ORGANIZATION AND ORGANIZATION AND ENVIRONMENT ENVIRONMENT Chapter 3 Chapter 3 Mary Jo Hatch with Ann L. Cunliffe
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ORGANIZATION AND ORGANIZATION AND ENVIRONMENTENVIRONMENT
Chapter 3Chapter 3
Mary Jo Hatch with Ann L. Cunliffe
ORG
ENVIRONMENT
Figure 3.1 Figure 3.1 The Organization in its EnvironmentThe Organization in its Environment
Inputs Outputs
Modernist Levels of the EnvironmentModernist Levels of the Environment
Interorganizational network
General environment
International environment
Organizational EnvironmentOrganizational Environment
Modernist theory, the environment …
lies outside the boundary of the organization.
provides the organization with resources and absorbs its products and services.
imposes constraints upon and demands adaptation from the organization.
Organizational EnvironmentOrganizational Environment
Symbolic-Interpretivists suggest environments …
are social constructions.
organizational members construct environmental features they think are significant.
different organizations construct their environments differently based on management’s interpretation.
Organizational EnvironmentOrganizational Environment
Postmodernists see environment as…
fragmented
boundaryless
image-driven
simulacra
ORG
Regulatory
Agencies
Special interests
Suppliers Customers
Competitors
Unions
Partners
Figure 3.2
NETWORK
Managing the EnvironmentManaging the Environment
Buffering
Protecting the internal organizational environment
from environmental shocks.
Example: Material, labour, or capital shortages.
Managing the EnvironmentManaging the Environment
Boundary Spanning
– Environmental monitoring activities.– Representing the organizational interests to the
environment.• Public relations• Advertising• Sales• Recruiting efforts
Stakeholder theoryStakeholder theory
Organizations operate under a social contract that guarantees certain rights to those who have a stake in the organization’s activities or outcomes. Those attending to stakeholder demands will be more successful.
Interorganizational NetworkInterorganizational Network
Stakeholders: Any actor that affects or is affected by the organization.
Network actors:
Investors, competitors, employees, media, suppliers, distributors, government, the physical environment, etc.
Figure 3.3 Figure 3.3 Interorganizational NetworkInterorganizational Network
ORG
Culture
Social
Legal
Political
Economy
Technology
Physical
Network
Figure 3.4
GENERAL
ENVIRONMENT
General Environment
ORG
Culture
Social
Legal
Political
Economy
Technology
PhysicalTASK ENV
terrorism
pluralism
diversity
broadband
globalization
global warming
surveillance
Some trends in the General Environment
ORG
GENERAL
TASK
ORG
GENERAL
TASK
ORG
GENERAL
TASK
ORG
GENERAL
TASK
ORG
GENERAL
TASKORG
GENERAL
TASK
ORG
GENERAL
TASK
Figure 3.5
INTERNATIONAL
ENVIRONMENT
International EnvironmentInternational Environment
The economic, political, socio-cultural, legal, technological, and physical interconnections that allow for permeable borders between nations.
Table 3.1 Table 3.1 Contribution of Environmental Contribution of Environmental SectorsSectors
Sector Contribution to Global Change
Technology Personal computers, internet, digital cameras, cell phones, etc.
Economic Global capital markets, technology exchanges, worldwide trade, etc.
Political/Legal Breakdown of nation-state authority, erosion of territorial borders, etc.
Social/Cultural Global media coverage, popular culture, consumerism, etc
Physical Population growth, loss of biodiversity, global warming, etc.
Network
Figure 3.6
GLOBAL
ENVIRONMENT
Culture
Political
Social
Technology
Economy
Physical
Legal
Environmental Contingency Theory
Resource Dependence Theory
Population Ecology
Environmental Contingency TheoryEnvironmental Contingency Theory
Successful organizations match their internal structure to environmental characteristics (dynamic or stable).
(Burns & Stalker, Lawrence & Lorsch)
Environmental Contingency TheoryEnvironmental Contingency Theory
Stable Environments• Routine activities• Strict lines of authority• Distinct areas of responsibility
Rapidly Changing Environments • Flexibility• Application of skill where needed• Changing work patterns
Environmental Contingency TheoryEnvironmental Contingency Theory
Information Perspective on Uncertainty
Uncertainty is experienced by individuals when they make decisions, rather than in the environment itself.
Fig. 3.7 Fig. 3.7 Environmental UncertaintyEnvironmental Uncertainty
Lowuncertainty
Moderate uncertainty
Moderateuncertainty
High uncertainty
low
high
high
low
Complexity
Rate of change
Fig. 3.8 Fig. 3.8 Links Between ConditionsLinks Between Conditions
Needed information is known and
Available.
Constant need for new information.
Information Overload.
Not known what information
is needed.
low
high
high
low
Complexity
Rate of change
Responding to UncertaintyResponding to Uncertainty
The Law of Requisite Variety (General Systems Theory)
For one system to deal effectively with another it must be of the same or greater complexity.
IsomorphismThe organization takes on the same formas its environment.
