ORGANIZATIONS: THEIR POLITICAL,

STRUCTURAL AND ECONOMIC

ENVIRONMENT
 UNDERSTANDING THE
ORGANIZATIONAL ENVIRONMENT
Organizations are complex adaptive systems that use people, tasks, and technologies to
achieve specified goals and objectives.

What is
> Internal organizational environment
> External organizational environment
 UNDERSTANDING THE
ORGANIZATIONAL ENVIRONMENT
Structure is the organization of the resources and assets and represents the division and
distribution of work among members (managers and employees) of the organization, and the
co-ordination of their activities in such a way that they are directed towards achieving the
declared goals and objectives of the organization. 

Management is about how the organization manages the structure, the resources and the
activities within the organization and how it measures and monitors the resulting
performance towards achieving the declared goals and objectives of the organization.
 UNDERSTANDING THE
ORGANIZATIONAL ENVIRONMENT
• Organizational Theory attempts to explain how organizations work by defining the
common features that organization share, by collecting data and by analyzing and assessing
them, “what works where – and why”.
 UNDERSTANDING THE
ORGANIZATIONAL ENVIRONMENT
It is important here to understand that structure and management of organizations will
differ - differ with the sector they operate in (public, private, voluntary) and differ with their
various stakeholder configurations, differ also with the particular strategic goals and objectives
they set themselves.  There is therefore no one 'recipe' that will work across all, or even many,
organizations, the structure will reflect what is today being called the 'DNA' of organizations -
which takes into account organizational culture -'the way we do things around here'  and other
factors particular to any one organization.
 UNDERSTANDING THE
ORGANIZATIONAL ENVIRONMENT
Drucker’s three criteria for effective organizations:
a. They must be organized for business performance.
b. Their structure should contain the least number of management levels.
c. Organizational structure should facilitate training and testing of future organization
leaders.
 UNDERSTANDING THE
ORGANIZATIONAL ENVIRONMENT
• Organizational structure is the pattern of relationships among positions in the organization
and among members of the organization.

Objective of an Organization Structure

> accountability for areas of work
> coordination of different parts of the organization
> effective and efficient organization performance
> monitoring the activities of the organization
> flexibility in respond to change
> social satisfaction of the members
 UNDERSTANDING THE
ORGANIZATIONAL ENVIRONMENT
Dimensions of organizational structure

Child’s six major dimensions as components of an organization structure:

1. Allocation of individual tasks and responsibilities, job specialization and definition
2. Formal reporting relationships, level of authority and spans of control
3. Groupings together of sections, departments, divisions and larger units
4. System for communication of information, integration of effort and participation
5. Delegation of authority and procedures for monitoring and evaluating the action
6. Motivation of employees through systems for performance appraisal
 UNDERSTANDING THE
ORGANIZATIONAL ENVIRONMENT
Consequences of Structural Deficiencies (Child)
1. Low motivation and morale
2. Late and inappropriate decisions
3. Conflict and lack of coordination
4. Poor response to new opportunities and external change
5. Rising costs
 UNDERSTANDING THE
ORGANIZATIONAL ENVIRONMENT
PRINCIPLES OF ORGANIZATIONAL DESIGN AND DIAGNOSIS
MITZBERG (1979) suggests that organizational structures fall into five basic categories:

• Simple structure: a centralized, perhaps autocratic arrangement typical of the entrepreneur-

