the organization’s culture.

As discussed in the text, a primary source of organizational culture is the company founder, and this case is an excellent illustration of that principle. It is the restaurant owner who scans the environment and who takes note of trends and changes within the industry and within the organization. And after doing so, it is the restaurant owner who will determine the company’s organizational goals, as well as the practical ways in which those goals will be met. Therefore, much of what is described in this case as the owner’s brainstorming is a critical part of forming a company vision, which defines the business’s purpose or reason for existing, and for establishing a consistent organizational culture, one that actively defines and teaches organizational values, beliefs and attitudes. With this base that is established by the owner/founder, the organizational culture is sustained through employee involvement, particularly through the telling of stories and celebration of organizational heroes. In our hypothetical restaurant, this might involve stories of how the focus on local, sustainable food provided a richer dining experience for a customer, a fulfilling experience with a local farmer, or a particular manager who went above and beyond to care for employees.

2. What do you think might already be seen, heard, and believed among the employees and customers in your restaurant?

This question has to do with the various ways that an organization’s culture is made manifest. As discussed in the text, organizational culture exist on three levels. The first, called the surface level, are reflections of an organization’s culture that can seen and observed. Examples of this level include the behavior of managers and employees, as well as symbolic artifacts, cultural symbols at the most visible and accessible level of an organizational culture. Examples of artifacts include the physical layout of an office, the dress code, or benefits packages. The second level of organizational culture, which lies just below the surface, consists of the values and beliefs expressed by the people within the company. The values and beliefs of an organization cannot be seen of course, but they can be perceived by listening to what people say and by observing how decisions are made. The last level of


organizational culture, unconsciously held assumptions and beliefs, lie deep below the surface. These are the unwritten views and rules that are so strongly held and so widely shared within the organization that they are simply assumed. They are rarely discussed or expressed explicitly. And, they are rarely even thought about unless someone attempts to change them or violates them.

Students’ responses to this question should show awareness of these three levels of culture, as well as to the fact that each of the levels reflects the organization’s culture and are an expression of the company’s ideals. Specifically, they should address how the visible and invisible aspects of the restaurant reflect the commitment to local, sustainable agriculture, a tasty and healthy alternative to fast food, and a commitment to quality workers. Possible responses might include the restaurant’s menu, which would emphasize local and sustainable ingredients and entrees that are healthy alternatives to fast food, the restaurant’s relationship with and support for local agriculture, and various training and outreach programs that emphasize healthy lifestyles.

3. Create a list of things you could do to grow and strengthen the organizational culture in your restaurant. Consider factors discussed in the text as you make your list: What stories could you tell? Who are your heroes? What visible artifacts could you create? How might you select employees?

There a number of elements critical to maintaining organizational cultures and adapting them to environmental changes to insure consistent growth and success. Organizational stories help employees make sense of organizational events and changes, and emphasize culturally consistent assumptions, decisions, and actions. In short, the stories reflect how the organizational culture is played out on a practical level in everyday activities. The culture of our hypothetical restaurant might be sustained through stories about how the menu changed the eating habits of an entire family, about how the restaurant’s business helps keep local farmers viable, or about how children and teens are being challenged to become more conscious of environmental issues.

An organization’s culture is also sustained through organizational heroes, those people in the organization who are admired for their qualities and achievements. Example of heroes in our restaurant might include a chef who teaches local citizens how to prepare healthier meals, an employee who spends weekends assisting a local farm, or a manager who takes a reduced salary so that other employees can receive a day-care stipend.

Students’ responses should also take note of the four characteristics that successful organizational cultures have in common. The first is adaptability, the ability to notice and respond to changes in the organization’s environment. A culture becomes dysfunctional if it cannot change. The second characteristic is employee involvement. Employees who are involved in the organization’s decision making process feel a greater sense of ownership and responsibility, which in turn makes their commitment to the organizational culture that much stronger. The third characteristic is company vision, the business’s purpose or reason for existing. In organizations with a clear company vision, there is less confusion about its strategic purpose and goals. What is more, when employees and managers face uncertain situations, a well formed vision statement will guide the decision making process by letting everyone know what matters, and what does not. Fourth, organization with consistent culture actively define and teach its values, beliefs and attitudes, so that they are widely shared and strongly held in all levels of the organization.

