dr. hab. Jerzy Supernat Institute of Administrative Studies University of Wrocław

1. The Environmentof Organizations dr. hab. Jerzy SupernatInstitute of Administrative StudiesUniversity of Wrocław

2. The Environment of Organizations • A key element in the effective management of an organization is: • determining the ideal alignment between the environment and the organization • working to achieve and maintain that alignment That is why managers must thoroughly understand the nature of the organization’s environment. dr hab. Jerzy Supernat

3. To illustrate the importance of the environment one can consider the analogy of a swimmer crossing the river. The swimmer must assess the current, obstacles, and distance before setting out. If these elements are properly evaluated the swimmer will arrive at the expected point on the far bank of the river. But if the elements are not properly understood, the swimmer might end up too far upstream or downstream. The organization is like a swimmer, and the environment is like the river. Thus, just as the swimmer needs to understand conditions in the water, the organization must understand the basic elements of its environment in order to maneuver properly among them. The Environment of Organizations

4. The Environment of Organizations • The environment of contemporary organizations is a VUCA environment. That is the name that the US Army War College gave to describe environment that is: • volatile • uncertain • complex • ambiguous dr hab. Jerzy Supernat

5. The Environment of Organizations • The organization’s environment: • external environment • general environment • task environment • internal environment dr hab. Jerzy Supernat

6. The Environment of Organizations General environment: the set of broad dimensions and forces in organization’s surroundings that create its overall context. Task environment: specific external organizations or groups that influence an organization. Internal environment: conditions and forces within the organization. dr hab. Jerzy Supernat

7. The Environment of Organizations • The general environment’s dimensions: • Political-legal • Economic • Sociocultural • Technological Government regulation of business. E.g. general economic growth, inflation, interest rates, and unemployment. The customs, mores, values, and demographic characteristics of the society. The methods available for converting resources into products or services. Pest:1.An annoying person or thing; a nuisance. 2. Aninjurious plant or animal, especially one harmful to humans. 3. A deadly epidemic disease; a pestilence. Show me a friend in need and I’ll show you a pest. dr hab. Jerzy Supernat

8. Pest.

9. The Environment of Organizations • The task environment includes: • competitors • customers • suppliers • regulators • strategic partners dr hab. Jerzy Supernat

10. The Environment of Organizations • Competitors • An organization’s competitors are other organizations that compete with it for resources. The resources that competitors vie for are: • customer money • quality labor • technological breakthroughs and patents • scarce raw materials • the right to purchase a prime piece of real estate in a growing community It is important to remember that competition takes place not only among organizations offering the same products but also between organizations offering substitute products. dr hab. Jerzy Supernat

11. The Environment of Organizations • Customers • A second dimension of the task environment is customers, or anyone who pays money to acquire an organization’s products or services. It is useful to distinguish among: • individual customers • institutional customers Dealing with customers has become increasingly complex in recent years. E.g. organizations face critical differences among customers as they expand internationally. dr hab. Jerzy Supernat

12. The Environment of Organizations Suppliers Suppliers are organizations that provide resources for other organizations. dr hab. Jerzy Supernat

13. The Environment of Organizations • Regulators • Regulators are elements of the task environment that have the potential to control, legislate, or influence an or-ganization’s policies and practices. There are two impor-tant kinds of regulators: • regulatory agencies (created by the government) • interest groups (organized by its members to attempt to influance organizations) dr hab. Jerzy Supernat

14. The Environment of Organizations • Strategic partners • Strategic partners / strategic allies are two or more orga-nizations that work together in joint ventures or other partnerships. • Strategic partnerships help organizations: • get from other organizations the expertise they lack • spread risk and open new market opportunities (indeed, most strategic partnerships are actually among interna-tional firms) dr hab. Jerzy Supernat

15. The Environment of Organizations • The internal environment (in the case of busi-ness organization) consists of: • owners • board of directors • employees • physical work environment • organization’s culture dr hab. Jerzy Supernat

16. The Environment of Organizations Owners The owners of a business are the people who can claim property rights to that business. Owners can be a single individual who establishes and runs a small business, partners who jointly own the busi-ness, individual investors who buy stock in a corporation (stockholders), or other organizations (institutional invest-ors). dr hab. Jerzy Supernat

17. The Environment of Organizations Board of directors A corporate board of directors is thegoverning body elec-ted by a corporation’s stockholders charged with over-seeing the general management of the organization to ensure that it is being run in a way that best serves the stockholders’ interests. dr hab. Jerzy Supernat

18. The Environment of Organizations Employees Of particular interest to managers today is the changing nature of the workforce as it becomes increasingly more diverse in terms of gender, age, ethnicity, and other dimensions. Workers are also calling for more job ownership – either partial ownership in the business or at least more say in how they perform their jobs. Another trend in many organizations is the increased reliance on temporary workers (temps) or part-time workers. dr hab. Jerzy Supernat

