Business Management

MANAGING THE EXTERNAL ENVIRONMENT

AND THE ORGANIZATION’S CULTURE

Chapter # 3

Hamidul Islam Hamid

Senior Assistant Professor,
Department of Marketing,
Faculty of Business Administration, AIUB
The Manager: Omnipotent or Symbolic?

 Omnipotent View of Management:

The dominant view in management theory and society in general is that
managers are directly responsible for an organization’s success or failure.

 Symbolic View of Management:

Others have argued that much of an organization’s success or failure is
due to external forces outside managers’ control.

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 The Omnipotent View

In Chapter # 1, we stressed how important managers were to organizations.

 Differences in an organization’s performance are assumed to be due to the decisions
and actions of its managers.
 Good managers anticipate change, exploit opportunities, correct poor performance, and
lead their organizations.
 When profits are up, managers take the credit and are rewarded with bonuses, stock
options, etc.
 When profits are down, top managers are often fired in the belief that “new blood” will bring
improved results.
In the omnipotent view, someone has to be held accountable when organizations perform poorly
regardless of the reasons, and that “someone” is the manager. Of course, when things go well,
managers also get the credit - even if they had little to do with achieving the positive outcomes. 3
 The Omnipotent View

Omnipotent View of Management

 Managers are directly responsible for an organization’s success or failure.
 The quality of the organization is determined by the quality of its managers.
 Managers are held accountable for an organization’s performance yet it is difficult
to attribute good or poor performance directly to their influence on the
organization.

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 The Symbolic View

 The symbolic view says that a manager’s ability to affect performance

outcomes is influenced and constrained by external factors. According to
this view, it’s unreasonable to expect managers to significantly affect an
organization’s performance.

 Instead, performance is influenced by factors over which managers have

little control, such as the economy, customers, governmental policies,
competitors’ actions, industry conditions, and decisions made by previous
managers.

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 The Symbolic View (Contd.)

This view is labeled “symbolic” because it’s based on the belief that
managers symbolize control and influence.
How? By developing plans, making decisions, and engaging in other
managerial activities to make sense out of random, confusing, and
ambiguous situations.
However, the actual part that managers play in organizational success
or failure is limited according to this view.

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 The Symbolic View

Symbolic View of Management

 Much of an organization’s success or failure is due to external forces outside of
managers’ control.
 The ability of managers to affect outcomes is influenced and constrained by
external factors.
 The economy, customers, governmental policies, competitors, industry
conditions,
technology, and the actions of previous managers
 Managers symbolize control and influence through their actions.
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Managerial Constraints

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

But their decisions and actions are constrained.
As you can see in the figure below, external constraints come from the
organization’s environment and internal constraints come from the
organization’s culture.

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The External Environment:
Constraints and Challenges

The term external environment refers to factors and forces

outside the organization that affect its performance.

As shown in figure below, it includes several different components.

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The External Environment:
Constraints and Challenges

 The economic component encompasses factors such as interest rates, debt &
credit availability, inflation, changes in disposable income, stock market
fluctuations, and business cycle stages.
 The demographic component is concerned with trends in population
characteristics such as age, race, gender, education level, occupations, family
structure, geographic location, income, and family composition.
 The political/legal component looks at central/ 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.
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The External Environment:
Constraints and Challenges

 The sociocultural component is concerned with societal and cultural factors

such as society's basic values, attitudes, trends, traditions, lifestyles, beliefs,
tastes, and patterns of behavior.
 The technological component is concerned with scientific or industrial
innovations such as availability of own technology from the host country or
borrowed technology from others.
 The global component encompasses those issues associated with globalization
and a world economy. For instance regional, and global business associations and
regulations.
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The Economic Environment

Managers need to be aware of the economic context so they

can make the best decisions for their organizations.
Recession:
In economics, a recession is a business cycle contraction
when there is a general decline in economic activity.
 Recessions generally occur when there is a widespread
drop in spending.

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The Demographic Environment

“Demography is destiny”.
Have you ever heard this phrase?
What it means is that the size and characteristics of a country’s population
can have a significant effect on what it’s able to achieve and on virtually
every aspect of life including politics, economics, and culture.
This should make it obvious why it’s important to examine demographics.
 Age is a particularly important demographic since the workplace often has
different age groups all working together.

