dr. hab. jerzy supernat institute of administrative studies university of wrocław

dr. hab. Jerzy SupernatInstitute of Administrative Studies

University of Wrocław

The Environmentof Organizations

The Environment of Organizations

dr hab. Jerzy Supernat

A key element in the effective management of an organization is: determining the ideal alignment between the environment and the organization working to achieve and maintain that alignment That is why managers must thoroughly understand the nature of the organization’s environment.

The Environment of OrganizationsTo illustrate the importance of the environment one can consider the analogy of a swimmer crossing the river. The swimmer must assess the current, obstacles, and distance before setting out. If these elements are properly evaluated the swimmer will arrive at the expected point on the far bank of the river. But if the elements are not properly understood, the swimmer might end up too far upstream or downstream. The organization is like a swimmer, and the environment is like the river. Thus, just as the swimmer needs to understand conditions in the water, the organization must understand the basic elements of its environment in order to maneuver properly among them.



The environment of contemporary organizations is a VUCA environment. That is the name that the US Army War College gave to describe environment that is:

• volatile • uncertain• complex• ambiguous



The organization’s environment:

• external environment general environment task environment

• internal environment



Generalenvironment

TaskEnvironment

Internalenvironment

Task environment: specific external organizations or groups that influence an organization.Internal environment: conditions and forces within the organization.

General environment: the set of broad dimensions and forces in organization’s surroundings that create its overall context.



The general environment’s dimensions:

• Political-legal• Economic• Sociocultural• Technological

Show me a friend in need and I’ll show you a pest.

Pest: 1. An annoying person or thing; a nuisance. 2. An injurious plant or animal, especially one harmful to humans. 3. A deadly epidemic disease; a pestilence.

E.g. general economic growth, inflation, interest rates, and unemployment.

The methods available for converting resources into products or services.

The customs, mores, values, and demographic characteristics of the society.

Government regulation of business.



The task environment includes:• competitors• customers• suppliers• regulators• strategic partners



CompetitorsAn organization’s competitors are other organizations that compete with it for resources. The resources that competitors vie for are: customer money quality labor technological breakthroughs and patents scarce raw materials the right to purchase a prime piece of real estate in a growing communityIt is important to remember that competition takes place not only among organizations offering the same products but also between organizations offering substitute products.



Customers

A second dimension of the task environment is customers, or anyone who pays money to acquire an organization’s products or services. It is useful to distinguish among:• individual customers • institutional customers

Dealing with customers has become increasingly complex in recent years. E.g. organizations face critical differences among customers as they expand internationally.



Suppliers

Suppliers are organizations that provide resources for other organizations.



Regulators

Regulators are elements of the task environment that have the potential to control, legislate, or influence an or-ganization’s policies and practices. There are two impor-tant kinds of regulators:• regulatory agencies (created by the government)• interest groups (organized by its members to attempt to influance organizations)



Strategic partners

Strategic partners / strategic allies are two or more orga-nizations that work together in joint ventures or other partnerships.

Strategic partnerships help organizations: • get from other organizations the expertise they lack• spread risk and open new market opportunities (indeed, most strategic partnerships are actually among interna-tional firms)



The internal environment (in the case of busi-ness organization) consists of:• owners• board of directors• employees• physical work environment• organization’s culture



Owners

The owners of a business are the people who can claim property rights to that business.

Owners can be a single individual who establishes and runs a small business, partners who jointly own the busi-ness, individual investors who buy stock in a corporation (stockholders), or other organizations (institutional invest-ors).



Board of directors

A corporate board of directors is the governing body elec-ted by a corporation’s stockholders charged with over-seeing the general management of the organization to ensure that it is being run in a way that best serves the stockholders’ interests.



EmployeesOf particular interest to managers today is the changing nature of the workforce as it becomes increasingly more diverse in terms of gender, age, ethnicity, and other dimensions. Workers are also calling for more job ownership – either partial ownership in the business or at least more say in how they perform their jobs. Another trend in many organizations is the increased reliance on temporary workers (temps) or part-time workers.



Physical work environmentPhysical work environment is the ac-tual physical environment of the orga-nization and the work that people do. Some organizations have their facili-ties in downtown skyscrapers. Others locate in suburban or rural settings… Some facilities have long halls lined with traditional offices. Others have modular cubicles with partial walls and no doors…



Organization’s culture

Terrance E. Deal, Allan A. KennedyOrganizational culture is the set of va-lues, beliefs, behaviors, customs, and attitudes that helps the members of the organization understand what it stands for, how it does things, and what it considers important.



