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Managing the External Environment
And
the Organization’s Culture
Managing the External
omnipotent view of management The view that managers are directly responsible for an
organization’s success or failure.
symbolic view of management The view that much of an organization’s success or failure
is due to external forces outside managers’ control.
How much difference does a manager make in how an organization performs? The dominant view in management theory and society in general is that managers are directly responsible for an organization’s success or failure. We call this perspective the omnipotent view of management. In contrast, others have argued that much of an organization’s success or failure is due to external forces outside managers’ control. This perspective is called the symbolic view of management.
The Omnipotent View
In Chapter 1, we stressed how important managers were to organizations. Differences in an organization’s performance are assumed to be due to the decisions and actions of its managers. Good managers anticipate change, exploit opportunities, correct poor performance, and lead their organizations. When profits are up, managers take the credit and are rewarded with bonuses, stock options, and the like. When profits are down, top managers are often fired in the belief that “new blood” will bring improved results. In the omnipotent view, someone has to be held accountable when organizations perform poorly regardless of the reasons, and that “someone” is the manager. Of course, when things go well, managers also get the credit—even if they had little to do with achieving the positive outcomes. This view of managers as omnipotent is consistent with the stereotypical picture of the take-charge business executive who overcomes any obstacle in seeing that the organization achieves its goals. And this view isn’t limited to business organizations. It also explains turnover among college and professional sports coaches, who are considered the “managers” of their teams. Coaches who lose more games than they win are usually fired and replaced by new coaches who are expected to correct the poor performance.
The Symbolic View
The symbolic view says that a manager’s ability to affect performance outcomes is influenced and constrained by external factors. According to this view, it’s unreasonable to expect managers to significantly affect an organization’s performance. Instead, performance is influenced by factors over which managers have little control, such as the economy, customers, governmental policies, competitors’ actions, industry conditions, and decisions made by previous managers. This view is labeled “symbolic” because it’s based on the belief that managers symbolize control and influence. How? By developing plans, making decisions, and engaging in other managerial activities to make sense out of random, confusing, and ambiguous situations. However, the actual part that managers play in organizational success or failure is limited according to this view.
In reality, managers are neither all-powerful nor helpless. But their decisions and actions are constrained. external constraints come from the organization’s environment and internal constraints come from the organization’s culture.
The External Environment:
Constraints and Challenges
external environment: Those factors and forces outside the organization that affect its
performance
Components of the External Environment Specific environment: external forces that have a direct and immediate impact on the organization. General environment: broad economic, socio-cultural, political/legal, demographic, technological, and global conditions that may affect the organization.
Specific environment:
Knowing what the various components of the external environment are and examining certain aspects of that environment are important to managers. There are three ways the environment constrains and challenges managers: first, through its impact on jobs and employment; next, through the environmental uncertainty that is present; and finally, through the various stakeholder relationships that exist between an organization and its external constituencies.
1- Jobs and Employment As any or all external environmental conditions (economic, demographic, technological, globalization, etc.) change, one of the most powerful constraints managers face is t he impact of such changes on jobs and employment —both in poor conditions and in good conditions. The power of this constraint was painfully obvious during the last global recession as millions of jobs were eliminated and unemployment rates rose to levels not seen in many years. Businesses have been slow to reinstate jobs, creating continued hardships for those individuals looking for work.
Customers: An organization exists to meet the needs of customers who use its output. Customers represent potential uncertainty to an organization because their tastes can change or they can become dissatisfied with the organization’s products or service.
Suppliers: ensure a steady flow of needed inputs (supplies). Limited or delayed in delivery can constrain managers’ decisions and actions. Suppliers also provide financial and labor inputs.
Competitors: all organizations ‒ profit and not-for-profit ‒ have competitors. Managers cannot afford to ignore the competition.
Public Pressure Groups: Managers must recognize special-interest groups that attempt to influence the actions of organizations.
Many college grads have struggled to find jobs or ended up taking jobs that don’t require a college degree. Although such readjustments aren’t bad in and of themselves, they do create challenges for managers who must balance work demands and having enough of the right types of people with the right skills to do the organization’s work.