founded company.  Little hierarchy or control exercised by the Chief Executive.
• Machine bureaucracy: best at mass produced tasks and is characterized by many layers of
management and formal procedures.
 UNDERSTANDING THE
ORGANIZATIONAL ENVIRONMENT
• Professional bureaucracy: likely to include some parts of the NHS - its administration is
set by independent professional bodies.  It tends to be more democratic and more highly
motivated, with its lines of authority less clearly set.
• Divisionalized form of bureaucracy: applies more to multinational or industrial
corporations where a small central core controls key guidelines for a number of otherwise
autonomous units. Despite being neither multinational or industrial the NHS today is
reckoned to exhibit some characteristics of this structure.
• Adhocracy: often found in new technology industries, which need constantly to innovate
and respond to quickly changing markets.
 UNDERSTANDING THE
ORGANIZATIONAL ENVIRONMENT
Types of Organizational Structure
This is essentially the process by which the organization's mission is divided into discrete
roles and tasks of individuals within the organization. There are different ways of doing this.
All essentially act initially by grouping key activities in the organization and then allocating
roles/tasks to individuals.
1. Functional
2. Product/service
3. Geographical
4. Divisional
5. Matrix
 UNDERSTANDING THE
ORGANIZATIONAL ENVIRONMENT
TYPES OF ORGANIZATIONAL STRUCTURE
1. Functional – grouping of major functions
Advantages:
• Increase utilization and coordination of groups of people with technical/specialized expertise
• Increases development and career opportunities for people in departments
Disadvantages:
• Encourages sectional interests and conflicts
• Difficult for organization to adapt to product/service diversification
 UNDERSTANDING THE
ORGANIZATIONAL ENVIRONMENT
TYPES OF ORGANIZATIONAL STRUCTURE
2. Product/Service - grouping by service/ product i.e. orthopedic, surgical, psychiatric, etc.,
rather than medical, nursing, paramedical, hotel services (functional).
Advantages:
• increases diversification
• adaptability increased if service/ product requires technical knowledge or large equipment
Disadvantages:
• encourages service conflicts
 UNDERSTANDING THE
ORGANIZATIONAL ENVIRONMENT
TYPES OF ORGANIZATIONAL STRUCTURE
3. Geographical  - a nationalized service develops regions, areas or district health authorities.
e.g. Clinical Commissioning Groups in England,
Advantages:
• more responsive to local/regional issues and different cultures, national/state laws etc.
Disadvantages:
• can lead to localities/regions conflicting with each other
 UNDERSTANDING THE
ORGANIZATIONAL ENVIRONMENT
TYPES OF ORGANIZATIONAL STRUCTURE
4.  Divisional - grouping of services and/ or geography and functionality (but with functions
such as finance, personnel, planning retained at headquarters).
• suitable for international companies who are highly diversified, working in more than one
country e.g. pharmaceutical company with divisions in each country producing and
marketing products developed by parent company.
Advantages:
• corporate strategic control with production and marketing independence at divisions
 UNDERSTANDING THE
ORGANIZATIONAL ENVIRONMENT
TYPES OF ORGANIZATIONAL STRUCTURE
5. Matrix - grouping of projects and functions, e.g. NASA (highly complex industries).
• More than one critical orientation to the operations of the organization
• Need to process simultaneously large amounts of information
• Need for sharing resources
 UNDERSTANDING THE
ORGANIZATIONAL ENVIRONMENT
TYPES OF ORGANIZATIONAL STRUCTURE
5. Matrix
Advantages:
• combines vertical and lateral lines of communication and authority
• stability and efficiency (of mechanistic structure) with flexibility and informality (of inorganic
structure)
• emphasizes project aims are all-important
 UNDERSTANDING THE
ORGANIZATIONAL ENVIRONMENT
TYPES OF ORGANIZATIONAL STRUCTURE
5. Matrix
Disadvantages:
• potential conflict between project leader and functional leader regarding resources
• project may be jeopardized if project members as well as leaders enter the conflict on opposite
sides
• does not tolerate diversification well

NOTE : Many large, complex organizations opt for mixed forms of specialization.
 UNDERSTANDING THE
ORGANIZATIONAL ENVIRONMENT
CENTRALIZATION – all power for decision making rests at a single point in the organization
ultimately in the hands of one person or group.

DECENTRALIZATION – the power is dispersed among people or groups

Note that some functions (research, planning, finance, personnel) are less amenable to
decentralization than others (e.g. contracting, patient services).

Centralization and decentralization should not be treated as absolutes, but rather as two ends of a
continuum.
 UNDERSTANDING THE
ORGANIZATIONAL ENVIRONMENT
Advantages of decentralization

• frees top management of routine every day decisions to concentrate on strategic

responsibilities
• decisions are more local, quicker, more responsive to clients (patients)
• increased awareness of cost effectiveness through the organization
• increased motivation and satisfaction by junior management
 UNDERSTANDING THE
ORGANIZATIONAL ENVIRONMENT
Disadvantages of decentralization

• requires good communication and adequate control to and from the center
• need for center to co-ordinate/integrate
• can lead to inequity in treatment of clients/patients
• need individuals willing to take on additional responsibilities
 UNDERSTANDING THE
ORGANIZATIONAL ENVIRONMENT
In general, large organizations lean towards:

less centralization
more specialization
more rules and procedures to be followed
 UNDERSTANDING THE
ORGANIZATIONAL ENVIRONMENT
LEVELS OF ORGANIZATION
According to Drucker (1998), organizations are layered into three main levels:

• Technical level
• Managerial level
• institutional level
 UNDERSTANDING THE
ORGANIZATIONAL ENVIRONMENT
LEVELS OF ORGANIZATION

• The technical level of the organization is concerned with specific operations and defined
tasks, with actual jobs to be done, and with performance of the technical function. Inter-
relates with managerial level.

