1. The Organizational Environment
Management
Organizational Behavior
C H A P T E R 4
The Organizational Environment
An Integrated Perspective
Jon L. Pierce & Donald G. Gardner with Randall B. Dunham
PowerPoint Presentation by Charlie Cook
Copyright © 2002 by South-Western

2. Learning Objectives
Identify and discuss key aspects of the organization’s general environment and task environments.
Identify the major problems that confront managers as a result of the relationship between their organization and its external environment.
Identify tactics that managers can use to increase their power over the task environment.
Explain how differences in environmental stability and segmentation influence the approach to managing and organizational design.
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3. Learning Objectives
Explain the concepts of mechanistic and organic organizations, and open and closed management systems.
Understand the importance of the boundary-spanning process.
Differentiate between the organizations’ external and internal environments.
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4. Organizational Environments
External environment
The environment that is outside the formal boundaries of the organization; having a set of conditions, circumstances, and influences that surround and affect the functioning of an organization.
Effective organizations develop management systems that integrate management practices and organizational design with the characteristics of their external environment.
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5. Organizational Environments (cont’d)
External environment partitions (cont’d)
The general environment—the broader milieu (environment, political setting, surroundings) in which an organization operates along with many other organizations.
The task environment—the more specific and immediate (localized) environment in which the organization conducts its business.
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6. The General Environment
Sociocultural domain
The values, customs, mores, and demographic characteristics of the people within a society.
Economic domain
The rules and economic institutions that regulate business activity and govern the transfers of land, labor, capital, goods and services that an organization needs to fulfill its goals.
Technological domain
The knowledge processes, means, systems, hardware, and software available to an organization to convert its inputs into outputs.
Legal/political domain
Those systems that allocate power among various groups in society and settle disputes as they arise, and that develop, administer, and enforce the law.
International domain
Organizations and the economic, legal,/political, technological and sociocultural domains of other countries with which they have contact.
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7. The Task Environment Suppliers Customers/ markets
All organizations have their suppliers, the providers of materials, labor, capital, equipment, and work space.
Customers/ markets
Customers and/or markets, those who are the distributors and users of the organization’s goods and services.
Regulatory and influence groups
Regulatory agencies and influence groups that organizations have to respond to, such as government agencies, unions, and professional associations.
Competitors
All those organizations that the organization competes with for both markets and resources.
Allies
Those firms with which an organization might form a a partnership for a joint venture.
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8. Relationship between the Task and General Environments and the Organization
Sociocultural
Economic
Technological
Legal/Political
International
Task Environment
Suppliers
Customers/markets
Regulatory and influence
groups
Competitors
Allies
Manager
and
Organization
FIGURE 4–1
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9. Organizational Environments (cont’d)
Internal environment
All that is the organization—such as its space, climate, machines/equipment, work and work processes, management and management processes, and organizational members.
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10. The Organization-Environment Relationship
Problems of environmental uncertainty
Managers can neither control nor predict everything that will happen in the organization’s interaction with the external environment.
Problems of interdependence
Organizations develop exchange relationships with other organizations that create interdependencies between the partners.
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11. Managing Uncertainty and Interdependence
Strategies for dealing with uncertainty and interdependence:
Managing the boundary that separates the organization from its external environment to reduce its impact on the organization.
Reducing the level of uncertainty and dependency on the environment by increasing the organization control over the external environment.
Integrating the organization with its external environment to create a “boundaryless” organization.
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12. Managing the Boundary Buffering Smoothing Anticipating and adapting
Stockpiling resources or warehousing outputs to avoid shortages and meet unexpected demand.
Smoothing
Attempting to influence the external environment by offering inducements or imposing premiums to adjust levels of product demand.
Anticipating and adapting
Using forecasts to predict anticipated demand and taking action on the forecast.
Rationing
Setting priorities for the use of scarce organizational resources to preserve the organization.
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13. Reducing the Level of Uncertainty and Dependency
Task Environment Strategies
Prestige—developing a favorable image that attracts others in the task environment.
Contracting—entering into binding arrangements with other entities.
Co-opting—absorbing part of the task environment into the organization.
Coalescing—merging or joining with a member of the task environment.
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14. Reducing the Level of Uncertainty and Dependency
Tactics
Selectively recruiting of key employees from external environment firms builds information and knowledge about competitors.
