STEPHEN P.

ROBBINS MARY COULTER

Chapter
Managing the External
3 Environment and the
Organization’s Culture
The Manager: Omnipotent or Symbolic?
➢Omnipotent view: managers are directly responsible
for an organization’s success or failure
➢Symbolic view: much of an organization’s success or
failure is due to external forces outside managers’
control
➢The dominant view in management theory and
society in general is that managers are directly
responsible for an organization’s success or failure.
We call this perspective the omnipotent view of
management. In contrast, others have argued that
much of an organization’s success or failure is due to
external forces outside managers’ control. This
perspective is called the symbolic view of
management.
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 Exhibit 3–1 Parameters of Managerial Discretion

In reality, managers are neither all-powerful nor helpless. But their

decisions and actions are constrained.
External constraints come from the organization’s environment and
internal constraints come from the organization’s culture
As you can see in Exhibit 3-1, external constraints come from the
organization’s environment and internal constraints come from the
organization’s culture.

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External Environment

 The economic component = such as interest rates, inflation, changes in

disposable income, stock market fluctuations, and business cycle stages.
 The demographic component = trends in population characteristics such as
age, race, gender, education level, geographic location, income, and family
composition.
 The political/legal = federal, state, and local laws as well as global laws and
laws of other countries. It also includes a country’s political conditions and
stability.
 The sociocultural= societal and cultural factors such as values, attitudes,
trends, traditions, lifestyles, beliefs, tastes, and patterns of behavior.
 The technological component = scientific or industrial innovations.
 The global component = globalization and a world economy.
Economic Environment
External Environment = volatile

 Nestlé is facing increased commodity costs. The maker of products from Crunch chocolate
bars to Nescafé coffee to Purina pet food has seen the price of chocolate so high, for
instance, increase by nearly 30 percent in five years. Overall, Nestlé spends more than $30
billion a year on raw materials.

 Rising costs are also affecting the cost of sushi. Higher global demand for fish and the
Japanese and U.S. currency exchange rates are influencing prices. Commodity (raw
materials) costs are just one of the many volatile economic factors facing organizations

The Global Economy and the Economic Context

keywords = challenge; business constraint
 The lingering Indonesian economic challenges began in 1997 with the turmoil and
increasing of indonesian foreign debt and the lack of of indonesian foreign exchange.
 Rupiah currency depreciation which closed at Rp 4,850/US dollar in 1997, rapidly decline
to a level of around Rp 17,000/US dollar on January 22, 1998. The rupiah has depreciated
more than 80 percent since the currency was floated on August 14, 1997.
Economic Inequality and the Economic
Context
keywords = constraint

 people believe that the gap between the rich and poor is problematic.
 As economic growth has languished and sputtered, and as people’s belief that anyone
could prosper declined, social discontent over growing income gaps has increased.
 Business leaders must realize that societal attitudes in the economic context have the
potential to create constraints. The bottom line is that business leaders need to
recognize how societal attitudes in the economic context also may create constraints
as they make decisions and manage their businesses.
Demographic environment
 Age is a particularly important demographic since the workplace often has different
age groups all working together
Baby Boomers born between 1946 - 1964
Gen Y (Millennials) born between 1978 - 1994
Post-Millennials (i generation and Gen Z-- touch screen generation)
 The size and characteristics of a country’s population can have a significant effect on
what it’s able to achieve in politics, economics, and culture.
 How the External Environment Affects
Managers
1. Jobs and Employment: The power of this constraint was painfully obvious during the last
global recession as millions of jobs were eliminated and unemployment rates rose to
levels not seen in many years. Work tasks may be done by freelancers hired to work on
an as-needed basis, or by temporary workers who work full-time but are not permanent
employees, or by individuals who share jobs.