The strength of an organizational culture not only depends on how well it is created but on how adeptly it can be changed in response to changes in the environment. Changes in behavior, through behavioral addition or behavioral substitution, are an important way of changing organizational culture. Behavioral addition is the process of having members perform a new behavior, while behavioral substitution is having members perform a new behavior in place of another behavior. In either case, it is critical that the new behaviors embody the desired culture. In our hypothetical restaurant, behavioral addition could occur by asking waiters to highlight certain menu items or by removing unhealthy items from the menu. Behavioral substitution could take place by, for example, having managers switch from national to local suppliers.

Cultural change also comes about through changes in visible artifacts. From changes to the menu, the décor, employee benefits or community outreach program, our restaurant can develop and sustain a culture by making changes to its visible elements.

Organizational culture can also be enacted through the hiring process. By selecting and hiring


people who have a set of values and beliefs, managers can ensure that the desired culture becomes firmly planted within an organization. This approach to hiring requires that managers reject traditional methods of selection, which emphasize knowledge, skills and abilities. Instead, they should look at how applicants fit with the set of values and beliefs that the company desires to install.

Management Team Decision

MAKING A NEW CULTURE

Purpose The purpose of this exercise is for students to consider what is involved in changing an organization’s culture from one that was focused on maximizing revenues to one that is focused on delivering excellent customer service.

Setting It Up Ask students to form groups of three or four members. As a preliminary exercise, you can ask them to think about how they would train people to be nice to someone else. Would they only try to hire nice people? Would they try have people go through simulated exercises? How would they deal with a trainee who was shy, or difficult, or emotionally unstable? After they’ve considered these questions, have them read through the case and discuss the questions that follow. Each group should then be prepared to present their responses to the rest of the class.

Questions1. What kind of training and evaluation program would you institute to change Home Depot’s culture?

As discussed in the chapter, there are a number of ways that organizations can change their culture. While student responses will vary on the level of detail, they should include awareness of the various ways of bringing about organizational change. Organizational members can tell organizational stories to make sense of organizational events and changes and to emphasize culturally consistent assumptions, decisions, and actions. Another method for change is to highlight organizational heroes, people admired for their qualities and achievements within the organization. Another way of changing a corporate culture is to use behavioral addition or behavioral substitution to establish new patterns of behavior among managers and employees. Behavioral addition is the process of having managers and employees perform a new behavior, while behavioral substitution is having managers and employees perform a new behavior in place of another behavior. The key in both instances is to choose behaviors that are central to and symbolic of the old culture you’re changing and the new culture that you want to create Another way in which managers can begin to change corporate culture is to change the visible artifacts of their old culture, such as the office design and layout, company dress code, and recipients (or nonrecipients) of company benefits and perks like stock options, personal parking spaces, or the private company dining room. Cultures can also be changed by hiring and selecting people with values and beliefs consistent with the company’s desired culture. Selection is the process of gathering information about job applicants to decide who should be offered a job. The second step is to ensure that applicants fit with the culture by using selection tests, instruments, and exercises to measure these values and beliefs in job applicants.

2. Recall from the text that there are three levels of organizational culture. What kinds of changes would you make to address each level?

Student responses will vary in terms of specific details, but they should include the recognition that there are three levels of organizational culture, and that the three levels are manifest in different ways. On the first, or surface, level are the reflections of an organization’s culture that can be seen and observed, such as symbolic artifacts (such as dress codes and office layouts) and workers’ and managers’ behaviors. Next, just below the surface, are the values and beliefs expressed by people in the company. You can’t see these values and beliefs, but they become clear if you carefully listen to what people say and observe how


decisions are made or explained. Finally, unconsciously held assumptions and beliefs about the company are buried deep below the surface. These are the unwritten views and rules that are so strongly held and so widely shared that they are rarely discussed or even thought about unless someone attempts to change them or unknowingly violates them. Changing such assumptions and beliefs can be very difficult. Instead, managers should focus on the parts of the organizational culture they can control. These include observable surface-level items, such as workers’ behaviors and symbolic artifacts, and expressed values and beliefs, which can be influenced through employee

3. How could an analysis of the company’s external environment help in establishing a new customer-based culture?

The manage team in this case should consider two elements of the company’s environment, the customer component and the competitor component. The company can analyze the customer component either through reactive customer monitoring, which involves identifying and addressing customer needs after issues come up, or proactive customer monitoring, which involves identifying and addressing customer needs before issues come up. In either case, understanding the customer component allows the company to gain a better understanding of what customers want, what they expect from their shopping experience, what kind of actions allows employees to connect to customers, and how to keep customers satisfied.

