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Principles of Principles of ManagementManagementMBA-I 1MBA-I 1st st Sec I & II Sec I & IILecture 7,8,9Lecture 7,8,9(The Constraints – (The Constraints – Organizational Culture & Organizational Culture & Environment)Environment)
Management and Management and ConstraintsConstraintsManagement’s task becomes more difficult in the context of open system theory (as it has to manage internal as well as external factors)
The Organizational Environment is classified into two major categories
Internal (commonly known as “Culture”Internal (commonly known as “Culture”
External Environment (simply called External Environment (simply called “Environment”)“Environment”)
The Manager: How Much The Manager: How Much Control?Control?
Omnipotent ViewManagers are directly responsible for an Managers are directly responsible for an organization’s success or failureorganization’s success or failure
The quality of the organization is determined The quality of the organization is determined by the quality of its managersby the quality of its managers
Managers are held most accountableManagers are held most accountablefor an organization’s performance,for an organization’s performance,yet it is difficult to attributeyet it is difficult to attributegood or poor performancegood or poor performancedirectly to their influencedirectly to their influenceon the organizationon the organization
The Manager: How Much The Manager: How Much Control? (cont’d)Control? (cont’d)
Symbolic ViewMuch of an organization’s success or failure is Much of an organization’s success or failure is due to external forces outside of managers’ due to external forces outside of managers’ controlcontrol
The ability of managers to affect outcomes is The ability of managers to affect outcomes is influenced and constrained by external influenced and constrained by external factors:factors:
The economy, customers, governmental policies, competitors, industry conditions,technology, and the actions ofprevious managers
Managers symbolize control andManagers symbolize control andinfluence through their actioninfluence through their action
Internal Environment (Heavily effected by the Internal Environment (Heavily effected by the norms and values shared by members of the norms and values shared by members of the organization)organization)
What is Organizational Culture?
The 7 Dimensions of Organizational Culture
Risk, Attention to Detail, Outcome Risk, Attention to Detail, Outcome Orientation, People Orientation, Team Orientation, People Orientation, Team Orientation, Aggressiveness & StabilityOrientation, Aggressiveness & Stability
Types (Strong Vs. Weak Culture)
Sources of Culture
How employees learn organizational culture
Stories, Rituals, Material Symbols & Stories, Rituals, Material Symbols & LanguageLanguage
The Organization’s The Organization’s CultureCultureOrganizational Culture
A system of shared meanings and A system of shared meanings and common beliefs held by organizational common beliefs held by organizational members that determines, in a large members that determines, in a large degree, how they act towards each degree, how they act towards each other.other.
““The way we do things around here.”The way we do things around here.”Values, symbols, rituals, myths, and practices
Implications:Implications:Culture is a perception.Culture is shared.Culture is descriptive.
Strong versus Weak Strong versus Weak CulturesCulturesStrong Cultures
Are cultures in which key values are Are cultures in which key values are deeply held and widely held.deeply held and widely held.Have a strong influence on Have a strong influence on organizational members.organizational members.
