Environment-Structure

Open Systems - EnvironmentOE – Adaptation to Environment – StructureDifferent Organizations – Different Levels of Environmental Uncertainty

Environment – Everything outside the boundariesGeneral and SpecificGeneral – PESTLEC – May Affect (WTO, Growth Rate, Planned Sectoral Expenditure, Labour Law ReformsSpecific – Directly Relevant to OE

Organization

Supplier

Customer

Union

Regulator

Association

Government

The Specific Environment

Environment-UncertaintyPerceived versus Objective Environment

Perception of environmental uncertainty determines structure

Uncertainty

Different parts of an organization perceive uncertainty differently

Different organizations perceive uncertainty differently in the same environment

It is the perceived environment that counts

Different parts of an organization perceive uncertainty differently

Different organizations perceive uncertainty differently in the same

Design

• Mechanistic structures: designed to induce people to behave in predictable, accountable ways– Emphasis on the vertical command structure– Roles are defined narrowly– Promotion is slow and steady– Best suited to organizations that face stable,

unchanging environments

Organic structures: promote flexibility, so people initiate change and can adapt quickly to changing conditionsLess emphasis on vertical command structureRoles are defined looselyStatus conferred by ability to provide creative leadershipEncourages innovative behaviorSuited to dynamic environments

Characteristic Mechanistic OrganicTask Definition Rigid FlexibleCommunication Vertical LateralFormalization High LowInfluence Authority ExpertiseControl Centralized Diverse

Burn & Stalker

ContinuumEffective structure adjusts to environment

Lawrence & Lorsch: Environment & Structure

• Investigated how companies in different industries differentiate and integrate their structures to fit the environment

– Three industries that experienced different levels of uncertainty: • The plastics industry• The food-processing industry• The container or can-manufacturing industry

Lawrence & Lorsch: Environment & Structure

Measure of External Environment = Degree of Uncertainty (rate of change in environment, time taken to get feedback from environment, clarity of information that management held about environment)

Measure of Internal Environment = Differentiation and Integration

H0: More successful organizations within each industry will have a better match between the two compared to less successful ones

Lawrence & Lorsch: Environment & Structure

Sub-Parts of organization deals with sub-parts of organization

Basic reason for differentiation was for departments to deal more effectively with sub-environments

Hypotheses: Complex, diverse, turbulent environment = High differentiation, high integration

Plastics: Successful firms highly differentiated, sales and R&D functions less complex than production

Findings: Lawrence and Lorsch

• Multiple specific environments• Different degrees of uncertainty• Sub-units meet the demands of sub

environments• Differentiate to deal with specific problems• Integrate to move towards organizational goals

Integrated Findings

• Three key dimensions: capacity, volatility, complexity

• Capacity = Potential for growth (eg automobile industry in India in 1980s)

• Volatility = Degree of instability in environment (stable or dynamic)

• Complexity = Number of diverse elements, ease of entry, number of competitors, specific environment)

Stable

Dynamic

ComplexSimple

Abundant

Scarce

•Akin to perfect competition•Slow but random changesPlacid Randomized

•Slow changes•Clustered threats, Utilities, Long Range PlanningPlacid Clustered

•Oligopolistic, dominated by few who can influence•Steel, Colas, competitive, series of tactical plansDisturbed Reactive

• Most dynamic and highest uncertainty, inter-related changes, ‘Future Shock’Turbulent Field

Power-Control & Structure

• Size, Strategy, Technology, Environment = 50-60%• Rest?

Organizational Conflict

• Clash between goal directed behavior• Negative connotation • Research suggests that some conflict can actually

improve organizational effectiveness– Can overcome inertia and lead to learning and

change

• Beyond a certain point, conflict becomes a cause for organizational decline– Inability to reach consensus and indecision– Too much time spent on bargaining rather than acting

swiftly to resolve problems• On balance, organizations should be open to conflict and

recognize its value

Organizational Conflict

Pondy’s Model of Organizational Conflict

Conflict is a process that consists of five sequential stages

Managing Conflict

Escalation of conflict may affect ‘culture’Managing conflict is an important priority

Functional and Dysfunctional Conflict – A balanceChoice of conflict resolution method depends on the source of the problem

Managing Conflict: Resolution Strategies

Acting at the level of structure: Because task interdependence and differences in goals produce conflict, alter the level of differentiation and integration to change relationshipsIncrease the number of integrating rolesAssign top managers to solve conflictRethink the hierarchy/reporting chain

Acting at the level of attitudes and individualsEstablish a procedural system that allows parties to air their grievances• Important for conflict between management and

unions– Use a third-party negotiator– Exchange/rotate/terminate individuals– CEOs can also use their power to resolve conflicts

and motivate units to cooperate

Organizational Power?

• the ability of one person or group to overcome resistance by others to achieve a desired objective or result

– Conflict and power are intimately related