A competitive analysis, meanwhile, helps companies understand the competitor component by identifying your competitors, anticipating competitors’ moves, and determining competitors’ strengths and weaknesses. In doing so, managers can understand what the competition is doing to deliver a more satisfying shopping experience, how they are doing it, and how it is affecting the company’ efficiency and effectiveness. This could then provide managers at Home Depot with a model of training and service that they can either follow or improve upon.

Practice Being a Manager

NAVIGATING DIFFERENT ORGANIZATIONAL CULTURES

Exercise Overview and ObjectiveThis exercise gives students some practice in recognizing cultural differences through a familiar lens, that of musical genres. Your class has been chosen as a representative college class, and executives at music company SonyBMG are interested in hiring students as interns who work with the company to identify and invest in the most promising up-and-coming talent in various genres. These interns will serve on the “Top Wave Team (TWT).” In this exercise students will be grouped by their primary musical affinity. The objective of the exercise is for students to explore the cultures that surround their particular genre and to consider the opportunities and challenges of managing across cultural differences.

PreparationYou should survey your class at least two sessions prior to the session in which you plan to conduct the exercise. You may use the form below for this survey (see Step 1):

---------------------------------------------------------------------------------------------------Musical Preferences Survey

Your Name: _________________________________Class/Time: _________________________________

Identify yourself with one of the following musical genres based on: a) preference/affinity (i.e., “This is my favorite type of music”); and b) knowledge/understanding (i.e., “of all types of music, I know the most about this type of music”):


___ a) Rock ___ e) Rap___ b) Country ___ f) Jazz/R&B___ c) Religious/Spiritual ___ g) Pop/Mainstream___ d) Urban/Hip-Hop ___ h) Classical

Other: __________________ (please identify)---------------------------------------------------------------------------------------------------

Examine the results of the survey, sorting student responses by genre. The exercise will work best if you have at least three (3) or four (4) groups with significant representation. If your students are heavily represented in only one or two genres, it will be best to conduct a follow-up survey by “sub-genres” (i.e., sub categories of preference within Urban/Hip-Hop). To develop a sub-genre survey form, enlist a few student volunteers who seem particularly interested in and savvy about music.

An alternative approach to a follow up survey is to simply ask the largest group(s) to sort themselves into sub-categories prior to running the exercise. Although the aim is to sort into three or four major groups, avoid forcing this result. The key in this exercise is to take advantage of naturally occurring musical cultures/sub-cultures.

In-Class UseEncourage students to tackle the exercise as representatives of their favorite musical genre. They are the ones who must argue for the future of the genre. This is also a rare opportunity to speak directly to the movers and shakers in a major music company. The exercise will be more productive and more fun to the extent that students take up the cause for their musical tribe.

Debrief by discussing these questions, which also appear in Step 6:

Did you sense some cultural affinity with others who shared your musical tastes? Why, or why not?

What expectations might be associated with choosing someone to represent a group on a team such as the TWT?

What tensions and challenges might face each member of the TWO in a real-life setting of serving on a group that represents various cultures?

You might close the debriefing session with a summation discussion of the opportunities and challenges posed by working across cultural differences. Recognize that students in your class may vary in their commitments to a particular musical culture from “passionate groupie” to “casual listener.” But within each of us we find some aspects of our identity that are rooted in cultures and sub-cultures. Drawing upon this diversity, while at the same time coordinating effectively across differences, is a major management challenge.

Develop Your Career Potential

DEALING WITH THE PRESS

Purpose This exercise is designed to introduce students to some basic rules about dealing with the press in a crisis. There are several ways to structure this exercise. One way is to have students prepare written answers to the questions before coming to class. Another is to have students answer the questions during class. If time is a consideration, give students one minute to answer each question. After students have generated their own answers to each question, form groups and have some students be reporters, firing the questions, while others are managers, answering the questions. What I prefer to do is to ask for volunteers who are willing to respond to the questions in front of the class. (But be sure to stress that this is a developmental exercise and that, since few of them have ever had to deal with the press, making mistakes is part of learning.)