19. The Environment of Organizations Physical work environment Physical work environment is the ac-tual physical environment of the orga-nization and the work that people do. Some organizations have their facili-ties in downtown skyscrapers. Others locate in suburban or rural settings… Some facilities have long halls lined with traditional offices. Others have modular cubicles with partial walls and no doors… dr hab. Jerzy Supernat

20. The Environment of Organizations Organization’s culture Terrance E. Deal, Allan A. Kennedy Organizational culture is the set of va-lues, beliefs, behaviors, customs, and attitudes that helps the members of the organization understand what it stands for, how it does things, and what it considers important. dr hab. Jerzy Supernat

21. The Environment of Organizations Edgar H. Schein The organizational culture (or the culture of a group) is a pattern of shared basicassumptions that the group learned as it solved its problems of external adaptation and internal integration, that has worked well enough to be considered valid and, therefore, to be taught to new members as the correct way to perceive, think, and feel in relation to those problems. dr hab. Jerzy Supernat

22. The Environment of Organizations Edgar H. Schein considers organizational culture the foundation for all organizational success. According to him the culture is also what is most difficult to change in the organization. He defines three levels of organizational culture. The most visible level is behavior and artifacts. This is the observable level of culture, and consists of behavior patterns and outward manifesta-tions of culture: perquisites provided to executives, dress codes, level of technology utilized (and where it is utilized), and the physical layout of work spaces. All may be visible indicators of culture, but difficult to inter-pret. Behavior and artifacts also may tell us what a group is doing, but not why. Values underlie and to a large extent determine behavior, but they are not directly observable, as behaviors are (conscious goals and strategies). There may be a difference between stated and operating values. Underlying assumptions grow out of core values, until they become taken for granted and drop out of awareness. Basic assumptions form around deeper dimensions of hu-man existence such as the nature of humans, human rela-tionships and activity, reality and truth. dr hab. Jerzy Supernat

23. The Environment of Organizations Multiculturalism Organizational culture is embedded in the surrounding societal context (social culture), an invisible, intangible force that drives the organization. When the people who belong to an organization represent different cultures, their differences in values, beliefs, behaviors, customs, and attitudespose unique opportunities and challenges for managers. These broad issues are generally referred to as multiculturalism. A related area of interest is diversity. dr hab. Jerzy Supernat

24. The Environment of Organizations • Diversity • Diversity exists in a community of people when its members differ from one another along one or more important dimensions. These differences can obviously reflect the multicultural composition of a community. • In the business world, however, the term diversity per se is more generally used to refer to demographic and other differences among a people within a culture, namelydifferences in: • gender • age • ethnicity • religious beliefs • marital status (single parents, dual-career couples) • sexual orientation • dietary preferences dr hab. Jerzy Supernat

25. The Environment of Organizations • Managing diversity and multiculturalism • Individual strategies (four basic attitudes of individuals) • understanding • empathy • tolerance • willingness to communicate • Organizational approaches • organizational policies • organizational practices • diversity and multicultural training • organizational culture Esp. formulated in organization’s mission statement. E.g. making organization’s important committees diverse. dr hab. Jerzy Supernat

26. The Environment of Organizations • How environments affect organizations: • James D. Thompson’s perspective • Michael E. Porter’s perspective dr hab. Jerzy Supernat

27. The Environment of Organizations James D. Thompson: The environment can be described along two dimensions: its degree of homogeneity and its degree of change.These two dimensions interact to determine the level of uncertainty faced by the organization.Figure below illustrates a simple view of the four levels of uncertainty defined by different levels of homogeneity and change. complex H O M O G E N E I T Y simple C H A N G E dynamic stable dr hab. Jerzy Supernat

28. The Environment of Organizations • Michael E. Porter suggests that managers view the en-vironment of their organizations in terms of five competi-tive forces: • threat of new entrance • power of suppliers • power of buyers • threat of substitutes • competitive rivalry • According to MichaelE. Porter the object of formulating competitive strategy is to find a position where the organization can best defend itself against these forces, or can influence them in its favor. The extent to which new competitors can easily enter a market. The extent to which suppliers have the ability to influence potential buyers. The extent to which buyers of the products have the ability to influence the suppliers. The extent to which alternative products may supplant or diminish the need for existing products. The nature of the competitive relationship between dominant firms in the industry. dr hab. Jerzy Supernat

29. The Environment of Organizations • How organizations adapt to their environments: • information management • strategic response • mergers, acquisitions (takeovers), and partnerships • organization design and flexibility • direct influence • social responsibility A boundary spanner; environmental scanning; information systems. Maintaining the status quo, altering strategy a bit, or adopting an entirely new strategy. Mechanistic vs. organic design. Vertical integration; advertising; lobbying. dr hab. Jerzy Supernat

30. Concluding Remark The environment is everything that isn’t me. Albert Einstein dr hab. Jerzy Supernat