MO: Topic 5
Influence of the External Environment and the Organization’s Culture
Learning Objectives
1. Contrast the actions of managers according to the omnipotent and symbolic views.
2. Describe the constraints and challenges facing managers in today’s external environment.
3. Discuss the characteristics and importance of organizational culture.
The Manager: Omnipotent or Symbolic?
Omnipotent View of Management:
Definition: The perspective that managers hold ultimate responsibility for an organization’s success or failure.
Symbolic View of Management:
Definition: The perspective that a significant portion of an organization’s success or failure arises from external factors that are beyond the control of managers.
Reality:
In practice, managers exhibit characteristics of both views; they are neither entirely powerful nor completely powerless in the face of constraints.
Constraints on Managerial Discretion
External Constraints:
Originating from the organization’s environment.
Internal Constraints:
Derived from the organization’s culture.
The External Environment
Definition:
The set of factors, forces, and components outside the organization that influence its performance.
Components of the External Environment:
Economic Factors:
Interest rates, inflation, changes in disposable income, stock market fluctuations, business cycle stages, etc.
Demographic Factors:
Trends in population characteristics (age, race, gender, education level, geographic location, income, family composition).
Political/Legal Factors:
Federal, state, and local laws; global laws and the political conditions of various countries.
Technological Factors:
Innovations in scientific or industrial arenas.
Sociocultural Factors:
Values, attitudes, trends, traditions, behaviors, and lifestyles within society.
Global Factors:
Issues arising from globalization and interconnectedness of the world economy.
Degree of Environmental Change
Environmental Stability:
Environments may be stable (minimal change, predictable) or dynamic (frequent, unpredictable changes).
Degree of Environmental Complexity
Simple vs Complex Environments:
Simple Organizations:
Have few components that are somewhat similar, requiring minimal sophisticated knowledge to manage.
Complex Organizations:
Contain numerous, dissimilar components that necessitate a high level of sophisticated knowledge.
The Specific Environment
Definition:
The aspect of the environment that is directly relevant to the fulfillment of organizational goals.
Stakeholders:
Stakeholders are constituencies affected by and influencing an organization's actions and decisions.
Organizational Culture
Definition:
The shared values, principles, traditions, and practices that shape how members act and differentiate the organization from others.
Characteristics:
Perception:
Based on employee experiences within the organization.
Descriptive:
How members describe the culture.
Shared:
Common perceptions and experiences among employees.
Cultural Evolution:
Cultural values and practices develop over time.
Six Dimensions of Organizational Culture:
Adaptability
Encouragement of innovation and risk-taking.
Attention to Detail
Emphasis on precision and careful analysis.
Outcome Orientation
Focus on results rather than processes.
People Orientation
Consideration of the impact on people in decision-making.
Team Orientation
Organization of work activities around teams.
Integrity
Exhibition of honesty and high ethical standards.
Cultural Emphasis:
Organizations may prioritize one cultural dimension over others, shaping its unique personality.
Examples:
Tesla Motors: High Adaptability focusing on product innovation.
Southwest Airlines: High People Orientation, centralizing employees in cultural processes.
Strong versus Weak Cultures
Characteristics of Strong Cultures:
Values are widely shared.
Consistent cultural messages about importance.
Employees identify strongly with culture.
Connection between shared values and behaviors.
Characteristics of Weak Cultures:
Values limited to a select few (usually top management).
Contradictory messages regarding what’s important.
Lack of collective identification with culture.
Origins and Maintenance of Culture
Founders' Philosophy:
The vision of organizational founders typically shapes the original culture.
Selection Criteria:
Hiring processes reinforce existing culture.
Top Management Influence:
The behaviors and decisions of top management play a significant role in shaping culture.
Example:
Dan Price, CEO of Gravity, raised staff salaries to improve organizational culture and performance.
Socialization:
The process through which new employees learn the organization's culture and adapt to existing practices.
How Employees Learn Culture
Mechanisms of Learning Culture:
Stories:
Narratives about significant events help perpetuate culture (e.g., tales of founders or rule-breaking incidents).
Rituals:
Repetitive actions that reinforce core values and goals.
Material Artifacts and Symbols:
Convey messages about importance and expected behaviors within the organization.
Language:
Unites members of a culture through unique jargon and acronyms commonly adopted by the organization.
Managerial Decisions Affected by Culture
Influence of Culture on Decision-Making:
A manager’s decisions are substantially influenced by the prevailing organizational culture, determining approach and strategy.
Review of Learning Objectives
Learning Objective 1 Review
Omnipotent View:
Managers take direct responsibility for organizational outcomes.
Symbolic View:
Success is largely influenced by external factors beyond managerial control.
Constraints on Managerial Discretion:
Organizational culture (internal) and external environment constraints.
Learning Objective 2 Review
External Environment Factors:
Influences include economic, demographic, political/legal, sociocultural, technological, and global components.
Constraints from Environmental Factors:
Affect job security, environmental uncertainty, and stakeholder dynamics.
Learning Objective 3 Review
Characteristics of Organizational Culture:
Strong culture correlates with effective management practices.
Culture reflects founders' vision and is maintained through stories, rituals, symbols, and language.
Review Questions
Which factor is economic in an organization's external environment?
A. Lifestyles and behavior
B. Education level (Demographic)
C. Disposable income-
D. Geographic location
What aspect pertains to population characteristics such as age and education?
A. Economic
B. Political/Legal
C. Demographic-
D. Global
What are the two dimensions of environmental uncertainty?
A. Degree of change and degree of complexity-
B. Degree of change and degree of volume
C. Degree of complexity and degree of impact
D. Degree of impact and degree of timing
What describes the shared values that influence organization members’ actions?
A. Corporate hierarchy
B. Business configuration
C. Organizational culture-
D. Industrial psychology
What does culture derive from in organizations?
A. Vision and mission
B. Organization founder-
C. Past practices
D. Top management behavior
What is the process that helps new employees understand the organization’s way of doing things? Socialization
Terms to Know
Omnipotent View of Management: The management will take full responsibility of the company’s failure or success
Symbolic View of Management: The company’s failure or success is largely based on external factors
Organizational Culture: The values and culture of the company
Strong Cultures
Socialization: The process of how new blood learns the values of the comapny
External Environment
Environmental Uncertainty
Stakeholders