FACTORS INFUENCING STRUCTURE

ENVIRONMENT
Environment means the surroundings, external objects, influences or circumstances under which someone or something exists.

DEFINITION:
the environment includes factors outside the firm which can lead to opportunities for or threats to the firm. Although there are many factors, the most important of the sector are socio economic, technological, supplier, competitor and government -William F. Glueck and Lawrence R. Jauch

Types of environment: 1)internal-controllable 2)external-uncontrollable

General versus Specific environment

Specific Environment that is directly relevant to achievement of an organization goal. Customers, competitors, suppliers, pressure groups. General environment broad external conditions that may affect the org. Economic conditions, political/legal conditions, socio cultural conditions, demographic conditions, technological and Global conditions.

Specific Environment
Customers: It is the customer who absorbs organizational outputs.

They represent potential uncertainty to an organization,Their taste can change,they can become dissatisfied with organizations product or service. Competitors: Organizations cannot afford to ignore its competitors. Managers must be prepared to respond to competitors policies regarding pricing new products,services offered and other incentives it is giving to customers

Suppliers:
Any party that provides input for the business. E.g- financial institutions are provider of money, colleges are suppliers of human resources. Managers need to have steady and and reliable flow of inputs to meet the goals.

Pressure groups: Managers must recognize the special interest groups that attempt to influence organization. Also GOVERNMENT , LABOUR UNIONS and TRADE UNIONS.

General Environment
Economic conditions: It includes the impact of economic factors like Interest rates,inflation,changes in disposable income and the stage of general business cycle. e.g - when consumers incomes fall their confidence about job security declines,they will postpone purchasing any thing that is not necessary . Political/legal conditions: Federal,state and local government influence what org can and cannot do.

Socio-cultural conditions: Managers must adapt their practices to the changing expectations of the society and their life style. Demographic Conditions: Trends in the physical characteristics of population such as gender, age, level of education, Income, geographical location. Technological: It is changing the ways the org are operating, so businesses must address this issue and its impact on performance of org.

Actual versus perceived environment

It is very difficult to differentiate actual and the perceived environment. The same environment that one organization perceives as unpredictable and complex may be seen as static and easily understood. Managers must respond to what they see. It depends on the background, education and functional areas in which the individual works.

ENVIRONMENTAL UNCERTAINTY
The degree of change and complexity in an orgs environment. Degree of change: If the components of in an orgs environment changes frequently we call it dynamic environment. If the change is minimal we call it stable. Environmental complexity: number of components in an orgs environment and extent of an orgs knowledge about its environmental components.

Complexity is measured in terms of the knowledge and an org needs to have about its environment. Fewer competitors,customers,suppliers governmental institutes,less complex environment and thus less uncertainty.

LANDMARK CONTRIBUTIONS
BURNS AND STALKER -Mechanistic and organic structures EMERY AND TRIST 1)The placid-randomized environment 2)The placid-clustered environment 3)The disturbed-reactive environment 4)The turbulent-field environment LAWRENCE AND LORSCH

BURNS AND STALKER

Used interviews with managers and their own observations to evaluate the impact of environment on organizational structure and management practice. The type of structure that existed in rapidly changing and dynamic environments was different from that in organizations with stable environments.

B & S labeled the two types organic and mechanistic, respectively.

ORGANIC ORGANIZATION
Organic organizations are relatively flexible and adaptable. They rely on lateral communication rather than vertical communication. Influence is based upon expertise and knowledge rather than on authority of position. Responsibilities are defined loosely rather than rigid job definitions. Emphasis is on exchanging information rather than on giving direction

MECHANISTIC ORGANIZATION
Mechanistic structures are characterized by high complexity, formalization and centralization. They perform routine tasks, rely heavily on programmed behaviors, and are relatively slow in responding to the unexpected.

Mechanistic Organization
A rigid and tightly controlled structure High specialization Rigid departmentalization. Narrow spans of control. High formalization Limited information network .(mostly downward communication) Low decision participation by lower-level employees.

Organic Organization
Highly flexible and adaptable structure Nonstandardized jobs. Fluid team-based structure. Little direct supervision. Minimal formal rules Open communication network. Empowered employees.

Characteristic
Task definition

Mechanistic
Rigid

Organic
Flexible

Communication
Formalization

Vertical
High

Lateral
Low

Influence
Control

Authority
Centralized

Expertise
Diverse

EMERY & TRIST

Offer a model that identifies four kinds of environments that organizations might confront: 1. 2. 3. 4. Placid-randomized Placid-clustered Disturbed-reactive Turbulent-field

Placid-randomized is least complex, Turbulent-field is the most complex.

