Transcript Organizations and Environments

Organizations and Environments
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)
Organizations
• Human creations whose operations and
products are results of the ways we govern
them and of the social, institutional, and
political structures within which they
operate (i.e., their environments)
• Organizations are both products of these
structures and de-stabilizers of these
structures
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
Trends and Tensions in
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. poor
memory capacity due to downsizing,
merger, and acquisition activity
Trends and Tensions in
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)
Essential Features of Organizations
• Open system: input, transformation, output
• Subsystems: boundary spanning, production,
maintenance, adaptation, management
• Domains: range of products and services
produced for serving markets and customers
• Environmental Transactions: dealing with factors
outside the organizational boundaries
Open Systems View of Organization
ENVIRONMENT
Raw
Materials
Products
Input
Transformation
Output
Organization
Resources
Services
Boundary
Spanning
Production
Maintenance
Adaptation
Management
Subsystems
Boundary
Spanning
Organization-Environment Interface
• General factors
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Economic
International
Political/legal
Technology
Social/demographic
Cultural
Physical/natural
resources
• Task (specific) factors
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Customers
Suppliers
Distributors
Regulatory agencies
Competitors
Unions
Partners
Special Interests
Environmental Uncertainty
• Stability-Change
Dimension
– How fast and
unpredictably elements
change
– Universities vs.
telecommunications
Determines how
often you need to
collect information
• Simple -Complex
Dimension
– Number of elements
and their similarity
– Family restaurant vs.
automobile
manufacturer
Determines what
information you need
Perceived Environmental
Uncertainty
• Simple vs. Complex Elements
• Stable vs. Dynamic Elements
• Richness vs. Poorness of Elements
• More uncertainty results when
organization has to deal with
complex, changing, and/or poor
quality elements.
Environmental Uncertainty
Rate of Change
Low
High
Low
Complexity
High
Low
Uncertainty
(Information known
and available)
Moderate
Uncertainty
(Information
overload)
Moderate
Uncertainty
(Constantly need
new information)
High
Uncertainty
(Information needs
unknown)
Theories of OrganizationEnvironment Relationships
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Contingency Theory
Resource Dependence
Strategic Choice
Population Ecology
Institutional Theory
Transaction Cost Theory
Contingency Theory
• Most effective way to organize is contingent on
complexity and change in environment
• Stable environments: Mechanistic structures
(specialization, formality, hierarchy)
• Changing environments: Organic structures
(less specialization, informality, lateral relations)
Resource Dependence
• Organizations obtain scarce and
valued resources from
environments
• Desire to control these resources
to minimize dependencies
• Processes and transactions used
to obtain resources develop
dependencies
• Balancing act of maintaining
autonomy and recognizing
dependencies
Strategic choice
• Managers perceive environments
• Make strategy and design structure
• Re-strategize when changes are
perceived
• Managers enact environments through
their decision-making choices
• Since managers perceive differently,
they bring organizations in different
directions
• Example: Sears vs. Montgomery
Ward
Population Ecology
• Focus is on whole population of
organizations (e.g., gasoline
stations in Canada; wine
industry in California)
• Natural selection processes:
VariationSelection  Retention
• Unsuccessful organizational
forms die out
• Environmental determinism
Institutional Theory
• Societal institutions are powerful forces
for 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
Transaction Cost Theory
• Organizations try to reduce monitoring,
negotiating, and governing exchanges with
environmental elements (transaction costs)
• Environmental uncertainty, opportunism,
bounded rationality, small numbers
bargaining, asset specificity, and risk levels
increase transaction costs
• Transaction and bureaucratic costs balanced
What specific adaptation devices
do organizations use?
• Structural Responses
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Develop new positions or units
Boundary-spanning activities
Buffering roles and units
Planning Groups
Forecasting
Management Information
Systems
Specific Adaptation Devices
Inter-organizational Linkages:
• Symbiotic interdependencies
• Benefit both organizations
• Competitive interdependencies
• Direct competition for scarce
resources
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 or
distribution
agreements
• Franchising
Competitive Interdependencies
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Collusions
Signaling
Cartels
Trade associations
• Regulatory bodies
• Competitive strategic
alliances
• Networking
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
What is organizational
effectiveness?
• Internal Systems Approach
– Innovation and quick response to changes
– Measured by decision making time, product
innovation 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
What is organizational
effectiveness?
• Technical efficiency approach
– Ability to convert skills and resources into
goods and services efficiently
– Measured 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
What is organizational
effectiveness?
• Stakeholder Approach
– Stakeholders are any individuals, groups, or
organizations that have an interest in the firm’s
activities and ultimate survival
– Internal stakeholders: owners or shareholders,
employees, and managers
– External stakeholders: customers, suppliers,
government, unions, local community, general
public, natural environment
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 for
adequate levels of stakeholder
contribution and vice versa
Managing Stakeholders
• Assess importance of
stakeholders
– Power, legitimate rights, and
urgency
• Assess potential for threat vs.
potential for cooperation
– Opportunity, capacity, and
willingness
• Determine appropriate
strategies for managing the
stakeholder
Potential for Threat
High
Low
Mixed Blessing
Stakeholder:
Supportive
Stakeholder:
Collaborative
strategies
Get Involvement
Non-supportive
Stakeholder:
Marginal
Stakeholder:
Defensive strategies
Monitor
High
Potential for
Cooperation
Low
Managing Stakeholders
• Managing multiple goals of stakeholders
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setting priorities or preference ordering
sequential attention
bargaining and compromise
satisficing
At least minimal satisfaction of all current
stakeholders is organizational effectiveness.
Total Responsibility Management
Systems
• Focus is on the triple bottom line:
– Economic (profits)
– Social (people)
– Environmental (place)
TRM can be significant source of competitive
advantage for firms who take the lead in these
initiatives
Pressures for TRM
• Primary stakeholders: owners, employees,
customers, and suppliers
• Secondary stakeholders: NGO’s, activists,
communities, and governments
• Social and institutional pressures and trends:
“best of” rankings and awards; emerging global
standards (e.g., UN’s Global Compact); and
reporting/accountability initiatives (e.g., GRI or
SA 8000 or AA1000)
Three Processes in the TRM
Approach
• Institutionalizing a 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 through
measurement, feedback systems, and learning and
remediation