Not only do changes in external conditions affect the types of jobs that are available, but they also affect how those jobs are created and managed. For instance, many employers use flexible work arrangements to meet work output demand. For instance, work tasks may be done by freelancers hired to work on an as-needed basis, or by temporary workers who work full-time but are not permanent employees, or by individuals who share jobs. Keep in mind that such responses have come about because of the constraints from the external environment. As a manager, you’ll need to recognize how these work arrangements affect the way you plan, organize, lead, and control. This whole issue of flexible work arrangements has become so prevalent and part of how work is done in organizations that we’ll address it in other chapters as well.
2- Assessing Environmental Uncertainty Another constraint posed by external environments is the amount of uncertainty found in that environment, which can affect organizational outcomes. Environmental uncertainty refers to the degree of change and complexity in an organization’s environment. The matrix in the Next Exhibit shows these two aspects. The first dimension of uncertainty is the degree of change. If the components in an organization’s environment change frequently, it’s a dynamic environment. If change is minimal, it’s a stable one. A stable environment might be one with no new competitors, few technological breakthroughs by current competitors, little activity by pressure groups to influence the organization, and so forth. The other dimension of uncertainty describes the degree of environmental complexity, which looks at the number of components in an organization’s environment and the extent of the knowledge that the organization has about those components. An organization with fewer competitors, customers, suppliers, government agencies, and so forth faces a less complex and uncertain environment. Organizations deal with environmental complexity in various ways. Complexity is also measured in terms of the knowledge an organization needs about its environment.
The degree of change in an organization’s environment.
If components in an organization’s environment change frequently, it’s a dynamic environment. If change is minimal, it’s a stable one. The degree of complexity in an organization’s environment.
The number of components in an organization’s environment and the extent of the organization’s knowledge about those components.
3- Managing Stakeholder Relationships
Stakeholders Any constituencies in the organization’s environment that are affected by an organization’s decisions and actions
These groups have a stake in or are significantly influenced by what the organization does. In turn, these groups can influence the organization.
Next Exhibit identifies some of an organization’s most common stakeholders. Note that these stakeholders include internal and external groups. Why? Because both can affect what an organization does and how it operates. Why should managers even care about managing stakeholder relationships? For one thing, it can lead to desirable organizational outcomes such as improved predictability of environmental changes, more successful innovations, greater degree of trust among stakeholders, and greater organizational flexibility to reduce the impact of change. But does it affect organizational performance? The answer is yes! Management researchers who have looked at this issue are finding that managers of high-performing companies tend to consider the interests of all major stakeholder groups as they make decisions. Another reason for managing external stakeholder relationships is that it’s the “right” thing to do. Because an organization depends on these external groups as sources of inputs (resources) and as outlets for outputs (goods and services), managers need to consider their interests as they make decisions.
Each of us has a unique personality—traits and characteristics that influence the way we act and interact with others. When we describe someone as warm, open, relaxed, shy, or aggressive, we’re describing personality traits. An organization, too, has a personality, which we call its culture. And that culture influences the way employees act and interact with others. An organization’s culture can make employees feel included, empowered, and supported or it can have the opposite effect. Because culture can be powerful, it’s important for managers to pay attention to it.
What Is Organizational Culture?
organizational culture The shared values, principles, traditions, and ways of doing things that influence the way organizational members act and that distinguish the organization from other organizations
In most organizations, these shared values and practices have evolved over time and determine, to a large extent, how “things are done around here.” Our definition of culture implies three things. First, culture is a perception. It’s not something that can be physically touched or seen, but employees perceive it on the basis of what they experience within the organization. Second, organizational culture is descriptive. It’s concerned with how members perceive the culture and describe it, not with whether they like it. Finally, even though individuals may have different backgrounds or work at different organizational levels, they tend to describe the organization’s culture in similar terms. That’s the shared aspect of culture. Research suggests seven dimensions that seem to capture the essence of an organization’s culture. These dimensions (shown in Exhibit) range from low to high, meaning it’s not very typical of the culture (low) or is very typical of the culture (high). Describing an organization using these seven dimensions gives a composite picture of the organization’s culture. In many organizations, one cultural dimension often is emphasized more than the others and essentially shapes the organization’s personality and the way organizational members work. The more employees accept the organization’s key values and the greater their commitment to those values, the stronger the culture. Most organizations have moderate to strong cultures, that is, there is relatively high agreement on what’s important, what defines “good” employee behavior, what it takes to get ahead, and so forth. The stronger a culture becomes, the more it affects the way managers plan, organize, lead, and control.