Resource Dependence TheoryResource Dependence Theory
Analysis of the interorganizational network can help the organization understand the power/dependence relationships that exist between it and other network actors.
Power and DependencePower and Dependence
An organization depends on resources controlled by the environment.
The environment therefore has power over an organization and can influence decision
making.
Fig. 3.9 Fig. 3.9 Applying Resource Dependence TheoryApplying Resource Dependence Theory
OrgRaw material inputs(suppliers)
Labor inputs(employees)
Outputs(customers)
Knowledge & equipment inputs (technology sector)
Capital inputs (investors)
Managing Power/DependenceManaging Power/Dependence
Pfeffer and Salancik suggest prioritizing dependence elements according to :
Criticality
The estimate of the importance
of a particular resource
Scarcity
The estimate of resource availability
Other Dependence Management Other Dependence Management StrategiesStrategies
• Vertical integration
• Horizontal integration
• Developing personal relationships
• Establishing formal ties with other firms
• Lobbying
• Marketing
*Your job as a manager: find the right mix of counter-dependencies you can create with those on whom you depend for critical, scarce, non-substitutable resources.
Population EcologyPopulation Ecology
Organizations within an ecological niche are competitivelyinterdependent and compete for survival. Study how & why some organizations survive.
• Variation
• Selection
• Retention
• Operation at the level of the environment
Population EcologyPopulation Ecology
The portion of the environment studied by population ecology is an ecological niche. Consisting of the resource pool upon which a group of competitors depends.
*Your job as a manager is to help your firm find a pool of resources over which it can compete successfully with other firms for its survival.
Darwin and OrganizationsDarwin and Organizations
Variation: Entrepreneurial innovation that gives birth to new organizations as well as adaptation of existing firms.
Selection: Organizations that best fit the needs and demands of their niche are supported with resources.
Retention: Organizational survival and fitness are maintained through the flow of resources.
Darwin’s survival of the fittest principle helps to explain the dynamics of populations of
organizations:
Cultural
Social
Legal
Political
Economic
Technological
PhysicalTASK ENV
Domain of Institutional Theory
Domain of Pop Ecology
Theory
Domain of Resource Dependence Theory
Institutional Theory
The Enacted Environment
Ambiguity Theory
Institutional Theory Institutional Theory (Selznick)(Selznick)
Organizations adapt to both the values of the internal groups and external society
Institutional Theory Institutional Theory (DiMaggio & Powell)(DiMaggio & Powell)
An organization is institutionalized by the following contexts:
1. Technical, Economic, or Physicale.g. production and exchange of
goods in a market
2. Social, Cultural, Legal, or Politicale.g. conforming to norms, values, rules, and beliefs upheld by society.
Institutional PressuresInstitutional Pressures
Coercive: Pressure to conform that comes from the government in the form of rules or laws.
Normative: Pressure from cultural expectations.
Mimetic: The desire of one organization to look like another. Usually used as a response to uncertainty.
Social LegitimacySocial Legitimacy
Institutional environments reward organizations for adopting acceptable practices and structures. Without this acceptance,
organizations can be driven out of business.
Your job as a manager is to to help your firm mimic practices indicated by the institutional environment through coercion or normative expectation in order to ensure its social legitimacy.
Fig. 3.10 Fig. 3.10 Social Legitimacy as an Social Legitimacy as an
Organizational ResourceOrganizational Resource
Transformation Process
Inputs Outputs
• raw materials
• labor
• capital
• equipment
• social legitimacy
Enacted Environment Enacted Environment (Weick)(Weick)
The conditions of the environment cannot be separated from managers perceptions of those conditions.
When decision makers respond to their perceptions they enact the environment they anticipated.
Ambiguity TheoryAmbiguity Theory
Encouraging multiple interpretations of goals, vision, and actions to produce different
strategies.
Deconstruction
Trace discursive and non-discursive influences over time
Fragmented environment
Burns’s Three Phases of IndustrializationBurns’s Three Phases of Industrialization
Phase 1: Simple manufacturing – British textile factories
Phase 2: Complex manufacturing – clothing, food, chemical processing, iron and steel factories
Phase 3: Supply outstrips demand, competition increases, search for global markets puts focus on consumer, all employees must contribute to economic success
Phases of Industrialization Phases of Industrialization (Burns)(Burns)
Phase 1:
The Factory System -
Productivity through machines and routinization.
Phases of IndustrializationPhases of Industrialization
Phase 2:Greater product variety, more complex production processes, growth in bureaucracy
- Control, routine, and specialization.
- Development of management structure
Phases of IndustrializationPhases of Industrialization
Phase 3Production overtakes domestic demand
- customer sensitive
- stimulated consumption
- internationalization
- technical developments
Post-Industrialism Post-Industrialism (Bell)(Bell)
Society is organized around the creation of knowledge and uses of information.
Society is shaped by its method of acquiring and distributing knowledge.
Avoiding HegemonyAvoiding Hegemony
Hegemony is the practice of interpreting the interests of the ruling class as universal.
- Surface language that implies the dominance of one group over others.
- Give voice to others.