Organizational Environment & Legitimacy

1. Organizational Environment & Legitimacy • Review Systems Theory Model • Organizational environment • Garnering legitimacy from the environment

2. Open System Model: Elements • Inputs: Materials and resources necessary for firm/system to remain functional. • Throughput: Transforming of inputs • Output: Finished good or service to be exchanged with the environment for new inputs • Environment/Feedback: information provided by the environment that effects the firm ability to continue operation.

3. Systems Theory Themes • Complexity and interdependence • No organization is an island or controls its world-IMPORTANT • Open system: organization has permeable boarders • Information, resources, energy passes in and out • Energy/activity/feedback is exchanged with the environment • Actions in environment effect Org. behavior and visa versa • Organizations are self regulating/responds to feedback • The whole is greater than the sum of its parts -Can not understand the entire organization by studying its parts example is engineered system functions as prototype, but not when mass produced

4. Simple Systems Model Environment: Output exchanged for Inputs Feedback of info. Inputs: Materials Resources Output: Finished Good/Svc. Throughput/ core technology Healthy open systems regularly exchanges feedback with its external environment and adjust inner-systems as needed.

5. RHP Environment: What are the actors and type of info provided Environment: Economic conditions, College acceptances Community perception # of people applying Inputs: Students, teachers, admin Smart boards….. Output: Educated, college prepared Young men and women Throughput Educational process, lesson plans, outdoor ed. extra curricular .

6. Forms of Feedback: RHP Feedback Examples • Feedback is information provided by environment which causes the organization to make modification in some form. • Note: not all information is detected by the focal organization

7. Organizational Environment: External Pressures, Demands, and Expectations

8. Environment/Organization (Pride of Lions) Interaction

9. Organizations and Environment Healthy open systems (read: organizations) regularly exchanges feedback (info) with its external environment and adjust inner-systems as needed. Organizations and their operating environment are in a constant state of change. Organization either adapt to (or are selected by) the environment or die.

10. Feedback: Environment • Outside of the “focal” organization: “field of play”. • Environment provides raw materials, resources, constraints, and information. • Environment consists of several entities and comprise interdependent relationships with the HSO and relevant others. • Environment affects change in the organization and organizations affect the environment.

11. Levels of the Environment General Focal Org. Instit/Task

12. General & Institutional/Task Levels • General: Context for the organization that consists of broad forces and dimensions • Economic trends; political legal dimensions; cultural issues…. • Institutional/Task: • Institutional: Rules and beliefs about development and operation. • Specific to HSO, where HSO gains LEGITIMACY in a non-market setting. • Task: Specific actors operating in some way with the focal organization’s domain. • Competitors, customers, suppliers; regulators

13. Environment: Dynamic Relationship • Events occurring in different levels have a ripple effect throughout. • Changes in task environment likely to have a more immediate effect upon focal organization. • Changes in general enviro. more difficult to detect and thus difficult to react to.

14. Environmental Dimensions to Evaluate HSO Context • Understand challenges HSO faces/relationship with environment. • Hostile/friendly (level of competition and interdependence with other actors) • Uncertain/certain. (sophistication of knowledge to compete and availability of resources)

15. Categorizing Environment Certain Most Manageable (sophistication of knowledge to compete ; availability of resources) Most Challenging Uncertain Friendly Hostile (level of competition, and interdependence with other actors)

16. Categorizing Organizations Certain Bricks/Mortar Bookstore Subway Restaurant (sophistication of knowledge to compete ; availability of resources) Start-up Biomedical Company Mortgage Lender Uncertain Friendly Hostile (level of competition and interdependence with other actors)

17. LEGITIMACY Currency of the HSO

18. HSO: Exchange for Resources Not Directly Dependent on Output Govt., Stakeholders Legitimacy $ Output: Transformed Client Note: Beneficiary of service does Not provide Currency for new inputs

19. Legitimacy: HSO • HSO needs money to operate, does not receive $ (in many cases) from the end-user. • The currency of the HSO is “legitimacy.” • Legitimacy is a conferred status the HSO earns and or is granted by entities and forces outside of the organization. • Those capable of providing resources must view the HSO as legitimate.