Factors Influencing the Strength of Culture
Size of the organization Age of the organization Rate of employee turnover Strength of the original culture Clarity of cultural values and beliefs
Benefits of a Strong Culture
Creates a stronger employee commitment to the organization. Aids in the recruitment and socialization of new employees. Fosters higher organizational performance by instilling and promoting employee initiative.
Where Does Culture Come From?
The next exhibit illustrates how an organization’s culture is established and maintained.
The original source of the culture usually reflects the vision of the founders.
The original source of the culture usually reflects the vision of the founders. Once the culture is in place, however, certain organizational practices help maintain it. For instance, during the employee selection process, managers typically judge job candidates not only on the job requirements, but also on how well they might fit into the organization. The actions of top managers also have a major impact on the organization’s culture. Through what they say and how they behave, top managers establish norms that filter down through the organization and can have a positive effect on employees’ behaviors. Finally, organizations help employees adapt to the culture through socialization, a process that helps new employees learn the organization’s way of doing things. For instance, new employees at Starbucks stores go through 24 hours of intensive training that helps turn them into brewing consultants.
Sources of Organizational Culture
Organization founder
Vision and mission
Past practices
The way things have been done
Top management behavior
Continuation of the Organizational Culture
Recruitment of like-minded employees who “fit”
Socialization - The process that helps new employees adapt to the organization’s culture.
For instance, during the employee selection process, managers typically judge job candidates not only on the job requirements, but also on how well they might fit into the organization. At the same time, job candidates find out information about the organization and determine whether they are comfortable with what they see. The actions of top managers also have a major impact on the organization’s culture.
How Employees Learn Culture?
Employees “learn” an organization’s culture in a number of ways. The most common
are stories, rituals, material symbols, and language.
Stories Organizational “stories” typically contain a narrative of significant events
or people, including such things as the organization’s founders, rule breaking,
reactions to past mistakes, and so forth.
Rituals Corporate rituals are repetitive sequences of activities that express and
reinforce the important values and goals of the organization.
Material Artifacts and Symbols When you walk into different businesses, do you get
a “feel” for what type of work environment it is—formal, casual, fun, serious, and
so forth? These reactions demonstrate the power of material symbols or artifacts in
creating an organization’s personality.
The layout of an organization’s facilities, how employees dress, the types of
automobiles provided to top executives, and the availability of corporate aircraft are
examples of material symbols. Others include the size of offices, the elegance of
furnishings, executive “perks” (extra benefits provided to managers such as health
club memberships, use of company-owned facilities, and so forth), employee fitness
centers or on-site dining facilities, and reserved parking spaces for certain
employees.
n
d the Creating an Innovative Culture
What does an innovative culture look like? it would be characterized by the following:
- Challenge and involvement —Are employees involved in, motivated by, and
committed to the long-term goals and success of the organization?
- Freedom —Can employees independently define their work, exercise discretion,
and take initiative in their day-to-day activities?
- Trust and openness —Are employees supportive and respectful of each other?
- Idea time —Do individuals have time to elaborate on new ideas before taking
action?
- Playfulness/humor —Is the workplace spontaneous and fun?
- Conflict resolution —Do individuals make decisions and resolve issues based on
the good of the organization versus personal interest?
- Debates —Are employees allowed to express opinions and put forth ideas for
consideration and review?
- Risk taking —Do managers tolerate uncertainty and ambiguity, and are
employees rewarded for taking risks?
Creating a Customer-Responsive Culture
When customer service translates into these types of results, of course managers
would want to create a customer-responsive culture!
What does a customer-responsive culture look like? Next Exhibit describes five
characteristics of customer-responsive cultures and offers suggestions as to what
managers can do to create that type of culture.
Spirituality and Organizational Culture
workplace spirituality
A culture where organizational values promote a sense of purpose through meaningful work
that takes place in the context of community
Characteristics of a Spiritual Organization Strong sense of purpose Focus on individual development Trust and openness Employee empowerment Toleration of employees’ expression
