Chapter 2 – the management environment (O)

*True or False*

Organizations can be too big to fail

FALSE
___ is the one constant for an organization
*Change* is the one constant for an organization
Organizations that are too bound by tradition and don’t (or resist) change are less likely to
Organizations that are too bound by tradition and don’t (or resist) change are less likely to *survive in today’s extremely competitive environment*
Companies must deal with the ___ environment and assess the important ___ in the managerial environment that are affecting the way organizations are managed
Companies must deal with the *dynamic environment* and assess the important *factors* in the managerial environment that are affecting the way organizations are managed
No successful organization, or its managers, can operate without understanding and dealing with the dynamic environment – ___ and ___ – that surrounds it.
No successful organization, or its managers, can operate without understanding and dealing with the dynamic environment – *external* and *internal* – that surrounds it.
The term *external environment* refers to
The term *external environment* refers to factors, forces, situations, and events outside the organization that affect its performance
What are the (6) components of the external environment?

See exhibit 2-1

1. economic
2. demographic
3. technological
4. sociocultural
5. political/legal
6. global
economic component
The *economic component* encompasses factors such as interest rates, inflation, changes in disposable income, stock market fluctuations, and business cycle stages.
demographic component
The *demographic component* is concerned with trends in population characteristics such as age, race, gender, education level, geographic location, income, and family composition.
technological component
The *technological component* is concerned with scientific or industrial innovations.
sociocultural component
The *sociocultural component* is concerned with societal and cultural factors such as values, attitudes, trends, traditions, lifestyles, beliefs, tastes, and patterns of behavior.
political/legal component
The *political/legal component* looks at federal, state, and local laws, as well as laws of other countries and global laws.
global component
The *global component* encompasses issues associated with globalization and a world ecoomy
How has the economy changed? (5)
*1. the “Great Recession” began with *turmoil in home mortgage markets* as many homeowners were unable to make payment*
2. The problems with home mortgages spread to businesses as credit markets collapsed.
*3. As liquidity dried up, the worldwide economic system sputtered and nearly collapsed. *
4. The slow recovery of global economies has continued to be a constraint on organizational decisions and actions.
*5. In addition, the World Economic Forum identified two significant risks facing business leaders and policy makers over the next decade: “severe income disparity and chronic fiscal imbalances.”*
How has the economy changed? short version (4)
1. Turmoil in mortgage markets
2. spread to businesses
3. “Great Recession”
4. foreclosure, unemployment, public debt, and social problems
Business leaders need to recognize how ____ and ____ affect business decisions.

What are (2) examples of this

Business leaders need to recognize how *social attitudes in the economic context * affect business decisions.
*Two examples are:*
1) People are becoming more discontented with the income gap between the rich and everyone else.
2) People’s belief that anyone can achieve prosperity is waning.
Just how much difference does a manager make in how an organization performs?
*Management theory proposes two perspectives to answer this:*
1. the Omnipotent view
2. the Symbolic view
the Omnipotent view
the view that managers are directly responsible for the success of failure of an organization
the Symbolic view
the view that much of an organization’s success of failure is due to external forces outside managers’ control, and that their decisions and actions are constrained
According to this view, managers experience what (2) constraints?
1. External constraints – come from the organization’s external environment
2. internal constraints – come from the organization’s culture
*So, back to answering the question…* Just how much difference does a manager make in how an organization performs?
Reality suggest a synthesis of the two theories- *managers are neither helpless nor all powerful*
The more logical approach to answering the question *”Just how much difference does a manager make in how an organization performs?”* is to see the manager as
The more logical approach to answering the question is to see the manager as *operating withing constraints imposed by the organization’s culture and environment*
Demographics
the characteristics of a population used for purposes of social studies, can and do have significant impact on how managers manager
*What role do demographics play?*

The __ and __ of a country’s population can have a significant effect on what it’s able to acieve