• The managerial level (or organizational level) is concerned with the co-ordination and

integration of work, at the technical level, e.g. resource allocation, administration and
control of the operations of the technical function.
 UNDERSTANDING THE
ORGANIZATIONAL ENVIRONMENT
LEVELS OF ORGANIZATION

• The community level (or institutional level) is concerned with the broad objectives and the
work of the organization as a whole. Decisions made at this level will include the selection
of operations, development of organizations in relation to external agencies and the wider
social environment, e.g. Board of Directors, governing bodies of universities. Control by
legislation, codes of standards, professional or trade associations, political or government
action and public interests.
 UNDERSTANDING THE
ORGANIZATIONAL ENVIRONMENT
Mintzberg's nine design parameters

Design assumes discretion, an ability to alter the system. In the case of the organizational
structure, design means 'turning those knobs' that influence the division of labor and the
coordinating mechanisms thereby affecting how the organization functions.
 UNDERSTANDING THE
ORGANIZATIONAL ENVIRONMENT
Mintzberg's nine design parameters

These nine design parameters are the basic components of organizational structure - that fall
into four broad groupings:
• Design of positions
• Design of superstructure
• Design of lateral linkages
• Design of decision making
 UNDERSTANDING THE
ORGANIZATIONAL ENVIRONMENT
 UNDERSTANDING THE
ORGANIZATIONAL ENVIRONMENT
 UNDERSTANDING THE
ORGANIZATIONAL ENVIRONMENT
Work design
• Work can be combined in various forms. Decisions on the methods of groupings will consider:
• the need for co-ordination
• the identification of clearly defined divisions of work
• economy
• the process of managing activities
• avoiding conflict, and
• the design of work organization which takes account of the nature of staff employed, their
interests and job satisfaction

Span of control - number of direct reports

 UNDERSTANDING THE
ORGANIZATIONAL ENVIRONMENT
Influencing factors:
• nature of organization, complexity of work, range of responsibilities
• ability and personal qualities e.g. capacity of manager
• time available to spend with subordinates
• ability and training of subordinates
• effectiveness of co-ordination, communication, control systems
• physical location of subordinates
 UNDERSTANDING THE
ORGANIZATIONAL ENVIRONMENT
Formal Organizational Relationships

• Line - vertical flow of authority

• Functional - between specialist in advisory positions and line management teams
• Staff - personal assistants to senior members
 UNDERSTANDING THE
ORGANIZATIONAL ENVIRONMENT
People and Organizational Relationship
 REGULATION, AREAS OF GOVT
REGULATION OF BUSINESS
REGULATION - is the administrative process of writing and passing laws that, to a certain
extent, restrain some fundamental rights of business

Areas of Government Regulation of Business

• Consumer protection Via Advertising Restrictions
• Employment and Labor Protection
• Environmental Impact of Business
• Date Security and Privacy Protection
• Safety and Health
 POLITICAL ENVIRONMENT OF
BUSINESS
• Political environment impacts company’s international operating activities.
• Political climate affects marketability of the product, inflow of investment and valuation of
share price.
• The political environment includes all laws, government agencies, and lobbying groups that
influence or restrict individuals or organizations in the society.
 POLITICAL ENVIRONMENT OF
BUSINESS
Philosophy of
political
parties

Ideology of
Nature of
the party in
bureaucracy
power
Political
Environment

The
The foreign
political
policy
stability
 CORPORATE SOCIAL RESPONSIBILITY
AND ORGANIZATIONS (CSR)
According to Carroll and Buchholtz, 2003, CSR is defined as the economic, legal, ethical
and discretionary expectations that society has of organizations at a given point in time.
 CORPORATE SOCIAL RESPONSIBILITY
AND ORGANIZATIONS (CSR)
• Economic Responsibilities – refer to society’s expectation that organizations will produce
goods and services that are needed and desired by customers and sell those goods and
services at a reasonable price. Organizations are expected to be efficient, profitable and to
keep shareholder interests in mind.

• Legal Responsibilities – relate to the expectation that organizations will comply with the
laws set down by society to govern competition in the marketplace. Legal responsibilities
include consumer and product laws, environmental laws and employment laws.
 CORPORATE SOCIAL RESPONSIBILITY
AND ORGANIZATIONS (CSR)
• Ethical Responsibilities – concern societal expectations that go beyond the law
- Discretionary Expectations
Economical
Responsibility

3E
Ethical Ecological
Responsibility Responsibility
 CONTEMPORARY SOCIAL ISSUES
Corporations deal with various social issues and problems both directly related to their
operation or not.

• Three Contemporary Social Issues that are of major concern:

- Environmental
- Global
- Technological
 ETHICAL BEHAVIOR IN THE
ENTERPRISE
• Six Foundation of Trust upon which ethical business practice is built:
- Character
- Ethics
- Integrity
- Laws
- Morals
- Values
 ROLE OF THE STATE AND ITS IMPACT ON
BUSINESS ORGANIZATIONS
•  Role of Government in Business
Private sector is the chief economic force of every country.
Constitution gives the government the power to regulate some commerce.
- Consumer Protection
- Contract Enforcement / Legal
- Employee Protection
- Environmental Protection
- Investor Protection
- Permission
- Taxation