Topic 3 Revision Notes
ORGANISATION AND ENVIRONMENT
Topic 3 Revision Notes Modernist approaches to the environment: Defining and analyzing organisational environments: •The modernist perceive the environment as an objective entity lying outside an organisation’s boundary •The environment provides the organisation with raw materials and other inputs/resources it needs to produce outputs •The environment imposes constraints and demands on the organisation Buffering and boundary spanning (Scott, 1992): •Buffering: involves protecting the internal operation of the organisational external environmental shocks, such as material and labour shortages. This is because you want production to go ahead without worrying about external shocks. •Boundary spanning: involves monitoring the environment and passing on information to decision makers, as well as presenting the organisation and its interests to the wider environment -EG: An organisation tries to keep up to date with technological developments. Stakeholder theory: •Stakeholders refer to “those groups without whose support the organisation would cease to exist” •Stakeholders are vital to an organisations success and survival •Examples of stakeholders for an organisation: -Customers -Government regulators -Professional associations -General public -Competitors -Partners/alliances -Media -Shareholders -Board of directors and management -Employees -Trade unions Inter-organisational networks: •Focusses attention on the complex web of relationships in which a group of organisation is embedded •Stakeholders often exist in networks •Also relevant for supply-chain organisations
ORGANISATION AND ENVIRONMENT PESTEL Evaluation: •Political sector: refers to the role of governments in shaping business (eg employment, taxation) •Economic sector: refers to the economic conditions that an organisation operates in (eg interest rate, inflation rate, unemployment, consumption, trade, public vs private firm) •Social sector: refers to trends in demographics and culture (eg population size, ethnic mix, culture trends) •Technology sector: centres on products and services provided by science, as well as the west way of doing things •Environmental sector: refers to the physical conditions that an organisation operates in •Legal sector: refers to the laws and how the courts influence business activity (eg corporate corruption laws) International environment and globalization: •International environment: organisation begins to expand its activities beyond the boundaries of its home nation, and will begin to interact with the environments of other nations •Globalization: refers to the integration of political, social, legal and technological interconnections, so the environments are becoming increasingly similar
ORGANISATION AND ENVIRONMENT
Theories: Environmental Contingency Theory – Burns and Stalker (1961):
Resource Dependency Theory – Pheffer and Salancik (1978):
Population Ecology – Hawley (1950):
•These theorists were among the first to argue that the environment dictates the best form of organisation to use: -In stable environments: successful organisations specialize in routine activities and strict lines of authority and distinct areas of assigned responsibility -In rapidly changing environments: successful organisations embrace flexibility and employees are encouraged to apply their skills when needed •Environmental uncertainty is the key as to why some succeed and why others fail. Environmental uncertainty is made up of complexity and rate of change of the environment. Also when managers lack information on their environment (information uncertainty), they find it even harder to make sound organisational decisions. •Law of requisite variety: states that for one system to deal effectively with another it must be of the same or greater complexity. In other words you need an adequate level of response to overcome problems. -If the environment is simple, the organisation takes a simple form. -If the environment is complex, the organisation will favor a complex form. •Theorists held that an analysis of the interorganisational network can help the organisation understand the power and dependence relationships that exist between it and other network actors -Managers try to anticipate likely sources of influence from the environment and in turn suggest ways that the organisation can offset this influence -Organisations depend on resources controlled by the environment, including; raw materials, labour, capital, equipment, knowledge, and outlets for its products and services -Therefore the environment has power over organisations and can influence their decision making -Competition over raw materials, customers, and employees can be sources for resource dependence •Resource dependence analysis prioritizes dependencies as it is impossible to satisfy every source of dependence an organisation faces. Resources that are both critical and scarce should be given the highest priority when managing dependencies. •Possible strategies to reduce dependency: -Establishing multiple sources of supply helps manage dependence by reducing the power of a particular supplier -Forming alliances or merging with competitors can increase negotiating power over suppliers and customers -Corporate image campaigns can help with managing negative public opinions in the media which may influence consumer or the government -If strategies fail, the organisation can release itself from unwanted dependency by changing its environment, by entering or exiting a line of business, altering its product mix, etc. EG: Ford could enter into range of SUVs •Held that an organisation that adapts to the environment will be more likely to survive (survival of the fittest). Good organisations innovate, make a best fit with the needs of the public, respond to threats and opportunities, and have an ongoing flow of resources.
