Chapter Organizational Environments and Cultures MGMT Chuck Williams Designed & Prepared by B-books, Ltd External Environments After reading the next four sections, you should be able to: discuss how changing environments affect organizations describe the four components of the general environment explain the five components of the specific environment describe the process that companies use to make sense of their changing environments Changing Environments Characteristics of Changing External Environments Environmental EnvironmentalChange Change Environmental EnvironmentalComplexity Complexity Resource Resource Scarcity Scarcity Uncertainty Uncertainty Environmental Change Environmental Change is the rate at which a company’s environments change  stable environments  dynamic environments Punctuated equilibrium theory Companies cycle through stable and dynamic environments 1.1 Environmental Complexity Environmental Complexity: the number of external factors in the environment that affect organizations Simple environments Complex environments 1.2 Resource Scarcity Resource Scarcity The degree to which an organization’s external environment has an abundance or scarcity of critical organizational resources 1.3 Natural Resources The scarcity of natural resources is a general concern Companies like Weyerhauser work extra hard to correct the misperception that they are using up valuable resources In fact, through careful planning and good management, Weyerhauser is able to both guarantee its lumber resources and be a good environmental steward Uncertainty 1.4 External Environment Specific Environment Components of the General Environment • • • • Economy Technological trends Sociocultural trends Political / Legal trends 10 Federal Regulation Agencies Consumer ConsumerProduct Product Safety Commission Safety Commission http://www.cpsc.gov http://www.cpsc.gov Department Departmentof ofLabor Labor http://www.dol.gov http://www.dol.gov Environmental EnvironmentalProtection ProtectionAgency Agency http://www.epa.gov http://www.epa.gov Equal EqualEmployment Employment Opportunity OpportunityCommission Commission Federal FederalCommunications Communications Commission Commission 3.4 http://www.eeoc.gov http://www.eeoc.gov http://www.fcc.gov http://www.fcc.gov Federal FederalReserve ReserveSystem System http://www.federalreserve.gov http://www.federalreserve.gov Federal FederalTrade TradeCommission Commission http://www.ftc.gov http://www.ftc.gov Food Foodand andDrug DrugAdministration Administration http://www.fda.gov http://www.fda.gov National NationalLabor LaborRelations RelationsBoard Board http://www http://www.nlrb.gov nlrb.gov Occupational OccupationalSafety Safetyand and Health Administration Health Administration Securities Securitiesand andExchange Exchange Commission Commission http://www.osha.gov http://www.osha.gov http://www.sec.gov http://www.sec.gov 22 Cost of Compliance Researchers studied U.S manufacturers and the costs they incur complying with the 25 major federal regulations They found: • There are about 300,000 manufacturing companies in the U.S • Each company spends roughly $2.2 million So, the aggregate cost of complying with federal regulations is roughly $660 billion And that’s just for manufacturing 23 Advocacy Groups Advocacy Groups  Groups of concerned citizens who band together to try to influence the business practices of specific industries, businesses, and professions  Techniques to try to influence companies  public communications  media advocacy  product boycotts 3.5 24 Advocacy Groups PETA is a well-known advocacy group that attempts to influence consumers and companies to pursue animal-friendly practices 25 Making Sense of Changing Environments Environmental Environmental Scanning Scanning Evaluating Evaluating External External Environments Environments Interpreting Interpreting Environmental Environmental Factors Factors Acting Acting on on Threats Threats and and Opportunities Opportunities 26 Environmental Scanning Searching the environment for events or issues that might affect an organization 4.1  keeps companies current on industry factors  reduces uncertainty  alters organizational strategies  contributes to organizational performance 27 Interpreting Environmental Factors Environmental Environmental Scan Scan Opportunities? Opportunities? Threats? Threats? 4.2 28 Acting on Threats and Opportunities Cognitive Maps  simplified models of external environments  depicts how managers believe environmental factors relate to possible organizational actions 4.3 29 Cognitive Maps 4.3 30 Internal Environments After reading this section, you should be able to: explain how organizational cultures are created and how they can help companies be successful 31 Internal Environments Internal Environment The trends and events within an organization that affect the management, employees, and organizational culture  important because it affects what people think, feel, and at work  organizational culture is the set of key values, beliefs, and attitudes shared by organizational members 32 Creation and Maintenance of Organizational Cultures Company Company Founder Founder Organizational Organizational Stories Stories Organizational Organizational Heroes Heroes 5.1 33 Successful Organizational Cultures Adaptability Adaptability Consistency Consistency Involvement Involvement Clear ClearVision Vision 5.2 Sales Sales Growth Growth Return Return on on Assets Assets Profits Profits Source: D.R Denison and A.K Mishra, Organization Science (1995): 204-223 Employee Employee Satisfaction Satisfaction Quality Quality 34 Levels of Organizational Culture   Behaviors Behaviors Surface Surface Symbolic Level Symbolic artifacts artifacts Level  What What people people say say2  How How decisions decisions are are made made Expressed Expressed Values Values and and Beliefs Beliefs  Beliefs Beliefs and and assumptions assumptions  Rarely Rarely discussed discussed Unconsciously Unconsciously Held HeldAssumptions Assumptions and and Beliefs Beliefs SEEN SEEN HEARD HEARD BELIEVED BELIEVED 5.3 35 Changing Organizational Cultures • Behavioral addition – is the process of having managers and employees perform a new behavior • Behavioral substitution – is having managers and employees perform a new behavior in place of another behavior • Change visible artifacts – such as the office design and layout, company dress codes, etc 5.3 36 ... misperception that they are using up valuable resources In fact, through careful planning and good management, Weyerhauser is able to both guarantee its lumber resources and be a good environmental