Lecture outline 2

THE ENVIRONMENT
Please read the textbook for the following:
External and internal environments, Meag vs task environment
Dimensions of environment: Complexity and Dynamism
Uncertainty
Being an effective manager means that you have to cope with uncertainty and make decisions.
There are two major factors to consider in such decisions: Lack of information, and the various
interests impinging on you. You have to cope with the lack of information, and manage to deal with
stakeholders. Dealing with stakeholders implies that you have to take into account various internal and
external interests, priorotize and then make a decision. The importance of internal and external
interests varies with your organization’s life cycle. Thus, the effectiveness model which is given
along with this notes.

Ways of coping with uncertainty in the task environment

1.Adaptation- Dance to the tune of the environment. You change yourself to suit the environment.
Buffering,
Smoothing,

Forecasting,
and Rationing
Adapt when
a. When the environment has more power than you and you cannot d o much to change it.
b. When the fluctuations in the environment are short or medium term.
c. environment is simple or moderately complex, and is stable or only moderately unstable.

2. Favorability Influence- Proactively take on the challenge of the environment, and try to change it to
your needs.
Advertising and Public Relations,
Boundary Spanning,

Political Activity such as lobbying and Trade Associations.

There are other tactics under this heading in the textbook. Please read them.
Use favorability influence when
a. When you have more power than the environment or you can get more power through these tactics.
b. When the fluctuations are permanent or long term, then using these tactics and spending some
resources is justified.
c. Can be used in any environment. But as uncertainty increases (that is environment is more complex
and more unstable), co-opting, vertical integration, strategic alliances and lobbying become
increasingly important.

3. Domain Shifts Changing the mix of products and services offered by the firm. You get out of the
current environment, go to a new one. You can do this through diversification or internal venturing.
Use this when
a. the fluctuations are so radical that your industry is irreversibly changed or is dying (e.g., tobacco).
The emergence of turbulent environments This is a scheme for understanding the evolution of
Industry level environments. While the "Simple-Complex" looks at the firm as such, the 'Placid-
Random' to "Turbulent" scheme looks at the entire industry.
The progression to turbulence: Placid Random, Placid Clustered, Disturbed-Reactive, Turbulent.
Most industries progress through these stages. In the turbulent stage, simultaneous cooperation and
competition become essential. The global economy and Info. Tech. have made it a reality for many
industries.

TURBULENCE AND AMBIGUITY

Ambiguity (some call it “equivocality”) arises when there are no clear cause –effect connections. The
following points are worth remembering:
1. Most radical events have multiple causes and multiple effects.
2. Totally unrelated events and developments impact you before you realize it.
3. Linear relationships do not hold (e.g., “A leads to B, and that is all” kind of relationships;
interested? Read Godel, Escher and Bach by Hofstadter).
4. Whatever actions you take under these circumstances usually have multiple effects although you
intend your action to have only one specific effect.

How do I deal with it

While there is not much you can do about unrelated events etc., in the environment, thought processes
can be refined.
1. Think in circles and not straight lines.
2. Arrange the facts you have to make up a story. That is what is called enactment. Facts do not
present themselves to you neatly with cause-effect relations. You as a manager ultimately have to
impose that order.
➢ Critical to question your assumptions and your knowledge before ordering the
facts.
➢ For every A B arrow you draw, ask yourself if it B increases or decreases due
to A. Ask yourself too, if the arrow should be A B. See if there is another thing C
which is actually causing A.

3. After you do that, go back and play with the arrows and plu/minus signs a little.
➢ Is the minus sign correct on this particular arrow or should it be plus etc., kind of
questions?
➢ This minus effect on B (some variable) is undesirable. What do I need to do to make it
a +?
Just one adjustment or several adjustments (adjustment to several variables) needed?

This type of thinking is not easy but needs time and practice. As you move up the ladder, you will
need more of it. With respect to points 2 and 3 above, how do we check our knowledge and
assumptions anyway? You need to talk to people who know stuff that you do not. Please see attached
2X2 matrix on equivocality and understanding environment. Networking with reliable experts becomes
extremely important in this respect. Interested?
Read “Networking Smart” by Wayne Baker (1994, McGraw Hill).