Factors Influencing the Strength of Culture
Size of the organizationSize of the organizationAge of the organizationAge of the organizationRate of employee turnoverRate of employee turnoverStrength of the original cultureStrength of the original cultureClarity of cultural values and beliefsClarity of cultural values and beliefs
Just few years back the company was fighting for it’s survival Just few years back the company was fighting for it’s survival and no focus on improving it’s HR practicesand no focus on improving it’s HR practicesIn year 2000 the company was facing $17 billion in debt and In year 2000 the company was facing $17 billion in debt and it’s stock price dropped from $63 to about $4it’s stock price dropped from $63 to about $4Company suffered loses for 7 consecutive quarters and Company suffered loses for 7 consecutive quarters and investigations were called against the accounting mattersinvestigations were called against the accounting matters
The ComebackShifted it’s product mix and offered desktop copiers for offices Shifted it’s product mix and offered desktop copiers for offices and quality printers for publishersand quality printers for publishersCompany had an increased income to $222 million from just Company had an increased income to $222 million from just $19 million$19 millionThe reasons behind this turnaroundThe reasons behind this turnaround
Focus on Customers
Thinking about employees as a core (People Orientation)With strong values of social responsibility, diversity, quality and innovation
Diversity for Success: Case Study on Diversity for Success: Case Study on UPSUPS
UPSIntroductionIntroduction
Founded in 1907 as a messenger company in the United States the world's largest package delivery company and a leading global provider of specialized transportation and logistics servicesManage the flow of goods, funds, and information in more than 200 countries and territories worldwide.The Company has got a global postureUPS´s workforce is multicultural, multidimensional, and reflective of the broad attributes of our global communitiesFORTUNE® magazine as one of the "50 Best Companies for Minorities
It is not about race or gender or background rather the focus is about how much employees care about the company or good at their jobs
1/3 of the employees are from minorities
Representation of minorities is also at each level of the organization
Has a supplier diversity Program encouraging small and minority group suppliers
Diversity driving UPS towards success (may be Diversity driving UPS towards success (may be other factors but diversified workforce with new other factors but diversified workforce with new ideas and flavors is a strong contributing factor ideas and flavors is a strong contributing factor
African-Americans, Hispanics, Asian-Pacific Americans and other minorities make up 35 percent of the company´s 348,400 employees in the United States.
Minorities accounted for half of UPS´s new employees in 2005.
Women represent 28 percent of the U.S. management team and 20 percent of the overall workforce, holding jobs from package handlers, to drivers, to senior management and to the UPS Board of Directors.
Among the company´s 63,000 U.S. managers, minorities hold nearly 30 percent of those executive positions. Positions held include district managers, the UPS Management Committee, and UPS´s Board of Directors.
Task EnvironmentTask EnvironmentTask EnvironmentTask EnvironmentTask Environment: forces from suppliers, distributors, customers, and competitors.Suppliers: provide organization with inputs
Managers need to secure Managers need to secure reliable input reliable input sourcessources..
Suppliers provide raw materials, components, Suppliers provide raw materials, components, and even labor.and even labor.
Working with suppliers can be hard due to shortages, unions, and lack of substitutes.Suppliers with scarce items can raise the price and are in a good bargaining position.
Managers often prefer to have many, similar Managers often prefer to have many, similar suppliers of each item.suppliers of each item.
Distributors: organizations that help others to sell goods.
Compaq Computer first used special computer Compaq Computer first used special computer stores to sell their computers but later sold stores to sell their computers but later sold through discount stores to reduce costs.through discount stores to reduce costs.
Some distributors like Wal-Mart have strong Some distributors like Wal-Mart have strong bargaining power.bargaining power.
They can threaten not to carry your product.
Customers: people who buy the goods.
Usually, there are several groups of customers.Usually, there are several groups of customers.For Compaq, there are business, home, & government buyers.
Task EnvironmentTask EnvironmentTask EnvironmentTask EnvironmentCompetitors: other organizations that produce similar goods.
Rivalry between competitorsRivalry between competitors is usually the is usually the most serious force facing managers.most serious force facing managers.
High levels of rivalry often means lower prices.High levels of rivalry often means lower prices.Profits become hard to find.
Barriers to entry keep new competitors out Barriers to entry keep new competitors out and result fromand result from::
Economies of scale: cost advantages due to large scale production.Brand loyalty: customers prefer a given product.
The General EnvironmentThe General EnvironmentThe General EnvironmentThe General Environment
Consists of the wide economic, technological, demographic and similar issues.
Managers usually cannot impact or control Managers usually cannot impact or control these.these.
Forces have profound impact on the firm.Forces have profound impact on the firm.
Economic forces: affect the national economy and the organization.
Includes interest rate changes, Includes interest rate changes, unemployment rates, economic growth.unemployment rates, economic growth.
When there is a strong economy, people When there is a strong economy, people have more money to spend on goods and have more money to spend on goods and services.services.