The *size* and *characteristics* of a country’s population can have a significant effect on what it’s able to acieve
Studying demographics involves
Studying involves demographics involves *looking at current statistics and future trends*
Demographic characteristics of concern to organizations include: (8)
1. age
2. income
3. sex
4. race
5. education level
6. ethnic makeup
7. employment status
8. geographic location
___ is a particularly important demographic for managers since the workplace often has difference age groups all working together
*Age* is a particularly important demographic for managers since the workplace often has difference age groups all working together
Demographic age cohorts are important to our study of management because
Demographic age cohorts are important to our study of management because *large numbers of people at certain stages in the life cycle can constrain decisions and actions taken by businesses, governments, educational institutions, and other organizations
Baby Boomers (2)
(1) born between 1946-1964
(2) The sheer number of people in that cohort means they’ve had significant impact on every aspect of the external environment – including Social Security
Gen X (2)
(1) born between 1965-1977
(2) this age group has been called the baby bust generation since it followed the baby boom and is on of the smaller age cohorts
Gen Y (or the “Millennials”) (2)
(1) typically considered to include those born between 1978 and 1994
(2) this age group is large in number and making its imprint on external environmental conditions as well
Post-Millennials
(1) the youngest identified age group, basically teens and middle schoolers.
(2) one thing that characterizes this group is that “many of their social interactions take place on the Internet, where they feel free to express their opinions and attitudes.”
One of the important organizational factors affected by changes in the external environment is ___ and ___.
One of the important organizational factors affected by changes in the external environment is *jobs* and employment*.
How can the external environment affect (1) employment and (2) jobs?
(1) Economic downturns (the external environment) result in higher unemployment and places constraints on staffing and production quotas for managers.

(2) The external environment also impacts how jobs are managed and created. Changing conditions can create demands fr more temporary work and alternative work arrangements

Technology
*Technology* includes the equipment, tools or operating processes to make work more efficient.

Technology has also impacted information, enabling work to be done anywhere and anytime

Management is impacted by technology while
Management is impacted by technology (while *attempting to manage virtual employees) in the way they plan, organize, lead and control.
Environments differ in their amount of ___, which relates to (1) ___ and (2) ___,

See exhibit 2-2

Environments differ in their amount of *environmental uncertainty*, which relates to (1) *the degree of change in an organization’s environment* and (2) *the degree of complexity in that environment*
Degree of change is characterized as being ___ or ___
Degree of change is characterized as being *dynamic* or *stable*
In a ___ environment, components of the environment change frequently. If the change is minimal, the environment is called a ___ environment
In a *dynamic* environment, components of the environment change frequently. If the change is minimal, the environment is called a *stable* environment
The degree of ___ is he number of components in an organizations environment and the extent of an organization’s knowledge about those components.
The degree of *environmental complexity* is he number of components in an organizations environment and the extent of an organization’s knowledge about those components.
If the number of components and the need for sophisticated knowledge is minimal, the environment is classified as ___
If the number of components and the need for sophisticated knowledge is minimal, the environment is classified as *simple*.
If a number of dissimilar components and a high need for sophisticated knowledge exist, the environment is ___
If a number of dissimilar components and a high need for sophisticated knowledge exist, the environment is *complex*
What are (3) ways the external environment affects managers?
1. its impact on (types of) *jobs and unemployment*
2. the amount of *environmental uncertainty*
3. the nature of *stakeholder relationships*
Environmental uncertainty
refers to the degree of *change* and *complexity* in an organization’s environment
Because uncertainty is a threat to ___, managers try to minimize environmental uncertainty
Because uncertainty is a threat to *organizational effectiveness*, managers try to minimize environmental uncertainty
*Assessing Environmental Uncertainty chart*

What are th
*Assessing Environmental Uncertainty chart*

What are th

*Assessing Environmental Uncertainty chart*
*Assessing Environmental Uncertainty chart*
*Assessing Environmental Uncertainty chart*
*Assessing Environmental Uncertainty chart*
The more obvious and secure an organization’s relationships are with ___, the more influence managers have over organizational controls
The more obvious and secure an organization’s relationships are with *external stakeholders*, the more influence managers have over organizational controls
Stakeholders