ORGANISATION AND ENVIRONMENT
Symbolic approaches to the environment: •Environments emerge from subjectively shared symbolism and beliefs about the environment; and by expectations set in motion by these symbols and beliefs •Organisational members have different cognition and feelings about the features of the environment they are surrounded in •Ultimately the environment is seen as a social construction Institutional Theory – Sezlnick (1957):
Enacted Environment Theory – Weick (1969):
Ambiguity Theory – March and Olsen (1976):
•Argues that not only do organisations require raw materials, knowledge, and equipment, they also depend upon the acceptance of the societies in which they operate -Organisations adapt to and express the values of their society -“Organisations compete not just for resources and customers, but for political power and institutional legitimacy, for social as well as economic fitness” •The environment puts demands on organisations in two different ways: 1. It makes technical, economic, and physical demands that require organisations to produce and exchange their goods and services in the market 2. It makes social, cultural, legal, and political demands that require organisations to play particular roles in society and to establish and maintain certain outward appearances •There are three different types of pressures that force institutionalized conformity on organisations: 1. Coercive: pressure to conform that comes from political sources in the form of government regulations and laws 2. Normative: pressure to conform that comes from social sources in the form of cultural values and expectations 3. Mimetic: pressure to conform that comes from organisational sources, by responding to uncertainties by replicating the structures, practices, or outputs of other organisations. •Conforming to institutionalized expectations wins social support and ensures legitimacy, which enhances the prospects for an organisation’s survival -However, there are limits to what institutionalization permits, eg ethical practices. -Also you have to be aware of the risks of accompanying such efforts towards institutionalization •Holds the view that when decision makers respond to their perceptions of the environment, they enact the environment they anticipated by constructing an interpretation that seems sensible -In other words, you construct your own reality of the environment based upon your own values and experiences •Managers and organisations can’t possibly understand everything in the environment, so they filter through their values and experiences to see what is important and what is not important •Holds that an ambiguous strategy in the environment enables people to interpret and give substance to the strategy in their thinking and actions. This strategy can produce favourable results and result in less burn out from workers.
ORGANISATION AND ENVIRONMENT
Post-Modern approach to the environment: •Hold that the environment is uncertain and boundary less Phases of Industrialization – Burns:
Challenging Stakeholder Theory – Freeman and Reed (1984):
Hegemony – Shrivastava (1995):
-First phase: arose because of the factory system with the use of machines to enhance productivity. The machines typically only performed one task in a simple process -Second phase: factory system spread to making clothing, food, engineering, steel processing, etc, all of which depended on a much more complex production process. This increased technological complexity led to emphasis on control and specialization of tasks, which in turn increased the ranks of managers. -Third phase: Industrial development in production would overtake consumers demand. Therefore, there is increased sensitivity to consumers, international markets, and technological developments. Ultimately leading to a greater customer orientation -Post-industrialism (Bell): Society is organised around the creation of knowledge, which leads to an increase in service sectors, but a decrease in production sectors. Also there is a shift from vertical structure to a horizontal structure in organisations -The post-industrial organisation is now associated with joint ventures, strategic alliances and virtual organisations -The stakeholder environment in modernist understandings is no longer stable and identifiable, its boundaries are marked by uncertainty, contradiction and paradox -It becomes almost impossible to privilege one set of interests, in terms of stakeholders. That is, organisations that attend to the demands of all stakeholders will outperform organisations that ignore some of their stakeholders while privileging others. -Hegemony is a form of domination in which the interests of the ruling class become the status quo through unquestioning acceptance -Post modernists try to challenge managers who have superior power by voicing out opinion to favour the disadvantaged