2. Assessing Environmental Uncertainty

 Environmental uncertainty: the degree of change and complexity in an organization’s
environment
A. Change: stable to dynamic = If the components in an organization’s
environment change frequently, it’s a dynamic environment. If change is minimal, it’s
a stable one.-- no new competitors, few technological breakthroughs by current
competitors, little activity by pressure groups to influence the organization
B. Complexity: simple to complex = looks at the number of components in an
organization’s environment and the extent of the knowledge that the organization has
about those components. An organization with fewer competitors, customers, suppliers,
government agencies, and so forth faces a less complex and uncertain environment
Exhibit 3–11 Environmental Uncertainty Matrix
(soal kuis)

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Stakeholder Relationships
• Stakeholders
➢Any constituencies in the organization’s environment
that are affected by the organization’s decisions and
actions
• Why Manage Stakeholder Relationships?
➢It can lead to improved organizational performance.
➢It’s the “right” thing to do given the interdependence of
the organization and its external stakeholders.

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 Exhibit 3–12 Organizational Stakeholders

© 2007 Prentice Hall, Inc. All rights

reserved. 3–11
What is Organizational Culture?
Organizational culture: the shared values, principles, traditions, and ways of doing things
that influence the way organizational members act and that distinguish the organization
from other organizations

In most organizations, these shared values and practices have evolved over time and
determine, to a large extent, how “things are done around here.”
1. Culture is a perception. It’s not something that can be physically touched or seen, but
employees perceive it on the basis of what they experience within the organization.
2. Organizational culture is descriptive. It’s concerned with how members perceive the
culture and describe it, not with whether they like it.
3. Even though individuals may have different backgrounds or work at different
organizational levels, they tend to describe the organization’s culture in similar terms.
Exhibit 3–2 Dimensions of Organizational Culture

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Strong versus Weak Cultures
• Strong Cultures
➢Are cultures in which key values are deeply held and
widely held.
➢Have a strong influence on organizational members.
• Factors Influencing the Strength of Culture
➢Size of the organization
➢Age of the organization
➢Rate of employee turnover
➢Strength of the original culture
➢Clarity of cultural values and beliefs

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Benefits of a Strong Culture
• Creates a stronger employee commitment to the
organization.
• Aids in the recruitment and socialization of new
employees.
• Fosters higher organizational
performance by instilling and
promoting employee initiative.

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Organizational Culture
• Sources of Organizational Culture
➢The organization’s founder
❖ Vision and mission
➢Past practices of the organization
❖ The way things have been done
➢The behavior of top management
• Continuation of the Organizational Culture
➢Recruitment of like-minded employees who “fit”
➢Socialization of new employees to help them adapt to
the culture

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Exhibit 3–4 Strong versus Weak Organizational Cultures

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How Employees Learn Culture
• Stories
➢ Narratives of significant events or actions of people that convey the
spirit of the organization
• Rituals
➢ Repetitive sequences of activities that express and reinforce the
values of the organization
• Material Symbols
➢ Physical assets distinguishing the organization
• Language
➢ Acronyms and jargon of terms, phrases, and word meanings
specific to an organization

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How Culture Affects Managers
• Cultural Constraints on Managers
➢Whatever managerial actions the organization
recognizes as proper or improper on its behalf
➢Whatever organizational activities the organization
values and encourages
➢The overall strength or weakness of the
organizational culture

Simple rule for getting ahead in an

organization:
Find out what the organization rewards and do
those things.
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Exhibit 3–5 How an Organization’s Culture Is Established
and Maintained

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Exhibit 3–6 Managerial Decisions Affected by Culture

• Planning
• The degree of risk that plans should contain
• Whether plans should be developed by individuals or teams
• The degree of environmental scanning in which management will
engage
• Organizing
• How much autonomy should be designed into employees’ jobs
• Whether tasks should be done by individuals or in teams
• The degree to which department managers interact with each other

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Exhibit 3–6 Managerial Decisions Affected by Culture (cont’d)

• Leading
• The degree to which managers are concerned with increasing
employee job satisfaction
• What leadership styles are appropriate
• Whether all disagreements—even constructive ones—should be
eliminated
• Controlling
• Whether to impose external controls or to allow employees to
control their own actions
• What criteria should be emphasized in employee performance
evaluations
• What repercussions will occur from exceeding one’s budget

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Organization Culture Issues
• Creating an Ethical • Creating an Innovative
Culture Culture
➢High in risk ➢Challenge and
tolerance involvement
➢Low to moderate ➢Freedom
aggressiveness ➢Trust and
➢Focus on means as openness
well as outcomes ➢Idea time
➢Playfulness/
humor
➢Conflict
resolution
➢Debates 3–23