Edgar H. Schein The organizational culture (or the culture of a group) is a pattern of shared basic assumptions that the group learned as it solved its problems of external adaptation and internal integration, that has worked well enough to be considered valid and, therefore, to be taught to new members as the correct way to perceive, think, and feel in relation to those problems.



Edgar H. Schein considers organizational culture the foundation for all organizational success. According to him the culture is also what is most difficult to change in the organization. He defines three levels of organizational culture.

Artifacts

Espoused values and beliefs.

Basic underlying assumptions and values.

The most visible level is behavior and artifacts. This is the observable level of culture, and consists of behavior patterns and outward manifesta-tions of culture: perquisites provided to executives, dress codes, level of technology utilized (and where it is utilized), and the physical layout of work spaces. All may be visible indicators of culture, but difficult to inter-pret. Behavior and artifacts also may tell us what a group is doing, but not why.

Values underlie and to a large extent determine behavior, but they are not directly observable, as behaviors are (conscious goals and strategies). There may be a difference between stated and operating values.

Underlying assumptions grow out of core values, until they become taken for granted and drop out of awareness. Basic assumptions form around deeper dimensions of hu-man existence such as the nature of humans, human rela-tionships and activity, reality and truth.



Multiculturalism

Organizational culture is embedded in the surrounding societal context (social culture), an invisible, intangible force that drives the organization. When the people who belong to an organization represent different cultures, their differences in values, beliefs, behaviors, customs, and attitudes pose unique opportunities and challenges for managers. These broad issues are generally referred to as multiculturalism.

A related area of interest is diversity.



DiversityDiversity exists in a community of people when its members differ from one another along one or more important dimensions. These differences can obviously reflect the multicultural composition of a community. In the business world, however, the term diversity per se is more generally used to refer to demographic and other differences among a people within a culture, namely differences in:• gender • age • ethnicity • religious beliefs • marital status (single parents, dual-career couples)• sexual orientation • dietary preferences



Managing diversity and multiculturalism

Individual strategies (four basic attitudes of individuals)• understanding• empathy• tolerance• willingness to communicate

Organizational approaches• organizational policies• organizational practices• diversity and multicultural training• organizational culture

Esp. formulated in organization’s mission statement.

E.g. making organization’s important committees diverse.



How environments affect organizations:

James D. Thompson’s perspective

Michael E. Porter’s perspective



James D. Thompson: The environment can be described along two dimensions: its degree of homogeneity and its degree of change. These two dimensions interact to determine the level of uncertainty faced by the organization. Figure below illustrates a simple view of the four levels of uncertainty defined by different levels of homogeneity and change.

Moderateuncertainty

(complex but stableenvironment)

Mostuncertainty(complex and

dynamic environment)

Leastuncertainty

(simple and stable environment)

Moderateuncertainty

(simple but dynamic

environment)

HOMOGENEITY

C H A N G Estable dynamic

simple

complex



Michael E. Porter suggests that managers view the en-vironment of their organizations in terms of five competi-tive forces:• threat of new entrance • power of suppliers• power of buyers• threat of substitutes• competitive rivalry

According to Michael E. Porter the object of formulating competitive strategy is to find a position where the organization can best defend itself against these forces, or can influence them in its favor.

The extent to which new competitors can easily enter a market.

The extent to which suppliers have the ability to influence potential buyers.

The extent to which buyers of the products have the ability to influence the suppliers.

The extent to which alternative products may supplant or diminish

the need for existing products.The nature of the competitive relationship between dominant

firms in the industry.



How organizations adapt to their environments:

• information management• strategic response• mergers, acquisitions (takeovers), and partnerships• organization design and flexibility• direct influence• social responsibility

A boundary spanner; environmental scanning; information systems.

Maintaining the status quo, altering strategy a bit, or adopting

an entirely new strategy.

Mechanistic vs. organic design.

Vertical integration; advertising; lobbying.

Concluding Remark


The environment is everything that isn’t me.

Albert Einstein

dr. hab. jerzy supernat institute of administrative studies university of wrocław

Documents

environment of organizationsto

vuca environment

jerzy supernattask environment

organizations surroundings

jerzy supernata key

general economic growth

substitute products

basic elements