Topic 3 Revision Notes Modernist approaches to the environment: Defining and analyzing organisational environments: •The modernist perceive the environment as an objective entity lying outside an organisation’s boundary •The environment provides the organisation with raw materials and other inputs/resources it needs to produce outputs •The environment imposes constraints and demands on the organisation Buffering and boundary spanning (Scott, 1992): •Buffering: involves protecting the internal operation of the organisational external environmental shocks, such as material and labour shortages. This is because you want production to go ahead without worrying about external shocks. •Boundary spanning: involves monitoring the environment and passing on information to decision makers, as well as presenting the organisation and its interests to the wider environment -EG: An organisation tries to keep up to date with technological developments. Stakeholder theory: •Stakeholders refer to “those groups without whose support the organisation would cease to exist” •Stakeholders are vital to an organisations success and survival •Examples of stakeholders for an organisation: -Customers -Government regulators -Professional associations -General public -Competitors -Partners/alliances -Media -Shareholders -Board of directors and management -Employees -Trade unions Inter-organisational networks: •Focusses attention on the complex web of relationships in which a group of organisation is embedded •Stakeholders often exist in networks •Also relevant for supply-chain organisations
ORGANISATION AND ENVIRONMENT PESTEL Evaluation: •Political sector: refers to the role of governments in shaping business (eg employment, taxation) •Economic sector: refers to the economic conditions that an organisation operates in (eg interest rate, inflation rate, unemployment, consumption, trade, public vs private firm) •Social sector: refers to trends in demographics and culture (eg population size, ethnic mix, culture trends) •Technology sector: centres on products and services provided by science, as well as the west way of doing things •Environmental sector: refers to the physical conditions that an organisation operates in •Legal sector: refers to the laws and how the courts influence business activity (eg corporate corruption laws) International environment and globalization: •International environment: organisation begins to expand its activities beyond the boundaries of its home nation, and will begin to interact with the environments of other nations •Globalization: refers to the integration of political, social, legal and technological interconnections, so the environments are becoming increasingly similar
ORGANISATION AND ENVIRONMENT
Theories: Environmental Contingency Theory – Burns and Stalker (1961):
Resource Dependency Theory – Pheffer and Salancik (1978):
Population Ecology – Hawley (1950):
•These theorists were among the first to argue that the environment dictates the best form of organisation to use: -In stable environments: successful organisations specialize in routine activities and strict lines of authority and distinct areas of assigned responsibility -In rapidly changing environments: successful organisations embrace flexibility and employees are encouraged to apply their skills when needed •Environmental uncertainty is the key as to why some succeed and why others fail. Environmental uncertainty is made up of complexity and rate of change of the environment. Also when managers lack information on their environment (information uncertainty), they find it even harder to make sound organisational decisions. •Law of requisite variety: states that for one system to deal effectively with another it must be of the same or greater complexity. In other words you need an adequate level of response to overcome problems. -If the environment is simple, the organisation takes a simple form. -If the environment is complex, the organisation will favor a complex form. •Theorists held that an analysis of the interorganisational network can help the organisation understand the power and dependence relationships that exist between it and other network actors -Managers try to anticipate likely sources of influence from the environment and in turn suggest ways that the organisation can offset this influence -Organisations depend on resources controlled by the environment, including; raw materials, labour, capital, equipment, knowledge, and outlets for its products and services -Therefore the environment has power over organisations and can influence their decision making -Competition over raw materials, customers, and employees can be sources for resource dependence •Resource dependence analysis prioritizes dependencies as it is impossible to satisfy every source of dependence an organisation faces. Resources that are both critical and scarce should be given the highest priority when managing dependencies. •Possible strategies to reduce dependency: -Establishing multiple sources of supply helps manage dependence by reducing the power of a particular supplier -Forming alliances or merging with competitors can increase negotiating power over suppliers and customers -Corporate image campaigns can help with managing negative public opinions in the media which may influence consumer or the government -If strategies fail, the organisation can release itself from unwanted dependency by changing its environment, by entering or exiting a line of business, altering its product mix, etc. EG: Ford could enter into range of SUVs •Held that an organisation that adapts to the environment will be more likely to survive (survival of the fittest). Good organisations innovate, make a best fit with the needs of the public, respond to threats and opportunities, and have an ongoing flow of resources.