See exhibit 2-3

any constituencies in the organization’s external environment that are affected by the organization’s decisions and actions
What are common organizational stakeholders?
1. employees
2. unions
3. shareholders
4. communities
5. suppliers
6. media
7. governments
8. trade and industry associates
9. competitors
10. social and political actions groups
11. customers
Note that these stakeholders include both ___ and ___ groups because both groups can affect what an organization does and how it operates
Note that these stakeholders include both *internal* and *external* groups because both groups can affect what an organization does and how it operates
Stakeholders relations management is important for what (2) reasons
a) It can lead to improved predictability of environmental changes, more successful innovation, greater degrees of trust among stakeholders, and greater organizational flexibility to reduce the impact of change.

b) It is the “right” thing to do, because organizations are dependent on external stakeholders as sources of inputs and outlets for outputs and the interest of these stakeholders should be considered when making and implementing decisions.

what is organizational culture?
the shared values, principles, traditions, and ways of doing things that influence the way organizational members act.
Culture is (3)
1. perceived
2. descriptive
3. shared
Culture is perceived. It is …
Culture is perceived. It is not something that can be physically touched or seen, but employees perceive it on the basis of what they experience within the organization
Culture is descriptive. It is …
Culture is descriptive. It is concerned with how members perceive or describe the culture, not with whether they like it
Culture is shared.
Culture is shared. Even though individuals may have different backgrounds or work at different organization levels, they tend to describe the organization’s culture in similar terms
Organizational culture is the shared values, principles, traditions, and ways of doing things that influence the way organizational members act. *This definition implies:*
a) Individuals perceive organizational culture based on what they see, hear, or experience within the organization.
b) Organizational culture is a descriptive term. It describes, rather than evaluates.
c) Organizational culture is shared by individuals within the organization.
What are the (7) proposed dimensions of an organization’s cu;ture
1) Innovation and risk taking
2) Attention to detail
3) Outcome orientation
4) People orientation
5) Team orientation
6) Aggressiveness
7) Stability
These seven dimensions (3)
1. range from low (not typical of the culture) to high (especially typical of the culture)
2. provide a composite picture of the organization’s culture
3. May emphasis one cultural dimension more than the others, essentially shaping the organization’s personality and they way organizational members work
Innovation and risk taking
the degree to which employees are encouraged to be innovative and take risks
Attention to detail
the degree to which employees are expected to exhibit precision, analysis, and attention to detail
Outcome orientation
the degree to which managers focus on results or outcomes rather than on the techniques and processes used to achieve those outcomes
People orientation
the degree to which management decisions take into consideration the effect on people within the organization
Team orientation
the degree to which work activities are organized around teams rather than individuals
Aggressiveness
the degree to which employees are aggressive and competitive rather than cooperative
Stability
the degree to which organizational activities emphasize maintaining the status quo in contrast to growth
Where does culture come from? (4)
1. The original source of an organization’s culture is usually a reflection of the vision or mission of the organization’s founders
2. Founders project an image of what the organization should be what its values are
3. Founders “impose”their vision on employees
4. Organizational members create a shared history or “who we are”
How do employees learn the culture?
culture is transmitted principally through stories, material symbols, and language
Organizational stories
*Organizational stories* are one way that employees learn the culture. These stories typically involve a narrative of significant events or people.
Rituals
*Rituals* are repetitive sequences of activities that express and reinforce the key values of the organization, which goals are most important, and which people are important or expendable.
Material symbols and artifacts
The use of *material symbols and artifacts* is another way in which employees learn the culture, learn the degree of equality desired by top management, discover which employees are most important, and learn the kinds of behavior that are expected and appropriate.
Language
*Language* is often used to identify members of a culture. Learning this language indicates members’ willingness to accept and preserve the culture. This special lingo acts as a common denominator to unite members of a particular culture.
An organization’s culture is important because it establishes constraints on
An organization’s culture is important because it establishes constraints on *what employees and managers can do*
Strong cultures are found in organizations where
Strong cultures are found in organizations where *values are intensely held and widely shared*
Strong cultures can create ___, ___, and ___ without the need for written document
Strong cultures can create *predicatability*, *orderliness*, and *consistsency* without the need for written document
How does culture affect managers? (4)
