ORGANIZATION AND ENVIRONMENT

Chapter 3

Mary Jo Hatch with Ann L. Cunliffe

Figure 3.1 The

Organization in its Environment

ENVIRONMENT
ORG

Inputs

Outputs

Modernist Levels of the Environment

Interorganizational network General environment International environment

Organizational Environment
Modernist theory, the environment
lies outside the boundary of the organization. provides the organization with resources and absorbs its products and services.

imposes constraints upon and demands adaptation from the organization.

Organizational Environment
Symbolic-Interpretivists suggest environments are social constructions.

organizational members construct environmental features they think are significant.

different organizations construct their environments differently based on managements interpretation.

Organizational Environment
Postmodernists see environment as
fragmented

boundaryless
image-driven

simulacra

NETWORK

Unions

Regulatory Agencies ORG Customers Partners

Suppliers Special interests

Figure 3.2

Competitors

Managing the Environment

Buffering
Protecting the internal organizational environment from environmental shocks.

Example: Material, labour, or capital shortages.

Managing the Environment

Boundary Spanning
Environmental monitoring activities. Representing the organizational interests to the environment.
Public relations Advertising Sales Recruiting efforts

Stakeholder theory
Organizations operate under a social contract that guarantees certain rights to those who have a stake in the organizations activities or outcomes. Those attending to stakeholder demands will be more successful.

Interorganizational Network
Stakeholders:
Any actor that affects or is affected by the organization.

Network actors:
Investors, competitors, employees, media, suppliers, distributors, government, the physical environment, etc.

Figure 3.3

Interorganizational Network

General Environment

Culture

Network

Legal

Political
Figure 3.4

ORG

Physical

Social

Economy Technology

GENERAL

ENVIRONMENT

Some trends in the General Environment

Legal Culture pluralism Political TASK ENV ORG Economy globalization Technology broadband surveillance

Physical
global warming

terrorism Social diversity

GENERAL GENERAL TASK ORG GENERAL TASK ORG GENERAL TASK GENERAL TASK ORG GENERAL TASK ORG TASK ORG

GENERAL TASK ORG

Figure 3.5

ORG

INTERNATIONAL ENVIRONMENT

International Environment

The economic, political, sociocultural, legal, technological, and physical interconnections that allow for permeable borders between nations.

Table 3.1

Contribution of Environmental Sectors

Contribution to Global Change
Personal computers, internet, digital cameras, cell phones, etc. Global capital markets, technology exchanges, worldwide trade, etc. Breakdown of nation-state authority, erosion of territorial borders, etc. Global media coverage, popular culture, consumerism, etc

Sector Technology Economic Political/Legal Social/Cultural

Physical

Population growth, loss of biodiversity, global warming, etc.

Culture

Legal

Network
Physical Political

Social Figure 3.6

Economy Technology

GLOBAL ENVIRONMENT

Environmental Contingency Theory Resource Dependence Theory Population Ecology

Environmental Contingency Theory

Successful organizations match their internal structure to environmental characteristics (dynamic

or stable).

(Burns & Stalker, Lawrence & Lorsch)

Environmental Contingency Theory

Stable Environments
Routine activities Strict lines of authority Distinct areas of responsibility

Rapidly Changing Environments

Flexibility Application of skill where needed Changing work patterns

Environmental Contingency Theory

Information Perspective on Uncertainty
Uncertainty is experienced by individuals when they make decisions, rather than in the environment itself.

Fig. 3.7

Environmental Uncertainty
low Rate of change high

low Complexity

Low uncertainty

Moderate uncertainty

high

Moderate uncertainty

High uncertainty

Fig. 3.8

Links Between Conditions

low Rate of change high

low Complexity

Needed information is known and Available.

Constant need for new information.

high

Information Overload.

Not known what information is needed.

Responding to Uncertainty
The Law of Requisite Variety
(General Systems Theory)

For one system to deal effectively with another it must be of the same or greater complexity.

Isomorphism
The organization takes on the same form as its environment.

Resource Dependence Theory

Analysis of the interorganizational network can help the organization understand the power/dependence relationships that exist between it and other network actors.

