Organizations and Environments Fall20032

7/28/2019 Organizations and Environments Fall20032

1/34


2/34

Definitions of Organizations

Social entity, goal directed, deliberately

structured, identifiable boundaries (Daft)

Response to and means of creating value

that satisfies human needs. Embodies

collective knowledge, values, and vision

(Jones) Integration of specialized knowledges into a

common task (Drucker)


3/34

Organizations

Human creations whose operations and

products are results of the ways we govern

them and of the social, institutional, andpolitical structures within which they

operate (i.e., their environments)

Organizations are both products of thesestructures and de-stabilizers of these

structures


4/34

Trends and Tensions in

Contemporary Organizations Small and flexible vs. large and vertically

integrated

Technology as work saver vs. work producer Networks vs. hierarchies

Knowledge workers vs. administrators as powerful

organizational members Manufacturing vs. service

Labor shortages vs. labor surpluses


5/34


Contemporary Organizations Production of high vs. low wage service

jobs

Job as package of specific duties in specific

time period vs. job as flexible in duties,

time, and space

Need for organizational learning vs. poormemory capacity due to downsizing,

merger, and acquisition activity


6/34


Contemporary Organizations Globalism vs. nationalism vs. environmentalism

Establishment of strong organizational cultural

values vs. appreciating diversity Multigenerational workplaces: Veterans vs.

boomers vs. GenXers, vs. Generation Y vs.

millennial generation

New technologies vs. old human values (e.g.,

biotechnology, wireless technology)


7/34

Essential Features of Organizations

Open system: input, transformation, output

Subsystems: boundary spanning, production,

maintenance, adaptation, management

Domains: range of products and servicesproduced for serving markets and customers

Environmental Transactions: dealing with factorsoutside the organizational boundaries


8/34

Open Systems View of Organization

Input Output

Raw

Materials

Resources

Transformation

Products

Services

ENVIRONMENT

Organization

Subsystems

Boundary

Spanning

Boundary

Spanning

Production

Maintenance

Adaptation

Management


9/34

Organization-Environment Interface

General factors

Economic

International Political/legal

Technology

Social/demographic

Cultural

Physical/natural

resources

Task (specific) factors

Customers

Suppliers Distributors

Regulatory agencies

Competitors

Unions

Partners

Special Interests


10/34

Environmental Uncertainty

Stability-ChangeDimension

How fast andunpredictably elementschange

Universities vs.telecommunications

Determines howoften you need tocollect information

Simple -ComplexDimension

Number of elementsand their similarity

Family restaurant vs.automobilemanufacturer

Determines whatinformation you need


11/34

Perceived Environmental

Uncertainty Simple vs. Complex Elements

Stable vs. Dynamic Elements

Richness vs. Poorness of Elements

More uncertainty results when

organization has to deal withcomplex, changing, and/or poorquality elements.


12/34

Environmental Uncertainty

Rate of Change

Complexity

Low

High

Low High

Low

Uncertainty

Moderate

Uncertainty

Moderate

Uncertainty

High

Uncertainty

(Information known

and available)

(Constantly need

new information)

(Information

overload)

(Information needs

unknown)


13/34

Theories of Organization-

Environment Relationships Contingency Theory

Resource Dependence

Strategic Choice

Population Ecology

Institutional Theory Transaction Cost Theory


14/34

Contingency Theory

Most effective way to organize is contingent oncomplexity and change in environment

Stable environments: Mechanistic structures

(specialization, formality, hierarchy)

Changing environments: Organic structures

(less specialization, informality, lateral relations)


15/34

Resource Dependence

Organizations obtain scarce andvalued resources fromenvironments

Desire to control these resourcesto minimize dependencies

Processes and transactions usedto obtain resources developdependencies

Balancing act of maintainingautonomy and recognizingdependencies


16/34

Strategic choice

Managers perceive environments

Make strategy and design structure

Re-strategize when changes are

perceived

Managers enactenvironments throughtheir decision-making choices

Since managers perceive differently,

they bring organizations in different

directions

Example: Sears vs. Montgomery

Ward


17/34


18/34

Institutional Theory

Societal institutions are powerful forcesfor ensuring control and order

In responding to institutional pressures,

organizations develop isomorphic (similar)

strategies, structures, and systems

Normative, coercive, and mimetic forces

make all organizations look the same

Goal is to obtain social legitimacy Example: banks, universities, discount

stores


19/34

Transaction Cost Theory

Organizations try to reduce monitoring,

negotiating, and governing exchanges withenvironmental elements (transaction costs)