Setting It Up Begin by rereading the scenario. Then pose the first question and give the student an opportunity to respond. At this point, you could stop to discuss what students liked or disliked about each answer. I prefer to simulate a press environment, by beginning with the initial question as stated in the case and then allowing the rest of the class, who has assumed the reporter role, to ask follow up questions as they think of them in the course of the interview. In my opinion, when reporters fire questions at the manager, and the manager has to respond immediately, the role play is much more realistic. After 3 or 4 minutes, we stop to discuss the manager’s responses: what we liked, didn’t like, and how they could be improved.

You may use the scenario below, titled “Rats Take Over Manhattan Taco Bell.” You may wish to do a second scenario in class, allowing the reporters and managers to switch roles and experience the same level of pressure. After role playing both scenarios and discussing, ask the class to generate an explicit list of rules for dealing with the press. After conducting the role plays, students will have a good feel for what works and what doesn’t. Then share this list of do’s and don’ts with your class.

Rats Take Over Manhattan Taco Bell

1. “Yesterday’s filming of rats at an ADF-owned Taco Bell has caused consumers to question the cleanliness of the restaurants where they eat. This restaurant is also owned by ADF Companies. Do you also have problems with rodents?”

Take the initiative - If you don’t answer reporters’ questions, they’ll find someone who will, someone who is likely to answer from a different perspective. Company spokespersons need to take the initiative to share the company’s perspective on what has occurred.

Make company management visible - As soon as possible, put top company management in front of the press. Because the public will hold top management accountable, it’s best to have top managers responding to reporters’ questions.

Bridging - Bridging is briefly answering a reporter’s questions and then switching to a message that you want to communicate. Politicians do this frequently. Answer a question, then briefly emphasize 3 or 4 points that summarize the company’s message to the public.

Identify and speak to your audience - In this case, there are several audiences: people who watch TV news, people who live near the restaurant, and people who like to eat at Taco Bell (and other fast-food restaurants). Obviously, the latter is the most important to Taco Bell. However, there is probably some overlap with people who live in the neighborhood. When speaking to an audience, it’s important to recognize that what you say is likely to be only a small part of a TV, print, or radio reporter’s story. Accordingly, you can speak more effectively to your audience by using visual or word images instead of facts. Most people don’t have the time or are reluctant to immerse themselves in the details of a story. Facts are easily forgotten. Images are easily remembered. For example, instead of stating that there are no rats at Taco Bell, take the reporters to the dining room and show how clean it is. Ordinary people are more likely to remember that image than a discussion of your cleaning procedure.

2. “Recent outbreaks of E. coli at other Taco Bells in the Northeast were finally attributed to contaminated lettuce, so Taco Bell changed suppliers.” To the cameraman: “Get the camera in close here [camera zooms into the kitchen area, the slop sink, and the handwashing station] because I want our viewers to see the kitchen.” Back to you: “How can consumers be sure that contamination occurred at the produce supplier and not inside filthy restaurants?”

Stick to the facts. Don’t wing it. If you don’t have a cleanliness policy or practice, don’t make one up on the spot. Reporters will smell a rat. If there are sanitation procedures, describe them. But don’t guess the answers to questions.

If you don’t know, offer to find out. Reporters don’t give exams. You don’t have to know the answer to each question off the top of your head. When you don’t know, say so. “I don’t know the answer to that question.” When you don’t know, but can find out, say so. But then be sure to deliver the answer in a timely manner.


Never say “no comment.” - No comment is perceived as a statement of guilt. It’s better to say, “I don’t know.”

Focus on shared objectives - In almost any crisis, emphasize shared objectives. For example, you might say, “At ADF Taco Bells, we try to ensure that all our produce is fresh and moves safely from the farm to our kitchens. We want all of our customers to enjoy a satisfying meal prepared in a sanitary kitchen.” Shared objectives help viewers see the crisis from the organization’s perspective.

3. “The health inspectors gave a passing grade to the rat-infested Taco Bell just a day before television crews filmed the rats running all over the restaurant. That doesn’t instill our viewers with great confidence in the system. Would you be willing to let our camera crews accompany the health inspector during a full inspection of your restaurant so that viewers can see what an inspection entails?”

