Managing the External

Environment and
Organizational Culture
AFTER STUDYING THIS CHAPTER, YOU SHOULD BE ABLE TO:

 Define, What is Organizational Culture.

 Recognize the characteristics and importance of
organizational culture.
 Asses how Culture effects a manager's performance.
 Describe current issues in organizational culture.
 Understand external environment of an organization.
 The Manager:
Omnipotent or Symbolic

?
Omnipotent View of Management

 Managers are directly responsible for an organization’s

success or failure.
 The quality of the organization is determined by the quality
of its managers.
 Managers are held accountable
for an organization’s performance
yet it is difficult to attribute
good or poor performance
directly to their influence
on the organization.
 Good managers anticipate change and
Exploit opportunities.
Symbolic View of Management

 Much of an organization’s success or failure is due

to external forces outside of managers’ control.
 The ability of managers to affect outcomes is
influenced and constrained by external factors.
 The economy, customers, governmental policies,
competitors, industry conditions,
technology, and the actions of
previous managers
 Managers symbolize control and
influence through their action.
Parameters of Managerial Discretion

Reality Suggests A Synthesis

In reality, managers are neither powerful nor helpless and
their decisions and action options are constrained
Internal constraints come from the organization’s culture
and external constraints come from the organization's
environment
 Organizational Culture

A system of shared meanings and

common beliefs held by organizational
members that determines, in a large
degree, how they act towards each other.
The Organization’s Culture

 “The way we do things around here.”

 Values, symbols, rituals, myths, and practices

 Implications:
 Culture is a perception.
 Culture is descriptive.
 Culture is shared.
Dimensions of Organizational Culture
How an Organization’s Culture Is Established and
Maintained
Strong versus Weak Cultures

 Strong Cultures
 Are cultures in which key values are deeply held and widely
held.
 Have a strong influence on organizational members.
 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.
Strong versus Weak Organizational Cultures
How Employees Learn Culture
 Stories
Narratives of significant events or actions of people that convey
the spirit of the organization
 Rituals
Repetitive sequences of activities that express and reinforce
the values of the organization
 Material Symbols
Physical assets distinguishing the organization
 Language
Acronyms and jargon of terms, phrases, and word meanings
specific to an organization
How Culture Affects Managers

 Cultural Constraints on Managers

 Whatever managerial actions the organization recognizes as
proper or improper on its behalf
 Whatever organizational activities the organization values
and encourages
 The overall strength or weakness of the organizational
culture

Simple rule for getting ahead in an organization:

Find out what the organization rewards and do those things.
 External Environment

Those factors and forces outside the

organization that affect the organization’s
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.
The Organizational Environment
1. Specific Environment
“External forces that have a direct impact on manager’s
decisions and actions and are directly relevant to the
achievement of an organization’s goals”.
 An organization’s specific environment is unique to it
Forces That Make Up A Specific Environment:
1. Customers
 An organization exists to meet needs and wants of its
customers and they represent a potential uncertainty to an
organization because their tastes are continuously changed
The Organizational Environment
2. Suppliers
 Managers seek to ensure a constant flow of needed inputs at
the lowest possible price and a limitation and delay in supply
can constrain a manager’s decisions
3. Competitors
 All organizations either NPOs, NGOs and POs ------ have
competitors
 Managers cannot afford to avoid or ignore competition
 For Example: PTV has completion with digital cable, satellite,
DVDs and the internet----provide customers a broader choice
The Organizational Environment
4. Pressure Groups
 Managers must recognize special-interest groups that attempt
to influence the actions of organizations
 A manager should have information about environmental and
human rights activists picketing, boycotting and threatening
some organizations in order to managers to get change
decisions
 For Example: Pressure by PETA on McDonalds
 Pressure by PALPA on PIA for improvements in incentives
The Organizational Environment
2. The General Environment
“It includes the broad economic, political/legal,
sociocultural, demographic and global conditions that
affect an organization”.
 This environment does not impact very much but a
manger must consider them as they plan, organize, lead
and control
The Organizational Environment
Forces That Make Up A Specific Environment:
1.Economic Conditions
Interest rates, inflation, changes in disposable income, stock
market fluctuations and the stage of the general business cycle are
some economic factors that affect management practices
When consumers income fall or when their confidence about job
security declines, they will postpone purchasing anything that isn’t
a necessity
2. Political/Legal Conditions
 Federal, State, Provincial and local laws, as well as global and
other country laws and regulations, influence what organizations
can and cannot do
 Organizations spend a great deal of time and money to meet such
Governmental demands, and these reduce managerial discretion
by limiting the available choices
 For Example: Quota for disables and minorities, principles of
good faith and dealings with employees by employers
 Besides this, political conditions and stability of a country where
an organization operates and the attitudes that elected
Governmental officials hold towards business also influences a
manager’s decisions
The Organizational Environment
3. Sociocultural Conditions
 Managers must adapt their practices to the chaining expectations
of the society in which they operate
 As values, customs and tastes change, managers must also
change
 For Example: The demand of more balanced life by the workers,
organizations have had to adjust by offering family leave
policies, flexible work hours and on-site child care facilities
The Organizational Environment
4. Technological Conditions
 The most rapid change in general environment
 Technology has introduced the automated offices, electronic
meetings, robotic manufacturing, lasers, integrated circuits, faster
and more powerful microprocessors, synthetic fuels and new
models of business
 Companies that have invested in technology have higher ROI
such as google, GE, e-bay and Wal-Mart
The Organizational Environment
5. Demographic Conditions
 Demographic conditions encompass trends in population
characteristics such as gender, age, level of education,
geographic location, income and family composition
 Changes in these conditions may constrain how managers
plan, organize, lead and control
6. Global Conditions
 Managers are challenged by an increasing number of global
competitors and markets as part of the external environment
 Globalization has impacted the way as mangers plan,
organize, lead and control
How the Environment Affects Managers