Environmental uncertainty, opportunism,

bounded rationality, small numbersbargaining, asset specificity, and risk levelsincrease transaction costs

Transaction and bureaucratic costs balanced


20/34

What specific adaptation devices

do organizations use? Structural Responses

Develop new positions or units

Boundary-spanning activities

Buffering roles and units

Planning Groups

Forecasting

Management Information

Systems


21/34

Specific Adaptation Devices

Inter-organizational Linkages:

Symbiotic interdependencies

Benefit both organizations

Competitive interdependencies Direct competition for scarce

resources


22/34

Symbiotic Interdependencies

Good reputation

Cooptation

Interlocking

directorates

Strategic alliances

Long-term

Contracts

Equity ownership in

other firms

Joint ventures

Mergers,

acquisitions, and

takeovers

Licensing

Consortia

Marketing ordistribution

agreements

Franchising


23/34

Competitive Interdependencies

Collusions

Signaling

Cartels

Trade associations

Regulatory bodies

Competitive strategic

alliances Networking


24/34

How do we assess if an organization

is effective in its environment?

Goals approach

Official vs. operative goals

Achieving organizational goals is effectiveness

Systems resource approach

Obtaining scarce and valued inputs

Measured by quality and costs of inputs; stock price

and market share

Example: Software firm hires the best engineers with

competitive compensation


25/34

What is organizational

effectiveness? Internal Systems Approach

Innovation and quick response to changes

Measured by decision making time, productinnovation rate, time to get new products to

market, reduction of conflict and motivation

problems

Example: 3M: 25% of sales must come from

products less than 5 years old


26/34


effectiveness? Technical efficiency approach

Ability to convert skills and resources into

goods and services efficientlyMeasured by rate of reduction of defects,

reduction of product costs and delivery times,

increases in customer service and product

quality

Example: TQM processes at Stanley

Engineering


27/34


effectiveness? Stakeholder Approach

Stakeholders are any individuals, groups, or

organizations that have an interest in the firmsactivities and ultimate survival

Internal stakeholders: owners or shareholders,employees, and managers

External stakeholders: customers, suppliers,government, unions, local community, general

public, natural environment


28/34

Managing Stakeholders

Inducements and contributions

balance

Inducements are what the firm

provides for stakeholder Contributions are what the

stakeholder provides for the firm

Firms would like to provide as

little inducement as possible foradequate levels of stakeholder

contribution and vice versa


29/34


30/34

Potential for Threat

High

High

Low

Low

Potential for

Cooperation

Supportive

Stakeholder:

Get Involvement

Marginal

Stakeholder:

Monitor

Non-supportive

Stakeholder:

Defensive strategies

Mixed Blessing

Stakeholder:

Collaborative

strategies


31/34

Managing Stakeholders

Managing multiple goals of stakeholders

setting priorities or preference ordering

sequential attention

bargaining and compromise

satisficing

At least minimal satisfaction of all current

stakeholders is organizational effectiveness.


32/34

Total Responsibility

Management Systems Focus is on the triple bottom line:

Economic (profits) Social (people)

Environmental (place)

TRM can be significant source of competitiveadvantage for firms who take the lead in theseinitiatives


33/34

Pressures for TRM

Primary stakeholders: owners, employees,

customers, and suppliers

Secondary stakeholders: NGOs, activists,communities, and governments

Social and institutional pressures and trends:

best of rankings and awards; emerging global

standards (e.g., UNs Global Compact); andreporting/accountability initiatives (e.g., GRI or

SA 8000 or AA1000)


34/34

Three Processes in the TRM

Approach Institutionalizinga vision and set of values

regarding responsible practice through the

enterprise (inspiration) Integration of the responsibility into practice

through strategy, management systems, and

human resource capacity

Improvement and innovation throughmeasurement, feedback systems, and learning and

remediation

Documents

Organizations and Environments Fall20032