If possible, cooperate with reporters - Reporters work under short deadlines. Reporters need information. Reporters want a good story. And if they don’t get these things from you, they’ll get them from someone else. It’s possible to cultivate a good relationship with the press by helping them do their jobs. What do they need? Print reporters (magazines and newspapers) want facts and details. Radio reporters want sound bites. TV reporters want visuals, a tour, an action shot (video of an ongoing event) and a brief sound bite. But you don’t have to agree to every request. In this case, if you don’t have the authority to grant the request, tell the reporters that you would be glad to ask your supervisor and get back with the reporters within the week. That way, you may be able to help the reporters get the story they really want (how health inspections are conducted) and also give your company time to make a decision. Were you to immediately acquiesce to the reporter’s request, you could end up in trouble with the company, particularly if higher levels of management would have been disinclined to grant the reporter’s wish. Then if you say yes, and upper management reneges for whatever reason, the reporter might then think your restaurant has something to hide.

Reel to Real – Biz Flix

Because they are so short, the Biz Flix videos are best used to supplement your lesson plans. They are designed to illustrate the content rather than convey all of the chapter concepts.

Video: Charlie Wilson’s War

Segment Summary: “Good-Time Charlie Wilson’s War (Tom Hanks) is a Democratic Congressman from East Texas with a reputation for partying, drinking, and womanizing. When Afghanistan rebels against the Soviet troop invasion in the 1980s, Wilson becomes the unlikely champion of the Afghan cause through his role in two major congressional committees that deal with foreign policy and covert operations. Julia Roberts plays the Houston socialite and conservative political activist Joanne Herring, who urges Wilson to help the rebels. Wilson’s covert dealings with the rebels have some unforeseen and long-reaching effects, however. In this clip from the beginning of the movie, Charlie Wilson is at work in the Capital Building, on his way to chambers where he’s about to cast a vote.

Discussion Questions from Text: 1. This chapter discussed organizational culture as having three levels of visibility. Visible artifacts are

at the first level and are the easiest to see. Which visible artifacts did you observe in this sequence?

A number of visible artifacts within the Capital Building can be observed in this video clip: One of the most visible is the Capital Building dress code, which is buttoned up and professional, promoting an “all business” mentality. Another visible artifact is the lack of diversity within the building. Middle-aged white men dominate, though the occasional female aid can be seen as well. The furnishings are large and traditional, signifying strength, endurance, and permanence. The building contains lavish decorations that signify prosperity and wealth, including ornate chandeliers,


decorative carpeting, and thick tapestries. Lastly, paintings of national heroes prominently displayed along the halls of the Capital Building help support the culture of the national government by recognizing and celebrating leaders.

2. Values appear at the next level of organizational culture. You can infer a culture’s values from the behavior of organizational members. Which values appear in this sequence?

Values are invisible beliefs expressed by people in a company. In a legislative environment, the most prominent values are those that pertain to our dominant political parties. Republicans will likely have more conservative values, while Democrats will likely have more liberal values. During the conversation between Charlie and the congressional aid, it becomes clear that ethics is not an important consideration for Charlie. Nonetheless, he accepts a role on an ethics committee because he realizes that this will create opportunities for him in the future.

3. Organizational members will unconsciously behave according to the basic assumptions of an organization’s culture. You also infer these from observed behavior. Which basic assumptions appear in this sequence?

Basic assumptions are unconscious beliefs held about a company that are buried deep below the surface. An example of a basic assumption in this video clip is the “good old boys club”, with white males dominating at the top, they have developed a strong network that works to their advantage. Another basic assumption is the “work hard, play hard” mentality. To make it in government, individuals must have impeccable qualifications and a strong work ethic. But many legislators, including Charlie, find that drinking and womanizing are the norms for this line of work. Some students may be surprised that neither aid reacts to Charlie’s comments about his after-hours activities.


Additional Discussion Questions: 1. Which components of the specific environment are most significant in Charlie Wilson’s role as a

legislator?

Students may answer that any of the five components are significant to a legislator. Customers and suppliers in this case represent the same individuals – constituent taxpayers. Because they are represented by the Congressman, they are likely the most important group to the legislator. Competitors may include political opponents, and can become a core focus of the job during election years. Industry regulators can be seen as the executive branch of government, an important partner for Congressmen and other legislators. Advocacy groups, or lobbyists in this case, have a firm foothold in legislative government and are able to influence legislative decisions.