1) Constraints from organizational culture are rarely explicit.
2) The link between corporate values and managerial behavior is fairly straightforward.
3) The culture conveys to managers what is appropriate behavior.
4) An organization’s culture, particularly a strong one, constrains a manager’s decision-making options in all managerial functions (see Exhibit 2-5).
How does culture affect managers? (2)
1. effect on what employees do and how they behave
1. effect on what managers do as they plan, organize, lead, and control
Strong cultures
cultures in which the key values are deeply held and widely shared. The more employees accept the organization’s key values and the greater their commitment to those values, the stronger culture is.
How does culture affect what employees do?
the stronger a culture becomes, the more it affects what employees do and the way managers plan, organize, lead, and control.
Most organizations have moderate to strong cultures; that is, there is a relatively high agreement on (3)
Most organizations have moderate to strong cultures; that is, there is a relatively high agreement on (1)*what’s important* (2) *what defines “good” employee behavior* (3) *what it takes to get ahead* and so forth
Strong cultures can (2)
Strong cultures can (1) *substitute for formal rules and regulations* and (2) *create predictability, orderliness, and consistency*
“ready-fire-aim” culture
In such a culture, managers take action and then analyze what has been done
“ready-aim-fire” culture
in such an organization, managers will study and analyze proposed projects endlessly before committing to them
If an organization’s culture supports the belief that profits can be increased by cost cutting and that the company’s best interests are served by achieving slow but steady increases in quarterly earnings. managers are unlikely to
If an organization’s culture supports the belief that profits can be increased by cost cutting and that the company’s best interests are served by achieving slow but steady increases in quarterly earnings. managers are unlikely to *pursue programs that are innovative, risky, long term or expansionary*
In an organization whose culture conveys a basic distrust of employees, managers are more likely to use an ___ leadership style than a ___ one.
In an organization whose culture conveys a basic distrust of employees, managers are more likely to use an *authoritarian* leadership style than a *democratic* one.
the culture establishes ___ and ___ for managers
the culture establishes *appropriate* and *expected behavior* for managers
A manager’s decisions are influenced by the ___ in which he or she operates.
A manager’s decisions are influenced by the *culture* in which he or she operates.
An organization’s culture, especially a strong one, ___s and ___s the way managers ___ (4).
An organization’s culture, especially a strong one, *influences* and *constrains* the way managers *plan, organize, lead, and control.*
Cultural influences managerial *planning* in what (3) ways
*Cultural influences managerial planning in:*
1. the degree of right that plans should contain
2. whether plans should be developed by individuals or teams
3. the amount/degree of environmental scanning in which management will engage
With *organizing* activities, culture influences (3)
*With managerial organizing activities, culture influences:*
1. how much autonomy should be designed into employees’ jobs
2. whether tasks should be done by individuals or in teams
3. the degree to which department managers interact with each other
When it comes to *leading*, ___ culture helps determine
*When it comes to leading, organization culture helps determine:*
1. the degree to which managers try to increase employee job satisfaction
2. appropriate leadership styles
3. whether all disagreements—even constructive ones—should be eliminated.
Finally, the culture influences managers’ *controlling* activities:
*Finally, the culture influences managers’ controlling activities:*
1. whether they impose external controls or to allow employees to control their own actions
2. which criteria should be emphasized in employee performance evaluations
3. the repercussions occur from exceeding one’s budget.
Chapter Summary
1 Explain what the external environment is and why it’s important.
The external environment refers to factors, forces, situations, and events outside the organization that affects its performance. It includes economic, demographic, political/legal, sociocultural, technological, and global components. The external environment is important because it poses constraints and challenges to managers.
2 Discuss how the external environment affects managers.
There are three ways that the external environment affects managers: its impact on jobs and employment, the amount of environmental uncertainty, and the nature of stakeholder relationships.
3 Define what organizational culture is and explain why it’s important.
Organizational culture is the shared values, principles, traditions, and ways of doing things that influence the way organizational members act. It’s important because of the impact it has on decisions, behaviors, and actions of organizational employees.
4 Describe how organizational culture affects managers.
Organizational culture affects managers in two ways: through its effect on what employees do and how they behave, and through its effect on what managers do as they plan, organize, lead, and control.
Questions
2-3 How has the changed economy affected what managers do? Find two or three examples in current business periodicals of activities and practices that organizations are using. Discuss them in light of the changed environment.
2-8 How is an organization’s culture formed and maintained?