 Environmental Uncertainty
 The extent to which managers have knowledge of
and are able to predict change their organization’s
external environment is affected by:
 Complexity of the environment: the number of
components in an organization’s external environment.
 Degree of change in environmental components: how
dynamic or stable the external environment is.
How the Environment Affects Managers
 There are two ways the environment affects
managers
(1) Through the degree of Environmental
Uncertainty
(2) Thorough managing stakeholders
relationships
How the Environment Affects Managers
1. Assessing Environmental Uncertainty
“The degree of change and complexity in an
organization's environment is called Environmental
Uncertainty”.
 Hence Environmental Uncertainty has two dimensions
(a) Degree of Change
(b) Degree of Complexity
How the Environment Affects Managers
(a) Degree of Change
 Stable Environment: If components in an origination's
environment change infrequently, its called Stable
Environment
 A stable environment might be one in which there are no new
competitors, few technological breakthroughs by current
competitors, little activity by pressure groups to influence the
organization and so forth e.g. Zippo Lighters have stable
environment
How the Environment Affects Managers
 Dynamic Environment: If components in an origination's
environment change frequently, its called Stable Environment
 A dynamic environment is highly uncertain and unpredictable
 E.g. The recorded music industry faces a dynamic environment
due to digital formats and music-downloading websites

 When we talk about degree of change, we mean change

that is unpredictable and if change can be accurately
anticipated, it’s not uncertainty that mangers must confront
How the Environment Affects Managers
(b) Environmental Complexity
 The number of components in an organization's
environment and the extent of the organization’s
knowledge about those components
 When an organization has fewer competitors, customers,
suppliers, government agencies and so forth, the less
complex and uncertain it’s environment is
How the Environment Affects Managers
(2) Managing Stakeholder's Relationships
Stakeholders: Any constituencies in the organization’s
environment that are affected by the organization’s
decisions and actions
The more obvious and secure the relationships among
stakeholders, the more influence the managers will have
over organizational outcomes
Hence Stakeholders are influenced by an organization and
influence on an organization in return
How the Environment Affects Managers
 These stakeholders include both internal and eternal
stakeholders
 Mangers take inputs (resources) from External
Stakeholders and as outlets for outputs (goods and
services)
Stakeholder Relationships

 Stakeholders
 Any constituencies in the organization’s environment that
are affected by the organization’s decisions and actions

 Why Manage Stakeholder Relationships?

 It can lead to improved organizational performance.
 It’s the “right” thing to do given the interdependence of the
organization and its external stakeholders.
Stakeholder Relationships
 Managers can manage Stakeholders relationships in
following ways
a) Identify the organization’s external stakeholders
b) Determine the particular interests and concerns of the external
stakeholders
c) Decide how critical each external stakeholder is to the
organization
d) Determine how to manage each individual external stakeholder
relationship
Organizational Stakeholders
Creating an Ethical Culture Creating an Innovative Culture

 Challenge and
 High in risk
involvement
tolerance
 Freedom
 Low to moderate  Trust and openness
aggressiveness  Idea time
 Focus on means as  Playfulness/humor
well as outcomes  Conflict resolution
 Debates
 Risk-taking
 Creating a Customer-Responsive Culture

 Hiring the right type of employees (ones with a

strong interest in serving customers)
 Having few rigid rules, procedures, and regulations
 Using widespread empowerment of employees
 Having good listening skills in relating to customers’
messages
 Providing role clarity to employees to reduce
ambiguity and conflict and increase job satisfaction
 Having conscientious, caring employees willing to
take initiative
Spirituality and Organizational Culture

Workplace Spirituality
 The recognition that people have an inner life that
nourishes and is nourished by 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