Encouraging regulation of the external competitive environment that favors current competitors over new or emerging competitors.
Engaging in political activities that secure additional resources for the organization.
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15. Environmental Change and Segmentation
The degree to which an organization’s task environment is stable (undergoing few and slow changes) or shifting (dynamic—undergoing frequent and rapid changes).
Environmental segmentation
The degree of homogeneity (similarities) and heterogeneity (differences) among components of the organization’s task environment.
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16. Environmental Conditions
Stable/Homogeneous
Low Uncertainty
Stable/Heterogeneous
Moderate Uncertainty
Shifting/Heterogeneous
High Uncertainty
Shifting/Homogeneous
Low
High
Degree of
Environmental
Segmentation
Degree of Environmental Change
Rules, regulations, SOPs
Boundary spanners,
specialized roles
Source: J. D. Thompson Organization in action. New York: McGraw-Hill, 72.
FIGURE 4–2
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17. The Organization-Environmental Relationship
Causes of Differentiation in Design and Management Practice
External Task
Environment
Organization
Design
and
Management
Practice
FIGURE 4–3
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18. Burns and Stalker A study of the relationships—
environmental conditions, management practice, and organizational design
between organizations and their environments.
Identified two types of organizations:
Organic organization
An organization whose structure is fluid and flexible.
Mechanistic organization
An organization whose structure is fixed and rigid (also referred to as a bureaucracy).
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19. Mechanistic and Organic Organizations
Source: T. Burns and G. Stalker The management of innovation. London: Tavistock.
TABLE 4–1
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20. Closed and Open Organizational Systems
Closed system
An organization that is “shut off” to its external environment and one in which managers look internally for ideas on productivity and efficiency improvements.
Open system
An organization that attempts to integrate itself with its external environment and looks to the outside for ideas on productivity and efficiency improvements.
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21. Closed Systems of Management
Institutional Level
Administrative Level
Technical Core
Note: The arrows represent forces in the environment that attempt to penetrate the system.
FIGURE 4–4
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22. Open Systems of Management
Institutional Level
Administrative Level
Technical Core
Environmental Information,
Ideas, Beliefs, . . .
Note: The arrows represent forces in the environment that attempt to penetrate the system.
FIGURE 4–4
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23. The Influence of Environmental Uncertainty
Moderate
High Uncertainty
Low Uncertainty
Control-Oriented Management,
Mechanistic and Closed
Organizations
Homogeneous
Stable
Shifting
Heterogeneous
Involvement-Oriented
Management, Organic
and Open Organizations
FIGURE 4–5
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24. Linking Environments and Organizations
The boundary-spanning process
The means by which managers link the organization with its external environment.
Boundary roles—those positions in organizations that link the organization with its external environment.
Boundary spanners—individuals whose job it is to span the organization’s boundaries and integrate the organization with the external environment.
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25. The Internal Environment
Structures
How are the jobs/work that employees do designed?
What is the structural arrangement of the organization?
What types of technology are used to produce products and/or services?
Processes
How is coordination of organizational components maintained?
How is decision making conducted in the organization?
How is information (communications) disseminated in the organization?
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26. People and their Beliefs
Organization’s social system
Includes organizational members—management, formal leaders, and nonmanagerial employees and the beliefs and values they share.
Organizational culture
A pattern of basic assumptions invented, discovered, or developed by a given group as it learns to cope with problems of external adaptation and internal integration.
Culture is stable and resistant to change once it is established.
Cultures have a strong effect on the performance of organizations.
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27. Managerial and Organizational Functions
Organizational climate
The prevailing organizational condition that reflects the overall organizational tone or character.
A company’s “personality” that is a function of both its environment and its reactions to the external environment.
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28. Managerial and Organizational Functions
Through the Managerial Functions:
Planning
Directing
Organizing
Controlling
Integration of Organizational Functions
Operations
Finance
Marketing
Accounting
Human Resources
FIGURE 4–6
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29. The Internal Environment and Organizational Climate
Job Design
Work Unit and Organization Design
Technology
Structure
Coordinating
Decision Making
Communicating
Processes
Climate
Management and Formal Leaders
Nonmanagerial Employees
Culture
People and Their Beliefs
FIGURE 4–7
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