Power and Dependence

An organization depends on resources controlled by the environment.

The environment therefore has power over an organization and can influence decision making.

Fig. 3.9

Applying Resource Dependence Theory

Knowledge & equipment inputs
(technology sector)

Capital inputs
(investors)

Raw material inputs

(suppliers)

Outputs

Org

(customers)

Labor inputs
(employees)

Managing Power/Dependence
Pfeffer and Salancik suggest prioritizing dependence elements according to :
Criticality The estimate of the importance of a particular resource Scarcity The estimate of resource availability

Other Dependence Management Strategies

Vertical integration
Horizontal integration Developing personal relationships Establishing formal ties with other firms *Your job as a manager: find the right mix of Lobbying Marketing
counter-dependencies you can create with those on whom you depend for critical, scarce, non-substitutable resources.

Population Ecology
Organizations within an ecological niche are competitively interdependent and compete for survival. Study how & why some organizations survive.

Variation Selection Retention

Operation at the level of the environment

Population Ecology
The portion of the environment studied by population ecology is an ecological niche. Consisting of the resource pool upon which a group of competitors depends.

*Your job as a manager is to help your firm find a pool of resources over which it can compete successfully with other firms for its survival.

Darwin and Organizations

Darwins survival of the fittest principle helps to explain the dynamics of populations of organizations:

Variation: Entrepreneurial innovation that gives birth

to new organizations as well as adaptation of existing firms.

Selection: Organizations that best fit the needs and

demands of their niche are supported with resources.

Retention: Organizational survival and fitness are

maintained through the flow of resources.

Domain of Institutional Theory

Legal Cultural TASK ENV Physical

Political Domain of Resource Dependence Theory Social Technological Economic Domain of Pop Ecology Theory

Institutional Theory The Enacted Environment Ambiguity Theory

Institutional Theory (Selznick)

Organizations adapt to both the values of the internal groups and external society

Institutional Theory

(DiMaggio & Powell)

An organization is institutionalized by the following contexts:

1. Technical, Economic, or Physical
e.g. production and exchange of goods in a market

2. Social, Cultural, Legal, or Political

e.g. conforming to norms, values, rules, and beliefs upheld by society.

Institutional Pressures
Coercive: Pressure to conform that comes from the government in the form of rules or laws.
Normative: Pressure from cultural expectations. Mimetic: The desire of one organization to look like another. Usually used as a response to uncertainty.

Social Legitimacy
Institutional environments reward organizations for adopting acceptable practices and structures. Without this acceptance, organizations can be driven out of business.

Your job as a manager is to to help your firm mimic practices indicated by the institutional environment through coercion or normative expectation in order to ensure its social legitimacy.

Fig. 3.10

Social Legitimacy as an

Organizational Resource

Inputs
raw materials labor capital equipment social legitimacy

Transformation Process

Outputs

Enacted Environment
The conditions of the environment cannot be separated from managers perceptions of those conditions. When decision makers respond to their perceptions they enact the environment they anticipated.

(Weick)

Ambiguity Theory
Encouraging multiple interpretations of goals, vision, and actions to produce different strategies.

Deconstruction Trace discursive and non-discursive influences over time Fragmented environment

Burnss Three Phases of Industrialization

Phase 1: Simple manufacturing British textile factories Phase 2: Complex manufacturing clothing, food, chemical processing, iron and steel factories Phase 3: Supply outstrips demand, competition increases, search for global markets puts focus on consumer, all employees must contribute to economic success

Phases of Industrialization

(Burns)

Phase 1:
The Factory System Productivity through machines and routinization.

Phases of Industrialization

Phase 2:
Greater product variety, more complex production processes, growth in bureaucracy
- Control, routine, and specialization. - Development of management structure

Phases of Industrialization

Phase 3
Production overtakes domestic demand
- customer sensitive - stimulated consumption - internationalization - technical developments

Post-Industrialism

(Bell)

Society is organized around the creation of knowledge and uses of information. Society is shaped by its method of acquiring and distributing knowledge.

Avoiding Hegemony
Hegemony is the practice of interpreting the interests of the ruling class as universal. - Surface language that implies the dominance of one group over others. - Give voice to others.