Chapter 2

The Changing
Environment Of
Organizations

© 2012 South-Western, a part of Cengage Learning Prepared by Charlie Cook

All rights reserved. The University of West Alabama
Chapter Learning Objectives
After studying this chapter you should be able to:
1. Discuss the emergence of international management and its
impact on organizations.
2. Describe the nature of diversity in organizations and identify and
explain key dimensions of diversity.
3. Discuss the changing nature of technology and its impact on
business
4. Describe emerging perspectives on ethics and corporate
governance
5. Discuss the key issues in new employment relationships

© 2012 South-Western, a part of Cengage Learning 2–2

 Globalization and Business

• Globalization
– The internationalization of business activities
– The shift toward an integrated global economy
• Factors Increasing Globalization
– Advances in communication and transportation
– Growth by expansion into international markets
– Control of labor, distribution and distribution costs
– In response to increased international competition

© 2012 South-Western, a part of Cengage Learning 2–3

 2.1 Forces That Have Increased International Business

© 2012 South-Western, a part of Cengage Learning 2–4

 Cross-Cultural Differences and Similarities

• Culture
– A set of shared values that help people in a group,
organization, or society understand which actions are
considered acceptable and which are deemed
unacceptable
• General Observations
– Cultural and national boundaries may not coincide
– Behavior in organizational settings varies across
cultures—culture is one major cause of this variation
– The causes and consequences of behavior within
organizational settings are diverse across cultures

© 2012 South-Western, a part of Cengage Learning 2–5

 Cross-Cultural Differences and Similarities
(cont’d)
• General Observations (cont’d)
– Organizations and the way they are structured
appears to be growing increasingly similar
– The same individual behaves differently in different
cultural settings
– Cultural diversity can be an important source of
synergy in enhancing organizational effectiveness

© 2012 South-Western, a part of Cengage Learning 2–6

 Specific Cultural Issues

• Geert Hofstede’s Research

– Attitudes and behaviors differ significantly because of
values and beliefs that characterize different countries
• Hofstede’s Categories
– Individualism
– Collectivism
– Power distance
– Uncertainty avoidance
– Masculinity
– Long-versus short-term values

© 2012 South-Western, a part of Cengage Learning 2–7

 Hofstede’s Primary Dimensions
Individualism The extent that people in a culture define themselves primarily
as individuals rather than as part of one or more groups or
organizations

Collectivism The tight social frameworks in which people tend to base their
identities on the group or organization to which they belong

Power Distance The extent to which people accept as normal an unequal

distribution of power

Uncertainty The extent to which people feel threatened by unknown

Avoidance situations and prefer to be in clear and unambiguous situations

Masculinity The extent to which the dominant values in a society

emphasize aggressiveness and the acquisition of money and
other possessions as opposed to concern for people, and
overall quality of life

Long-Term versus A focus on the future, working on projects that have a distant
Short-Term Values payoff, persistence, and thrift versus an orientation toward the
past and the present including respect for traditions and social
obligations

© 2012 South-Western, a part of Cengage Learning 2–8

 2.1 Work-Related Differences in Ten Countries

References: Adapted from Geert Hofstede and Michael Harris Bond, “The Confucius Connection: From Cultural Roots to Economic Growth,” Organizational Dynamics,
Spring 1988, pp.5-21; Geert Hofstede, “Motivation, Leadership, and Organization: Do American Theories Apply Abroad?” Organizational Dynamics, Summer 1980, pp. 42-63.

© 2012 South-Western, a part of Cengage Learning 2–9

 2.2 Differences Across Cultures in Managers’ Beliefs
about Answering Questions from Subordinates

Reference: Reprinted from International

Studies of Management and Organization,
vol. XIII, no. 1-2, Spring-Summer 1983, by
permission of M.E. Sharpe, Inc. Armonk,
NY. 10504.
© 2012 South-Western, a part of Cengage Learning 2–10
 Diversity and Business

• Workforce Diversity
– The important similarities and differences among the
employees of organizations
• Stereotypes
– Generalizations about a person or a group of persons
based on certain characteristics or traits
• Prejudices
– Judgments about others that reinforce superiority
or inferiority beliefs

© 2012 South-Western, a part of Cengage Learning 2–11

 Pitfalls of Stereotyping and Prejudices

• Stereotypes and Prejudices

– Can create management systems that do not meet the
needs of a diverse workforce
– Can cause failures to recognized employee’s
distinctive talents
– Can become self-fulfilling prophecies

© 2012 South-Western, a part of Cengage Learning 2–12

 Dimensions of Diversity

• Primary Dimensions
– Factors that are either inborn or exert extraordinary
influence on early socialization
• Age, race, ethnicity, gender, sexual orientation,
physical/mental abilities

• Secondary Dimensions
– Factors that matter to us as individuals and that to
some extent define us to others
• Educational background, geographical location, income,
marital status, military experiences, parental status, religious
beliefs, work experiences

© 2012 South-Western, a part of Cengage Learning 2–13

 Who Will Be the Workforce of the Future?