2. In your opinion, how do you think that the organizational culture has changed at the Capital Building since 1980? What has stayed the same?

It is likely that much of the visible artifacts have remained the same since the 1980’s. Congressmen still wear suits and carry themselves in a professional demeanor. One significant difference is that they will be more diverse, with more women and minorities in top positions. Because the décor within the Capital Building was traditional in the 1980s, it is unlikely that this has changed much since then. Individual values have likely stayed the same, particularly since legislators are representatives of political parties that have stable sets of conservative or liberal values. Many basic assumptions and attitudes have changed since 1980. For example, talk of boastful womanizing would be less prevalent, and more discreet.

Biz Flix Video Quiz: 1. In the clip, Charlie Wilson engages in environmental scanning when he:

a. sets up an appointment with Jim van Wagenenb. asks his aide how he’s supposed to vote on the Boy Scoutsc. negotiates for membership on the Kennedy Center board d. checks the news wires e. sets up a meeting with a colleague for Tuesday

ANS: D

2. Before he goes to vote, Charlie Wilson set into action by news wire story he reads about Afghanistan. The news constitutes which element of the environment? a. customerb. political/legalc. supplierd. competitore. industry regulation

ANS: B

3. After reading the news wire article about Afghanistan, Charlie quickly acts to set up a meeting with Jim van Wagenen, an expert on weapons appropriation. This is an example of Wilson making sense of changing environments by acting on threats and opportunities. ANS: T


Reel to Real – Management Workplace

Management Workplace videos can support several in-class uses. In most cases you can build an entire 50-minute class around them. Alternatively, they can provide a springboard into a group lesson plan. The Management Workplace video for Chapter 2 would be a nice companion to your introduction to the course on the first day teaching this chapter.

Video: Preserve The Corporate Culture: The Natural Environment

Summary: Eric Hudson had earned his MBA and wanted to put it to use by starting his own company when he saw an opportunity that others were missing – a “green” one. He noticed that more and more consumers were recycling and that recycled materials were plentiful, but few people ever saw what became of it. What if they were able to purchase new products made with recycled materials? Hudson broke into the natural product arena with the Preserve Toothbrush made from recycled materials in 1996, and his company was born. The product line grew to feature razors, colanders, cutting boards, tableware, and more. In this video, Hudson and his small team of employees discuss the challenges of marketing recycled products, how they practice what they preach about environmental consciousness, and ways they think the “green industry” might be different in the future. Discussion Questions from Text: 1. How would you describe the rate of Preserve’s environmental change? Do you think it’s more stable

or more dynamic? Why?

Environmental change is the rate at which a company’s general and specific environments change. The rate of change is slow in stable environments and fast in dynamic environments. Preserve is operating in a dynamic environment. Just in the last two years, the green industry has seen dramatic technological changes, and more and more people are recycling and looking for recycled products. The company itself has seen tremendous growth in recent years as a result of this, and it must now learn to manage this growth and stave off competitors. As a small company, Preserve focuses on collaboration and adaptability to compete with larger competitors and win over more customers.

2. How do Eric Hudson and his employees practice what they preach when it comes to environmental consciousness?

Employees at Preserve do practice what they preach when it comes to environmental consciousness. For example, when commuting to work, employees arrive on foot, in biodiesel cars, commuter rails, and bikes. Employees can be described as “rough around the edges” rather than “sleek and smooth”. On the weekends, they would most prefer to spend their free time enjoying the outdoors. All in all, the company culture is grounded by the shared values and interests of the people within this small organization.

3. What aspects of the general environment are relevant to Preserve?

The general environment consists of economic, technological, sociocultural, and political/legal events and trends. Students may argue that all of these components are relevant to Preserve. Sociocultural components have been particularly dramatic, with the increase in consumer consciousness driving the green revolution. Technological changes have led to new raw materials, new processes, and new finished products. Economic issues are especially important for a small company like Preserve, where financial fluctuations can quickly become threats and opportunities. Finally, political and legal trends are likely to affect the viability of the green industry as a whole.

Additional Discussion Questions: 1. At Preserve, what role does resource scarcity play in defining the company’s external environment?


