Management: Influence of the External Environment and the Organization’s Culture

This chapter explores the intricate relationship between an organization’s management practices, the external environment, and the internal organizational culture. Understanding these connections is pivotal for effective management and organizational success.

Reflective Questions

What are the factors in the external environment that could affect the management of the business?
How would you describe the culture of USEK?
How much difference does a manager really make in how an organization performs?
Do you like to work with people from other cultures? Why and why not?
What makes you a close friend to X and not a close friend to Y?

Learning Objectives

By the end of this chapter, students should be able to:

Contrast the actions of managers according to the omnipotent and symbolic views.
Describe the constraints and challenges facing managers in today’s external environment.
Discuss the characteristics and importance of organizational culture.

The Manager: Omnipotent or Symbolic?

There are two primary perspectives on the role of managers in organizational success or failure:

Omnipotent View: This perspective posits that managers have direct control over an organization’s success or failure, making crucial decisions that impact outcomes.
Symbolic View: This viewpoint argues that much of an organization's performance is influenced by external factors that are beyond the manager's control, such as market conditions and consumer behavior.

For instance, a decrease in sales can be attributed to either poor managerial decisions (omnipotent) or external economic conditions where consumers lack purchasing power (symbolic).

Managerial Constraints: What is Happening in Reality?

In practice, managers find themselves in a middle ground where they are neither completely omnipotent nor entirely helpless. Their decisions are constrained by both internal and external factors:

External Constraints: These stem from the broader environment in which the organization operates, including economic fluctuations, customer behaviors, and competitors' actions.
Internal Constraints: These arise from within the organization itself, primarily influenced by the culture and the skills or abilities of the employees.

The Environment and Environmental Uncertainty

The term 'environment' refers to the array of institutions or forces outside the organization that can influence its performance. Environmental uncertainty is characterized by two dimensions:

Degree of Change: Environments can be stable, where components remain consistent, or dynamic, marked by frequent changes that introduce unpredictability.
Degree of Complexity: Complex environments contain numerous components requiring sophisticated knowledge, while simple environments have fewer components that are easier to manage.

The External Environment

The external environment encompasses factors that can affect an organization's overall performance:

Economic Factors: These include interest rates, inflation, income changes, and stock market fluctuations.
Demographic Factors: This involves age, race, gender, education level, geographic location, and income.
Political/Legal Factors: Factors such as local laws, global regulatory frameworks, and political stability impact operations.
Sociocultural Factors: Encompass the values, attitudes, trends, and lifestyles of the society in which the organization operates.
Technological Factors: Include innovations that can alter how businesses operate within their industry.
Global Factors: Address issues related to globalization and the interconnectedness of world economies.

The Specific Environment

The specific environment directly relates to the achievement of organizational goals and includes stakeholders critical to success:

Suppliers: Vital for maintaining a steady flow of inputs.
Customers: Organizations exist to meet customer needs, making customer engagement essential.
Competitors: It is crucial to monitor competitors to adapt strategies effectively.
Government Agencies: Influence organizational operations through regulations.
Special Interest Groups: These groups can significantly impact organizational practices and policies.

Organizational Culture: Constraints and Challenges

Organizational culture acts like the personality of an organization, affecting employees’ feelings of inclusion, empowerment, and support. Understanding the organizational culture is crucial for managers:

Organizational Culture: Defined as the shared values, principles, and traditions that guide how members act and distinguish the organization from others.

Characteristics of Organizational Culture

The culture within an organization can be characterized by three key aspects:

Culture is a perception: It is recognized and understood by employees through their experiences within the organization.
Culture is descriptive: It is about how members perceive and describe it, irrespective of their personal liking.
Culture is shared: Employees tend to describe it in similar terms, regardless of their diverse backgrounds.

Six Dimensions of Organizational Culture

Research identifies six dimensions capturing an organization’s culture, reflecting various aspects of employee behavior:

Adaptability: The degree of innovation, flexibility, and risk-taking encouraged among employees.
Attention to Detail: Focus on precision and thoroughness in tasks performed by employees.
Outcome Orientation: Emphasis placed on results rather than processes.
People Orientation: Consideration of how decisions affect people's welfare.
Team Orientation: Encouragement of collaboration, with activities organized around teams.
Integrity: Promotion of honesty and high ethical standards within the organization.

Strong vs. Weak Cultures

Strong cultures are defined by the widespread and intense acceptance of core values among employees:

Characteristics of Strong Cultures:

Values are shared widely.
Response to change is coherent and consistent.
Striking narratives about the organization’s history are known to most employees.
High identification with shared values and behaviors.

Weak Cultures: Contrarily, in weak cultures, values are limited to a few individuals, leading to:

Conflicting messages about what is essential.
Limited knowledge of the organization’s history among employees.
Little connection between shared values and behaviors.

Where Culture Comes From?

Culture primarily originates from the founder's vision and is perpetuated through:

Maintaining practices that reinforce cultural values.
Hiring practices aimed at cultural fit.
The actions and behaviors of top management.
Socialization processes that help new employees adapt and align with the existing culture.

How Employees Learn Culture

Culture is imparted through various methods, including:

Stories: Narratives that connect the past with present goals.
Rituals: Repetitive activities reinforcing the organization’s values (e.g., annual ceremonies).
Material Artifacts and Symbols: Physical representations of culture, such as organizational layouts and employee attire.
Language: Specialized jargon or terms that create a sense of belonging and unity among employees.

How Culture Affects Managers

Organizational culture significantly influences the managerial role, affecting:

The decision-making process.
Expected behaviors and norms.
Dress codes and formalities.
Selection criteria and recruitment practices.
Socialization and integration of new employees.

The intersection of culture and management practices shapes how managers effectively plan, organize, lead, and control their teams, thus impacting overall organizational performance.

Classroom Activities

Develop guidelines to create more meaningful training programs that engage employees.
List desirable and undesirable characteristics of an organizational culture to ensure alignment with personal values.

Review Learning Objectives

3.1 Managerial Perspectives

Contrast between omnipotent and symbolic views:

Omnipotent view emphasizes direct managerial responsibility for outcomes.
Symbolic view highlights the influence of external factors.
Constraints on management arise from organizational culture and the external environment.

3.2 External Environment Constraints

Main challenges for managers include understanding and adapting to:

Economic forces impacting performance.
Demographic changes affecting customer needs.
Political/legal regulations influencing operational capabilities.
Sociocultural trends that shape consumer behaviors.
Technological advancements redefining industry standards.
Globalization challenges and opportunities.

3.3 Organizational Culture Importance

Characteristics of organizational culture to be noted:

Six dimensions including attention to detail, outcome orientation, and more.
A strong culture impacts managerial effectiveness significantly.
Founders’ vision is critical in shaping organizational culture.
Culture is shared and transmitted through various means such as stories and rituals.

Management: Influence of the External Environment and Organizational Culture

Management: Influence of the External Environment and Organizational Culture