20. Sources of Legitimacy • Market does not determine Value of the HSO • Institutional environment confers legitimacy onto the HSO • HSO ability to meet PERCEIVED expectations of Institutional environment creates legitimacy

21. Institutional Environment: Bosses outside of the HSO • Environment contains actors that are like “bosses” outside the HSO who have a say in what is done inside the HSO • Instit. Enviro. facilitates the founding of a new HSO by recognizing/prioritizing a human service need and providing resources skilled in dealing with a need. • Comprised of regulatory approval agencies (FDA), certification organizations, legal restraints, recognized experts….that give formalized approval of HSO technology/treatments • Policy changes and laws alter the operating environment of HSO

22. Institutional Environment:Currency of the HSO is Legitimacy • Market for services does not determine Value of the HSO. Institutional environment confers legitimacy onto the HSO. • Instit. Enviro. facilitates the founding of a new HSO by recognizing/prioritizing a human service need and providing resources skilled in dealing with a need. • Comprised of regulatory approval agencies (FDA), certification organizations, legal restraints, recognized experts….that give formalized approval of HSO technology/treatments • HSO ability to meet PERCEIVED expectations of Inst. enviro. actors creates legitimacy

23. Institutional Environment: HSO Legitimacy • Outputs of the HSO are not easily evaluated. • Little formal empirical evaluation of treatments, treatment effects decay, measures of success vary, • Disagreement of what measures to use when evaluating a service. • In contrast outputs (good and services) of FPO are scrutinized and evaluated-Market. • Consumer reports, trade magazines, consumer satisfaction surveys… big part of FPO world. • Meeting expectations of institutional environment is important for survival-Legitimacy Relevance.

24. How to Garner Legitimacy: Institutional Environment • Empirical evaluation of your programs • “succeeding at what you set out to do” • satisfies donors that $ are well spent • becoming a requirement for many grant sources • Nonprofit governance • HSO must show that it’s internal oversight is transparent and effective • Monitor changes in political arena, economy and other global, macro arenas • Changes here will have an effect on the task/institutional “if we are to safeguard our credibility…we must take every step toward effective stewardship”

25. General Environment • Operate as an open system-events occurring outside of the organization cause threats/change within the organization • Events, trends, occurrences that effect the field of play for the HSO and all other HSO operating in the same strategic space • Examples: Economic shocks, political events/changes, public opinion

26. Managing the Environment “The only constant is change” • Critical management function is scanning the environment, detecting/reacting change • Understand implications of legislative, judicial, and budgetary change • Changes to needs and desires of consumers • Aware of trends/changing beliefs within professional associations and academic focus of study

27. Example: Enviro Change Effect Legitimacy • The institutionalization of mental health patients is viewed as inhumane by some in mental healthcare community and civil libertarians • Policy makers are lobbied to change laws that allow for involuntary institutionalization • Policy changes and laws are enacted • Residential facilities lose legitimacy, cuts in funding-go out of business

28. Garnering Legitimacy • Meet a widely recognized need • Save Reggie (alligator) not good for legitimacy • Be Big and Old: United Way. • Experts and Academics validate treatment/programs • Quality of treatment/service • Marketing and Promotion:

29. Promoting the HSO • Name recognition is not sufficient • People need to know what HSO does • Elevator Speech: Message starts with HSO fully understanding its mission • People in organization are clear on what you do • Make sure stakeholders fully understand mission • Promote

30. Marketing Examples • Open Doors Ministry: Sends donors a monthly newsletter describing how lives are being transformed. • UJA-Federation uses facebook and other social media to communicate message-30% increase in donations. • Laura Rhea, CEO Arkansas Rice Depot “it is important to tell the Rice Depot story…once people learn about (us) they are so willing to support what we do.” Factoid: to raise $100 costs $20 for a HSO. FPO the cost is $4.

31. Next Class • Read 9/11 effect: Do the exercise outlined on the next 3 slides • Read and summarize the following in a paragraph: • Organizational Evaluation (keep in mind linking quality of service with attracting $) • Managing revenue: navigating a tough economy

32. 9/11 Effect Class Exercise: Hypothetical HSO • You are the Exec. Director of a small NYC homeless shelter on Sep. 12, 2001. • Analyze the effects the terrorist attacks will have on your operating environment. • Think like an economist: effects on demand, supply, availability of resources. • Use systems theory model as framework for your analysis.

33. NYC Homeless Shelter: 9/11 effects • Demand for services: increase, decrease, stable? • Resource availability: more, less or same? • Competition for resources: Increase keep up with demand or decrease? • Supply of available services for homeless:

34. Hypothetical: Systems Model • Inputs: raw materials; resources/energy to do business • Throughput: ability to provide service/care • Outputs: effect people’s lives • Feedback: How does environment effect ability to function; Increase or loss of Legitimacy?