Demographic forces: result from changes in the nature, composition and diversity of a population.
These include gender, age, ethnic origin, etc.These include gender, age, ethnic origin, etc.For example, during the past 20 years, women have entered the workforce in increasing numbers.
Currently, most industrial countries are aging.Currently, most industrial countries are aging.This will change the opportunities for firms competing in these areas.New demand for health care, assisting living can be forecast.
Political-legal forces: result from changes in the political arena.
These are often seen in the laws of a society. These are often seen in the laws of a society.
Today, there is increasing deregulation of many state-Today, there is increasing deregulation of many state-run firms.run firms.
Global forces: result from changes in international relationships between countries.
Perhaps the most important is the increase in Perhaps the most important is the increase in economic integration of countries.economic integration of countries.
Free-trade agreements (GATT, NAFTA, EU) decreases Free-trade agreements (GATT, NAFTA, EU) decreases former barriers to trade.former barriers to trade.
Provide new opportunities and threats to managers.Provide new opportunities and threats to managers.
How the Environment How the Environment Affects ManagersAffects Managers Environmental Uncertainty
The extent to which managers have The extent to which managers have knowledge of and are able to predict knowledge of and are able to predict change their organization’s external change their organization’s external environment is affected by: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.
Managers can counter environmental threats by reducing the number of forces.
Many firms have sought to reduce the number of Many firms have sought to reduce the number of suppliers it deals with which reduces uncertainty.suppliers it deals with which reduces uncertainty.
All levels of managers should work to minimize the potential impact of environmental forces.
Examples include reduction of waste by first line Examples include reduction of waste by first line managers, determining competitor’s moves by managers, determining competitor’s moves by middle managers, or the creation of a new strategy middle managers, or the creation of a new strategy by top managers.by top managers.
Responding To The Responding To The EnvironmentEnvironmentAdapting to the environment
company adjusts its structures and work processescompany adjusts its structures and work processes
in uncertain environment caused by in uncertain environment caused by complexitycomplexity, , companies tend to decentralize decision makingcompanies tend to decentralize decision making
empowerment - process of sharing power with employees
enhances their confidence in their ability to enhances their confidence in their ability to perform their jobs perform their jobs
engenders beliefs that they are influential engenders beliefs that they are influential contributors to the firmcontributors to the firm
in uncertain environments caused by in uncertain environments caused by dynamismdynamism, , companies tend to establish more flexible structurescompanies tend to establish more flexible structures
bureaucracy - suited for stable environments (low dynamism)
organic - provides flexibility required for changing environments (high dynamism)
Boundary SpanningBoundary SpanningBoundary SpanningBoundary SpanningManagers must gain access to information needed to forecast future issues.Boundary spanning is the practice of relating to people outside the organization.
Seek ways to respond and influence stakeholder Seek ways to respond and influence stakeholder perception.perception.
By gaining information outside, managers can By gaining information outside, managers can make better decisions about change.make better decisions about change.
More management levels involved in spanning, yields better overall decision making.
Scanning and MonitoringScanning and MonitoringScanning and MonitoringScanning and MonitoringEnvironmental scanning is an important boundary spanning activity.
Includes reading trade journals, attending Includes reading trade journals, attending trade shows, and the like.trade shows, and the like.
Gatekeeping: the boundary spanner decides what information to allow into organization and what to keep out.
Must be careful not to let bias decide what Must be careful not to let bias decide what comes in.comes in.
Interorganizational Relations: firms need alliances globally to best utilize resources.
Managers can become agents of change Managers can become agents of change and impact the environment.and impact the environment.
Any constituencies in the Any constituencies in the organization’s external environment organization’s external environment that are affected by the organization’s that are affected by the organization’s decisions and actionsdecisions and actions
Why Manage Stakeholder Relationships?
It can lead to improved organizational It can lead to improved organizational performance.performance.
It’s the “right” thing to do given the It’s the “right” thing to do given the interdependence of the organization interdependence of the organization and its external stakeholders.and its external stakeholders.