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The Demographic Environment (Contd.)

Population researchers use these terms to refer to three of the more well-known
age groups found in the U.S. population.

 Baby Boomers
 Generation Y
 Post-Millennials

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The Demographic Environment (Contd.)

 Baby Boomers:
Baby Boomers are those individuals born between 1946 and 1964.
The total number of people in that group means they’ve significantly affected every
aspect of the external environment (from the educational system to
entertainment/lifestyle choices to the Social Security system and so forth) as
they’ve cycled through the various life stages.

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The Demographic Environment (Contd.)

 Generation Y:
Gen Y (or the “Millennials”) is typically considered to encompass those individuals
born between 1978 and 1994.
As the children of the Baby Boomers, this age group is also large in number and
making its imprint on external environmental conditions as well.
From technology to clothing styles to work attitudes, Gen Y is making its imprint on
workplaces.

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The Demographic Environment (Contd.)

 Post-Millennials (Generation Z):

Then, we have the Post-Millennials—the youngest identified age group -
basically teens and middle-schoolers.
This group has also been called the iGeneration, primarily because they’ve
grown up with technology that customizes everything to the individual.
Although this youngest group has not officially been “named,” some are
referring to them as the “touch-screen generation.”

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 How the External Environment Affects Managers ?

Jobs and Unemployment:

 Facing unemployment, employee layoffs, and reinstate.
 Balancing work demand and having right types of people with the right skills.
 Flexible work arrangements, use of freelancers etc.

Assessing Environmental Uncertainty:

 The degree of change and complexity in an organization’s environment.
 Stable and dynamic changes in the environment.
 Complex and simple complexity of operations.

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 How the External Environment Affects Managers ?
Managing Stakeholder Relationships

Stakeholders are any constituencies in the organization’s environment

affected by an organization’s decisions and actions.
These groups have a stake in or are significantly influenced by what the
organization does. In turn, these groups can influence the organization.
For example, think of the groups that might be affected by the decisions and actions
of Starbucks - coffee bean farmers, employees, specialty coffee competitors, local
communities, and so forth.
The idea that organizations have stakeholders is now widely accepted by both
management academics and practicing managers.
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Managing Stakeholder Relationships

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Managing Stakeholder Relationships

Benefits of Good Stakeholder Relationships

 Improved predictability of environmental changes.
 Increase successful innovations.
 Increase trust among stakeholders.
 Greater organizational flexibility to reduce the impact of change.

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The Organizational Culture:
Constraints and Challenges

Each of us has a unique personality - traits and characteristics that influence the way
we act and interact with others.
When we describe someone as warm, open, relaxed, shy, or aggressive, we’re
describing personality traits.
 An organization, too, has a personality, which we call its culture.
And that culture influences the way employees act and interact with others.
An organization’s culture can make employees feel included, empowered, and
supported or it can have the opposite effect.
Because culture can be powerful, it’s important for managers to pay attention to it.
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What Is Organizational Culture?

Organizational Culture has been described as 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.”

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What Is Organizational Culture?

Our definition of culture implies three things.

 First, 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.
 Second, organizational culture is descriptive.
It’s concerned with how members perceive the culture and describe it, not with
whether they like it.
 Finally, even though individuals may have different backgrounds or work at different
organizational levels, they tend to describe the organization’s culture in
similar terms. That’s the shared aspect of culture. 24
Dimensions of Organizational Culture?

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Strong Cultures

All organizations have cultures, but not all cultures equally influence employees’
behaviors and actions.
Strong cultures - those in which the key values are deeply held and widely
shared, have a greater influence on employees than weaker cultures.

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Strong Cultures

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Strong Cultures

 The more employees accept the organization’s key values and the
greater their commitment to those values, the stronger the culture.
 Most organizations have moderate to strong cultures, that is, there is relatively
high agreement on what’s important, what defines “good” employee behavior,
what it takes to get ahead, and so forth.
 The stronger a culture becomes, the more it affects the way managers plan,
organize, lead, and control.

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Where Culture Comes From and How It Continues

How an organization’s culture is established and maintained.