Resource scarcity is the abundance or shortage of critical organizational resources. Preserve is a unique brand in that its raw material is another company’s finished product that has fulfilled its use and is now viewed as waste. Supply of raw material is likely to fluctuate, but supply resources are abundant rather thank scarce. On the other hand, because it is a small company, capacity and financial resources are scarce in comparison. With this in mind, the company must be careful in deciding how to invest its limited resources, and must time new initiatives and projects carefully.

2. What steps and specific actions can Eric Hudson take to make sense of the changing environment within his company?

To make sense of the changing environment at Preserve, Eric Hudson should follow three steps: environmental scanning, interpreting information, and acting on threats and opportunities. Environmental scanning involves searching the environment for important events or issues that might affect an organization. After scanning, Eric Hudson would determine what environmental events and issues mean to the organizations and categorize them as either threats or opportunities. In the third step, Eric Hudson will select certain threats and opportunities and act on them. This is a difficult step because in many cases, not all the information that is needed will be present.

Workplace Video Quiz1. True or False? Consumer attitudes towards “green” issues is not a significant aspect of Recyline’s

external environment.

ANS: F

2. According to , Recycline is likely to face long periods in which consumer attitudes are relatively stable, followed by shorter, complex period of rapid change. A. stable environmentsB. dynamic environmentsC. punctuated equilibrium theoryD. resource scarcity

ANS: C

3. True or False? Companies that offer products that are similar to Recyline’s goods are a part of its specific environment.

ANS: T

4. As described in the video, many of Recycline’s executives are personally committed to environmental issues. This is a reflection of the company’s: A. internal environmentB. general environmentC. specific environmentD. retail environment

ANS: A

5. True or False? The recent global economic recession, which paralyzed companies worldwide, is a part of Recycline’s specific environment.

ANS: F


Review Questions

1. Describe the three basic characteristics of changing external environments.

The three basic characteristics of changing external environments are environmental change, complexity, and munificence.

Environmental change is the rate at which a company’s general and specific environments change. If the environment is stable, this means that the rate of change is slow; if the environment is dynamic, this means that the rate of change is fast.

Environmental complexity is the number of external factors in the environment that affect organizations. Complex environments have many environmental factors; simple environments have few.

Resource Scarcity is the degree to which an organization’s external environment has an abundance or scarcity of critical organizational resources.

2. How do the characteristics of changing environments affect uncertainty?

Environmental change, environmental complexity, and resource scarcity affect environmental uncertainty, which is how well managers can understand or predict the external changes and trends affecting their businesses. Environmental uncertainty is lowest when environmental change and environmental complexity are at low levels and resource scarcity is small (i.e., resources are plentiful). In these environments, managers feel confident that they can understand, predict, and react to the external forces that affect their businesses. By contrast, environmental uncertainty is highest when environmental change and complexity are extensive and resource scarcity is a problem. In these environments, managers may not be at all confident that they can understand, predict, and handle the external forces affecting their businesses.

3. What is the difference between the general and specific business environments?

The general environment includes the economic, technological, sociocultural, and political trends that indirectly affect all organizations. The specific environment includes the customer, competitor, supplier, industry regulation, and public pressure group trends that are unique to an industry and which directly affect how a company does business. All companies participate in the same general environment, but each company’s specific environment is distinct, based on its business and industry.

4. List the components of the general environment.

The general environment consists of economic, technological, sociocultural, and political/legal events and trends that affect all organizations. Because the economy influences basic business decisions, managers often use economic statistics and business confidence indices to predict future economic activity. Changes in technology, which is used to transform inputs into outputs, can be a benefit or a threat to a business. Sociocultural trends, like changing demographic characteristics, affect how companies run their businesses. Similarly, sociocultural changes in behavior, attitudes, and beliefs affect the demand for a business’s products and services. Court decisions and new federal and state laws have imposed much greater political/legal responsibilities on companies.

5. How do the elements of the specific business environment affect businesses?

Each organization also has a specific environment that is unique to that firm’s industry and directly affects the way it conducts day-to-day business. The specific environment of any company can be divided in to five sectors:

Customers influence the products and services a company offers, the prices charged for those offerings, the company’s reputation, and the sales generated by business operations.

Competitors also influence the products and services a company offers and the prices charged for those offerings. Competitors also influence how a company conducts business in a certain


market segment, the company’s location, and the overall strategy a company pursues (attack or avoid competitors).