• Tomorrow’s Workforce in the

United States
– Fewer white males
– A larger overall workforce
– More females
– An older workforce
• Tomorrow’s Global Workforce
– More females
– Increasing diversity due to increased
worker mobility

© 2012 South-Western, a part of Cengage Learning 2–14

 2.3 Workforce Composition: 1984-2014

Source: Bureau of Labor Statistics, Labor Force Projections

to 2014, http://www.bls.gov/opub/mlr/2005/11/art3full.pdf
© 2012 South-Western, a part of Cengage Learning 2–15
 2.4 Projected Growth from 2004 to 2014

http://www.bls.gov/opub/mlr/2005/11/art3full.pdf

© 2012 South-Western, a part of Cengage Learning 2–16

 Diversity Issues
• The Value of Diversity
– Workforce composition affects
organizational productivity

• Diversity and the Modern Organization

– Celebrate the differences
– Utilize the variety of talents, perspectives,
backgrounds of all employees

© 2012 South-Western, a part of Cengage Learning 2–17

 Into the Melting Pot: Assimilation

• Assimilation
– The process through which members of a minority
group are forced to learn the ways of the majority
group
• Assimilation Effects
– Homogeneity reduces awareness of diversity issues
– Perpetuation of false stereotypes and prejudices
– Dominant groups continue to make decisions based
on their own values and beliefs
– Minority groups have little say in decision-making

© 2012 South-Western, a part of Cengage Learning 2–18

 2.2 Attributes Reinforced by the Culture in Typical Organizations

Reference: Marilyn Loden and Judy B. Rosener, Workforce America! Managing Employee Diversity as a Vital Resource
(Homewood, Ill.: Business One irwin, 1991), pg. 43. Copyright © 1991 by Business One Irwin. Used with permission.
© 2012 South-Western, a part of Cengage Learning 2–19
 Benefits of Valuing Diversity

• Diversity’s Results
– A richness of ideas and perspectives which can lead
to new product and market development and
improvement in customer services
– Workers that are valued and therefore are more
creative, motivated, and productive
– Higher productivity, better teamwork, deeper
employee commitment to the organization and its
goals

© 2012 South-Western, a part of Cengage Learning 2–20

 Technology and Business

• Technology
– Methods used to create products, including both
physical goods and intangible services
• Manufacturing Organization
– A form of business that combines or transforms
resources into tangible outcomes that are then sold
• Service Organization
– One that transforms resources into an intangible
output; it creates time and place utility for its
customers

© 2012 South-Western, a part of Cengage Learning 2–21

 Technology and Competition

• Challenges for Technology Leaders

– Maintaining a leadership position: technology
is the basis of competition for some firms
– Coping with decreasing cycle times
• Advances in Information Technology
– Advantages: leaner and more flexible organizations,
increased collaboration, improved management
processes/systems
– Disadvantages: less personal communication, less
“down time”, an increased sense of communication
and decision-making urgency

© 2012 South-Western, a part of Cengage Learning 2–22

 Ethics and Corporate Governance

• Ethics
– A person’s beliefs about what constitutes
right and wrong behavior
• Contemporary Ethical Issues
– Financial abuses resulting from rapid changes in
business relationships and organizational structures
– Executive compensation
– Environmental protection
– Working conditions in foreign factories
– Pricing policies
– Pressure to balance profits against costs

© 2012 South-Western, a part of Cengage Learning 2–23

 Ethics and Business Practices

• Corporate Governance
– The oversight of a public corporation by its board of
directors
• Governance Issues
– Proper management of the business in the best
interests of the stakeholders
– Independence of the board from the business
• Information Technology Issues
– Individual rights to personal information privacy
– Abuse of information technology

© 2012 South-Western, a part of Cengage Learning 2–24

 New Employment Relationships

• Management of Knowledge Workers

– Employees who add value in an organization
simply because of what they know
• Computer scientists, physical scientists, engineers,
product designers, video game developers

• Knowledge Worker Employment Issues

– Unique working arrangements and performance
motivation requirements
– Specifically (individually) tailored compensation
packages

© 2012 South-Western, a part of Cengage Learning 2–25

 New Employment Relationships (cont’d)

• Outsourcing
– The practice of hiring other firms to do work previously
performed by the organization itself
• Advantages of Outsourcing
– Helps firms to focus on core activities
– Lowers labor costs through exportation of work
• Disadvantage of Outsourcing
– Disaffected employees: out-of-job workers are used
train the newly-hired foreign replacements
– Reduction of domestic job opportunities

© 2012 South-Western, a part of Cengage Learning 2–26

 Organizational Behavior in Action

• After reading the chapter:

– Why have concerns about globalization been so late in
coming to the forefront of business thought in the
United States?
– What factors are likely to increase the rate of
globalization?
– What factors are likely to decrease the rate of
globalization?
– Should social business enterprises (SBEs) such as
Stonyfield Farm be given preferences in international
trade?

© 2012 South-Western, a part of Cengage Learning 2–27