PLACID-RANDOMIZED ENVIRONMENTS
This environment is relatively unchanging. Therefore, environmental uncertainty is low. Environmental demands are distributed randomly, and change slowly. Managerial decision making does not give much attention to the environment.

PLACID-CLUSTERED ENVIRONMENT
Environment changes slowly, but threats are clustered, not random. The forces in the environment are linked, and pose a higher threat than randomized changes. These organizations use long-range planning and forecasting to learn as much as possible about their environments. Structures will tend to be centralized.

DISTURBED-REACTIVE ENVIRONMENTS
A more complex environment than either placid one. Many similar organizations seeking similar ends. One or more may be large and have ability to influence the environment. Two or three large companies can dominate an industry. Organizations in this type of environment used planned tactical initiatives, calculate reactions by other, and develop counteractions. This requires flexibility and a structure with some decentralization.

TURBULENT-FIELD ENVIRONMENTS
The most dynamic of the environments and has the highest level of uncertainty associated with it. Environmental elements are increasingly organized and interrelated. Major, dynamic shifts can occur in the environment as one, or a small group of large companies change the rules of competition. Thus, planning is not as useful here.

LAWRENCE & LORSCH

Studied ten firms in three industries: plastics, food and containers. The three industries were deliberately chosen as they differ significantly in the environmental uncertainty associated with each one.

The underlying hypothesis was that internal environments of the firms must match the external environmental requirements. The better the match, the more successful the firm.

DIFFERENTIATION & INTEGRATION

Differentiation and integration was posited as the variables to examine to determine the state of the internal environment. Differentiation, a la Lawrence & Lorsch, closely resembles the traditional definition of horizontal differentiation, but in addition to task segmentation, suggested that managers will differ in their: (1) time frame, (2) interpersonal orientation, and (3) goal orientation Integration is the quality of collaboration needed to overcome differentiation and achieve unity of effort among units.

LAWRENCE & LORSCH MODEL

DEPARTMENTAL DIFFERENTIATION BASED UPON SUBENVIRONMENT CHARACTERISTICS

TIME, GOAL & INTERPERSONAL ORIENTATIONS

INTEGRATION TECHNIQUES AND APPROPRIATE ENVIRONMENTS

LAWRENCE & LORSCH FINDINGS

Four task environments and their organisational structures(based on robbins,1987)

D Y N A M I c

C H A

3. Moderately high perceived uncertainty Complexity : low Formalisation : low centralisation Eg: small entrepreneurial firm

4. High perceived uncertainty

Complexity : low Formalisation :low decentralisation Eg: advertising firms, r & d units 2. Moderately low perceived uncertainty Complexity: high Formalisation: high decentralisation

N G E

S T A B L e

1. Low perceived uncertainty

Complexity: high Formalisation: high centralisation Eg: mass production, manufacturing companies

Simple

Complex

COMPL EXITY

STRUCTURE VS ENVIRONMENT

The Environment-Structure Relationship

Every organization depends on its environment to some degree.
Function of vulnerability and in turn dependency. Dynamic environment has more influence over structure than a static one. Dynamic towards organic , static towards mechanistic.

Dynamic environment are not , in actual, that prevalent. Managers may not recognize dynamic environment when they see them. Organizations have devised ways in which to reduce their dependencies when facing dynamic environments.

Environment and Complexity

Environment and Formalization Environment and Centralization

Strategies For Managing Environment

Domain choice Recruitment Vertical integration Buffering Smoothening Advertising Contracting Mergers/ Acquisitions/ Strategic Alliances Lobbying

BUFFERING
On the input side, buffering usually takes the form of stockpiling critical resources whose supply is uncertain or whose price fluctuates widely over time. On the output side, buffering typically involves building and keeping up warehouse and distribution inventories. By buffering, environmental uncertainties are absorbed because an organizations technical core produces at a constant rate. Other methods of buffering might include preventative maintenance and recruiting and training.

SMOOTHING (LEVELING)
Where buffering absorbs environmental uncertainties, smoothing involves efforts to manage environmental uncertainties. Smoothing attempts to protect the technical core by reducing uncertainties associated with cyclical variations in product or service demand. Examples might include differential costs of long distance telephone calls that are lower during non-peak times, discount airline fares for off-time flights.