Suppliers influence the cost of the products and services a company offers and therefore affect the profitability of the firm. Suppliers (who they are and what they can provide) also affect the types of products that a company is able to put on the market.

Industry regulation has the potential to influence nearly every aspect of a company’s operations. For example, a caterer would need to comply with all the health codes and liquor laws that govern its industry.

Advocacy groups affect businesses through boycotts (or support). For example, advocacy groups were ultimately responsible for Home Depot changing its policy of buying lumber harvested from old-growth forests.

6. Describe the three-step process that managers use to make sense of their changing environments.

Environmental scanning: Managers search the environment for important events or issues that might affect an organization. This allows managers to stay up-to-date on important industry factors and to reduce uncertainty.

Interpreting environmental factors: Managers determine what these environmental events and issues mean to the organization. These events could present either threats to or opportunities for the organization.

Acting on threats and opportunities: Managers can protect themselves against competition or capture strategic opportunities.

7. How are organizational cultures created and maintained?

An organizational culture is the set of key values, beliefs, and attitudes shared by organizational members. Founders of organizations are the primary drivers of organizational culture. However, when they are gone, organizational heroes sustain their values, attitudes, and beliefs. Organizational heroes are people admired throughout the organization for their qualities and achievements. Their activities provide the basis for organizational stories, which help employees make sense of organizational events and changes.

8. What are the characteristics of successful organizational cultures?

Organizational cultures create a successful internal environment by binding all employees together in a “we’re- in-this-together” attitude. When employee attitudes are congruous with the culture, employees are happy and motivated to work hard for the organization because they believe in what they’re doing. Preliminary research shows that organizational culture is related to organizational success. Cultures based on adaptability, involvement, a clear vision, and consistency can help companies achieve higher sales growth, return on assets, profits, quality, and employee satisfaction. Adaptability is the ability to notice and respond to changes in the organization’s environment. Involvement is the degree to which employees participate in decision making. (Higher involvement leads to a greater sense of ownership and responsibility among employees.) A clear vision provides a direction for organizational activities, and consistency involves actively defining and teaching organizational values, beliefs, and attitudes throughout the company.

9. Identify the three levels of organizational culture and give examples of each.

Three levels of organizational culture are: 1) the surface, where reflections of culture can be heard, seen, or otherwise observed (examples of such artifacts include dress codes, office layouts, and specific employee behaviors); 2) just below the surface, where values, beliefs, and attitudes are expressed by people (such values and beliefs can be understood by observing what people say and decision-making processes); and 3) far below the surface, where unconsciously held assumptions and beliefs lie (those are the unwritten views and rules of the organization that constitute its core principles and values).

10. How can managers change organizational cultures?


Managers can successfully change the surface levels of culture by motivating different behavior. The underlying elements (far below the surface) are difficult to identify and change. Managers can change culture through behavioral addition or behavioral substitution. In behavioral addition, employees are motivated to perform a new behavior in addition to already accepted ones. In behavioral substitution, employees perform a new behavior in place of another.

Additional Activities and Assignments

Out-of-Class Project: “Organizational Culture.” Divide the class into small groups. Have each group collect stories about the founders of large businesses such as McDonald’s, Starbucks, UPS, Walgreens, or Wrigley’s. Have these groups write a paper or make a presentation focusing on who these founders are, what vision they created, and how they may still influence the current culture of the organization. Alternately, assign this to individual students.

Out-of-Class Project: “Competitive Analysis.” Divide the class into groups of 4-5 students. Assign each group to represent one of the following companies: IBM, Coca-Cola, Microsoft, Daimler-Chrysler, Procter & Gamble, Nike, McDonald’s, Wal-Mart, United Airlines, or General Electric. Have each group do a thorough analysis of the company’s top 3 or 4 competitors, including the following: the competitors’ strengths and weaknesses, key financial information (total sales, gross profit, and net income), target markets (both geographic and demographic), and key product lines.

In-Class Activity: “Environmental Scanning.” Divide the class into small groups (no more than 2-3 students). Give each group a recent annual report of a well-known company and have them list all the factors in the external environment that have affected the company. Students should focus on both the general and specific environments. (If the classroom has computers, have students download or read the annual reports on-line.) Have groups discuss what they’ve found.


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