 The original source of the culture usually reflects the vision of the
founders.
 Once the culture is in place, certain organizational practices help
maintain it.
 The actions of top managers also have a major impact on the
organization’s culture.
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Where Culture Comes From and How It Continues

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 How Employees Learn Culture

Employees “learn” an organization’s culture in a number of ways.

The most common are:
 Stories
 Rituals
 Material Artifacts and Symbols
 Language

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 How Employees Learn Culture (Contd.)

 Stories:
Organizational “stories” typically contain a narrative of significant events or
people, including such things as the organization’s founders, rule breaking,
reactions to past mistakes, and so forth.
Managers sometimes can tell stories celebrating employees who perform
heroically for customers.
Such stories help convey what’s important and provide examples that people
can learn from.
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 How Employees Learn Culture (Contd.)

 Rituals:
Corporate rituals are repetitive sequences of activities that express and
reinforce the important values and goals of the organization.
Salespeople are rewarded for sales goal achievements with an array of
expensive gifts, including big-screen televisions, diamond rings, trips, etc.
This “show” acts as a motivator by publicly acknowledging outstanding sales
performance.

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 How Employees Learn Culture (Contd.)

 Material Artifacts and Symbols:

When we go into different businesses, we get a “feel” for what type of work
environment it is - formal, casual, fun, serious.
These reactions demonstrate the power of material symbols or artifacts in creating an
organization’s personality.
The layout of an organization’s facilities, how employees dress, the types of
automobiles provided to top executives, and the availability of corporate aircraft are
examples of material symbols.

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 How Employees Learn Culture (Contd.)

 Material Artifacts and Symbols (Contd.):

Others include the size of offices, the elegance of furnishings, executive “perks” (extra
benefits provided to managers such as health club memberships, use of company
owned facilities, and so forth), employee fitness centers or on-site dining facilities, and
reserved parking spaces for certain employees.
Material symbols convey to employees who is important and the kinds of behavior (for
example, risk taking, conservative, authoritarian, participative, individualistic, etc.) that
are expected and appropriate.

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 How Employees Learn Culture (Contd.)

 Language:
Many organizations and units within organizations use language as a way to
identify and unite members of a culture.
By learning this language, members attest to their acceptance of the culture and
their willingness to help preserve it.
For instance, at Cranium, a Seattle board game company, “chiff” is used to remind employees of
the need to be incessantly innovative in everything they do. “Chiff” stands for “clever, high quality,
innovative, friendly, fun.”

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Creating an Innovative Culture

According to Swedish researcher Goran Ekvall, “Creating an Innovative Culture

would be characterized by the following:
 Challenge and involvement
 Freedom
 Trust and openness
 Idea time
 Playfulness/humor
 Conflict resolution
 Debates
 Risk taking 37
Creating an Innovative Culture (Contd.)

 Challenge and Involvement

Are employees involved in, motivated by, and committed to the long-term
goals and success of the organization?
 Freedom
Can employees independently define their work, exercise discretion, and
take initiative in their day-to-day activities?
 Trust and Openness
Are employees supportive and respectful of each other?
 Idea Time
Do individuals have time to elaborate on new ideas before taking action? 38
Creating an Innovative Culture (Contd.)

 Playfulness/Humor
Is the workplace spontaneous and fun?
 Conflict Resolution
Do individuals make decisions and resolve issues based on the good of the
organization versus personal interest?
 Debates
Are employees allowed to express opinions and put forth ideas for
consideration and review?
 Risk Taking
Do managers tolerate uncertainty and ambiguity, and are employees
rewarded for taking risks? 39
Creating a Customer-Responsive Culture

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Spirituality and Organizational Culture

Workplace Spirituality?
It’s a culture in which organizational values promote a sense of purpose
through meaningful work taking place in the context of community.
Organizations with a spiritual culture recognize that people have a mind and a
spirit, seek to find meaning and purpose in their work, and desire to connect with
other human beings and be part of a community.

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 Spirituality and Organizational Culture (Contd.)

Research shows that spiritual organizations tend to have five cultural

characteristics:
 Strong sense of purpose
 Focus on individual development
 Trust and openness
 Employee empowerment
 Tolerance of employee expression

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END OF THE CHAPTER…

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