ORGANISATION AND ENVIRONMENT
Symbolic approaches to the environment: •Environments emerge from subjectively shared symbolism and beliefs about the environment; and by expectations set in motion by these symbols and beliefs •Organisational members have different cognition and feelings about the features of the environment they are surrounded in •Ultimately the environment is seen as a social construction Institutional Theory – Sezlnick (1957):
Enacted Environment Theory – Weick (1969):
Ambiguity Theory – March and Olsen (1976):
•Argues that not only do organisations require raw materials, knowledge, and equipment, they also depend upon the acceptance of the societies in which they operate -Organisations adapt to and express the values of their society -“Organisations compete not just for resources and customers, but for political power and institutional legitimacy, for social as well as economic fitness” •The environment puts demands on organisations in two different ways: 1. It makes technical, economic, and physical demands that require organisations to produce and exchange their goods and services in the market 2. It makes social, cultural, legal, and political demands that require organisations to play particular roles in society and to establish and maintain certain outward appearances •There are three different types of pressures that force institutionalized conformity on organisations: 1. Coercive: pressure to conform that comes from political sources in the form of government regulations and laws 2. Normative: pressure to conform that comes from social sources in the form of cultural values and expectations 3. Mimetic: pressure to conform that comes from organisational sources, by responding to uncertainties by replicating the structures, practices, or outputs of other organisations. •Conforming to institutionalized expectations wins social support and ensures legitimacy, which enhances the prospects for an organisation’s survival -However, there are limits to what institutionalization permits, eg ethical practices. -Also you have to be aware of the risks of accompanying such efforts towards institutionalization •Holds the view that when decision makers respond to their perceptions of the environment, they enact the environment they anticipated by constructing an interpretation that seems sensible -In other words, you construct your own reality of the environment based upon your own values and experiences •Managers and organisations can’t possibly understand everything in the environment, so they filter through their values and experiences to see what is important and what is not important •Holds that an ambiguous strategy in the environment enables people to interpret and give substance to the strategy in their thinking and actions. This strategy can produce favourable results and result in less burn out from workers.
ORGANISATION AND ENVIRONMENT
Post-Modern approach to the environment: •Hold that the environment is uncertain and boundary less Phases of Industrialization – Burns:
Challenging Stakeholder Theory – Freeman and Reed (1984):
Hegemony – Shrivastava (1995):
-First phase: arose because of the factory system with the use of machines to enhance productivity. The machines typically only performed one task in a simple process -Second phase: factory system spread to making clothing, food, engineering, steel processing, etc, all of which depended on a much more complex production process. This increased technological complexity led to emphasis on control and specialization of tasks, which in turn increased the ranks of managers. -Third phase: Industrial development in production would overtake consumers demand. Therefore, there is increased sensitivity to consumers, international markets, and technological developments. Ultimately leading to a greater customer orientation -Post-industrialism (Bell): Society is organised around the creation of knowledge, which leads to an increase in service sectors, but a decrease in production sectors. Also there is a shift from vertical structure to a horizontal structure in organisations -The post-industrial organisation is now associated with joint ventures, strategic alliances and virtual organisations -The stakeholder environment in modernist understandings is no longer stable and identifiable, its boundaries are marked by uncertainty, contradiction and paradox -It becomes almost impossible to privilege one set of interests, in terms of stakeholders. That is, organisations that attend to the demands of all stakeholders will outperform organisations that ignore some of their stakeholders while privileging others. -Hegemony is a form of domination in which the interests of the ruling class become the status quo through unquestioning acceptance -Post modernists try to challenge managers who have superior power by voicing out opinion to favour the disadvantaged
