Fundamentals of Management - The Management Environment

Fundamentals of Management - The Management Environment

Learning Objectives

  • 4.1 Explain the external environment and its importance.
  • 4.2 Discuss the external environment's effects on managers.
  • 4.3 Define organizational culture and explain its importance.
  • 4.4 Describe how organizational culture affects managers.
  • 4.5 Describe current issues in organizational culture.

External Environment

  • Definition: Factors, forces, situations, and events outside the organization that affect its performance.

Components of the External Environment

  • Exhibit 4-1 illustrates the components of the external environment.

Economic Factors

  • Global Productivity: Moderated globally, lagging in the U.S.
  • Global Trade: Improving, with strongest growth in Europe and Asia.
  • U.S. Employment: Up.
  • U.S. Workers: Many with steady jobs lack reliable income.
  • Health-care Law Mandates: Encouraging low-wage industries to use part-time workers.
  • American Dream: Questioning if it is still possible.

Economic Inequality

  • Harris Interactive Poll: Only 10% of adults think economic inequality is “not a problem at all.”

Sharing Economy

  • Asset owners share underutilized physical assets or knowledge/skills/time with others for a fee via peer-to-peer services.

Demographics

  • Demography: Is destiny.
  • Age Cohorts:
    • Baby Boomers
    • Gen X
    • Gen Y
    • Gen Z

How External Environment Affects Managers

  • Jobs and Employment
  • Assessing Environmental Uncertainty
  • Managing Stakeholder Relationships

Environmental Uncertainty

  • Exhibit 4-2: Environmental Uncertainty Matrix
    • Cell 1 (Simple, Stable): Stable and predictable, few components, similar components, minimal need for sophisticated knowledge.
    • Cell 2 (Complex, Stable): Stable and predictable, many components, dissimilar components, high need for sophisticated knowledge.
    • Cell 3 (Simple, Dynamic): Dynamic and unpredictable, few components, similar but changing components, minimal need for sophisticated knowledge.
    • Cell 4 (Complex, Dynamic): Dynamic and unpredictable, many components, dissimilar and changing components, high need for sophisticated knowledge.

Managing Stakeholder Relationships

  • Stakeholders: Constituencies affected by an organization’s decisions and actions.

Organizational Stakeholders

  • Exhibit 4-3: Common Organizational Stakeholders Includes:
    • Unions
    • Shareholders
    • Communities
    • Employees
    • Suppliers
    • Customers
    • Social and Political Action Groups
    • Competitors
    • Trade and Industry Associations
    • Media
    • Governments

Good Stakeholder Relationships

  • Lead to desirable organizational outcomes.
  • Affect organizational performance.
  • Demonstrate doing the “right” thing.

Organizational Culture

  • Definition: Shared values, principles, traditions, and ways of doing things that influence how members act.

Culture Characteristics

  • Perceived
  • Descriptive
  • Shared

Dimensions of Culture

  • Exhibit 4-4:
    • Innovation and Risk Taking: Degree of employee encouragement for innovation and risk taking.
    • Attention to Detail: Degree of expected precision, analysis, and attention to detail.
    • Outcome Orientation: Focus on results/outcomes vs. how they are achieved.
    • Aggressiveness: Degree of competitiveness vs. cooperation.
    • Team Orientation: Work organized around teams vs. individuals.
    • People Orientation: Management decisions consider effects on people.
    • Stability: Emphasis on maintaining the status quo.

Learning Organizational Culture

  • Origin: Usually reflects the vision or mission of founders.
  • How Employees Learn:
    • Organizational Stories: Narrative tales of significant events/people.
    • Corporate Rituals: Repetitive activities reinforcing values/goals.
    • Material Symbols/Artifacts: Facility layout, dress code, office size, perks, etc.
    • Language: Special acronyms, unique terms.

Strong Cultures

  • Cultures in which key values are deeply held and widely shared.
  • Can substitute for formal rules and regulations.
  • Create predictability, orderliness, and consistency.

Culture's Affect on Managers

  • Effect on what employees do and how they behave
  • Effect on what managers do

Managerial Decisions Influenced by Culture

  • Exhibit 4-5 illustrates managerial decisions affected by culture.

Current Issues in Organizational Culture

  • Organizational culture can drive employee productivity, engagement, and retention.

Creating a Customer-Responsive Culture

  • Exhibit 4-6: Creating a Customer-Responsive Culture
    • Type of Employee: Hire those with customer service personalities (friendly, attentive, enthusiastic, patient, good listeners).
    • Type of Job Environment: Design jobs with employee control to satisfy customers without rigid rules.
    • Empowerment: Give service-contact employees discretion for day-to-day decisions.
    • Role Clarity: Reduce uncertainty through training on product knowledge, listening, and behavioral skills.
    • Consistent Desire to Satisfy: Clarify commitment to doing whatever it takes, even outside normal requirements.

Creating an Innovative Culture

  • Challenge and involvement
  • Freedom
  • Trust and openness
  • Idea time
  • Playfulness/humor
  • Conflict resolution
  • Debates
  • Risk taking

Creating a Sustainability Culture

  • Involve everyone in defining sustainability for the organization.
  • Involve employees in finding ways to be more sustainable.
  • Create rituals to reinforce sustainability.
  • Use rewards.

Ethical Culture

  • Shared concept of right/wrong behavior reflecting core values and influencing ethical decision-making.

Learning Culture

  • Starts with buy-in at the top; leaders must understand what it takes and be committed to it.