This lecture discusses the components and complexities of an organization’s culture and

the external /internal environment and how these may constrain managers. Managers are
also responsible for improving stakeholder involvement in decisions making and actions
taking. Managers must be aware that organizational culture and organizational
environments will influence both the way an organization is managed as well as its
effectiveness. How can an understanding of organizational culture and the external
environment help the manager? Let us learn.

THE ENVIRONMENT:

The impact of the external environment on a manager’s actions and behaviors cannot be
overemphasized. There are forces in the environment that play a major role in shaping
managers’ endeavors The environment is defined as outside institutions and forces
outside the organization that potentially affect an organization’s performance.

Types of Environment:

1) External Environment

2) Internal Environment

External Environment

‘Major forces outside the organisation with potential to influence significantly a

product or service’s likely success is called its external environment.’ Types of
external environments: The insights derived from systems theory have helped to
highlight the importance of a managed interaction between an organization and its
external environment. Two major divisions have been made in the external environment:

1) The Mega Environment

2) The Task Environment The Mega Environment The mega-environment, or general

environment as it is sometimes called, is that segment of the external environment that
reflects the broad conditions and trends in the societies within which an organization
operates.

Major Elements of the Mega Environment

1. The technological element of the mega-environment reflects the current state of

knowledge regarding the production of products and services.

a. Technology is a particular state of knowledge. It is not “things.” A computer, for

instance, is an artifact or an example of technology and is not technology itself.
b. Research indicates that technology tends to evolve through periods of incremental
change punctuated by technological breakthroughs that either enhance or destroy the
competence of firms in an industry.

c. Numerous publications (such as Business Week, Forbes, etc.) and on-line services
(such as LEXIS/NEXIS) provide information regarding technological and other
environmental elements.

d. 2. The economic element of the mega-environment encompasses the systems of

producing, distributing, and consuming wealth.

a. In a capitalist economy, economic activity is governed by market forces and the means
of production are privately owned by individuals, either directly or through corporations.

b. In a socialist economy, the means of production are owned by the state and economic
activity is coordinated by state plan.

c. In practice, countries tend to have hybrid economies, incorporating elements of

capitalism and socialism.

d. Organizations are influenced in any given economic system by a variety of economic

conditions over which they have little control, such as inflation and interest rates.

3. The legal-political element of the mega-environment includes the legal and

governmental systems within which an organization must function.

a. Organizations must operate within the general legal framework of the countries in
which they do business.

b. Organizations are subject to an increase in lawsuits filed by customers or employees.

c. The political issues which affect organizations include those which influence the extent
of government regulation.

4. The socio-cultural element of the mega-environment includes the attitudes, values,

norms, beliefs, behaviors, and associated demographic trends that are characteristic of a
given geographic area.

a. The sociocultural element is of particular importance to multinational corporations.

b. Sociocultural trends can result in important shifts in demand for products.

5. The international element of the mega-environment includes the developments in

countries outside an organization’s home country that have the potential impact to the
organization. International factors far beyond the direct influence of a particular
organization can have profound effects on its ability to operate successfully.
a. Fluctuations of the dollar against foreign currencies influence the ability of an
organization to compete in international markets.

b. Free-trade agreement, such as the NAFTA, GATT can affect an organization either
positively or negatively.

The Task Environment

The task environment is that segment of the external environment made up of specific
outside elements (usually organizations) with which an organization interfaces in the
course of conducting its business.

The task environment depends on the products and services the organization
offers and the locations where it conducts business. The organization may be more
successful in affecting its task environment than it is its mega-environment.

Elements of the Task Environment:

1. An organization’s customers and clients are those individuals and organizations that
purchase its products and/or services. It is becoming increasingly important to stay in
touch with customers’ needs.

2. An organization’s competitors are other organizations that either offers of have a high
potential of offering rival products or services.

a. Organization needs to keep abreast of who their competitors are and what they are
doing.

b. Ways to track what competitors are doing include obtaining information from
commercial data bases, specialty trade publications, news clippingsbr> from local
newspaper, help-wanted ads, published market research reports, business reports, trade
shows, public filings, advertisements, and personal contacts.

3. An organization’s suppliers are those individual organizations that supply the resources
(such as raw materials, products, or services) the organization needs to conduct its
operations.

4. An organization’s labor supply consists of those individuals who are potentially

employable by the organization.

a. Organization may have to shift their location if labor supplies dry up in some areas and
increase in others.

5. Various government agencies provide services and monitor compliance with laws and
regulations at local (e.g., consumer affairs), state or regional (e.g., health department),
and national (e.g., CBR) levels.
6.Organization’s Relationships with Stakeholders:

1. Stakeholders are any constituencies in the organization’s external environment that are
affected by, or have a vested interest in, the organization’s decisions and actions

2. Stakeholder relationship management is important for two reasons:

a. It can lead to improved predictability of environmental changes, more successful

innovation, greater degrees of trust, 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 should be considered when
making and implementing decisions.

3. Stakeholder relationships are managed using four steps:

a. Identify external stakeholders

b. Determine the specific interests of each stakeholder group

c. Decide how critical these interests are to the organization

d. Determine what specific approach managers should use to manage each relationship.

THE ORGANIZATION’S CULTURE:

Just as individuals have a personality, so, too, do organizations. We refer to an

organization’s personality as its culture. Organizational culture is a system of shared
meaning and beliefs within an organization that determines, in large degree, how
employees act. This definition implies several things.

1. Culture is a perception that exists in the organization, not in the individual.

2. Organizational culture is a descriptive term. It describes rather than evaluates.

3. Seven dimensions of an organization’s culture have been proposed:

a. Innovation and risk taking (the degree to which employees are encouraged to be
innovative and take risks)

b. Attention to detail (the degree to which employees are expected to exhibit

precision, analysis, and attention to detail)

c. Outcome orientation (the degree to which managers focus on results or outcomes rather
than on the techniques and processes used to achieve those outcomes)
d. People orientation (the degree to which management decisions take into consideration
the effect on people within the organization)

e. Team orientation (the degree to which work activities are organized around teams
rather than individuals)

f. Aggressiveness (the degree to which people are aggressive and competitive rather than
easygoing and cooperative)

g. Stability (the degree to which organizational activities emphasize maintaining the

status quo in contrast to growth) Employees “learn” an organization’s culture in different
ways.

1. Organizational stories are one way that employees learn the culture. These stories
typically involve a narrative of significant events or people.

2. Rituals are repetitive sequences of activities that express and reinforce the key values
of the organization, what goals are most important, which people are important.

SOCIAL RESPONSIBILITY

Where are we today? What current management concepts and practices are shaping
“tomorrow’s history”? This session establishes first a framework for understanding social
responsibility and managerial ethics. Then, in this session, we’ll attempt to answer those
above stated questions by introducing several trends and issues that we believe are
changing the way managers do their jobs: globalization, entrepreneurship, managing in
an e-business world.

Organizational social Responsibility

WHAT IS SOCIAL RESPONSIBILITY?

Before the 1960s, few people questioned the role of business organizations in social
responsibility. However, times have changed. Now it’s important to get an understanding
of what social responsibility is.
A. There are two opposing views of what social responsibility is.

1. The classical view is the view that management’s only social responsibility is to
maximize profits.

a. Milton Friedman is the most outspoken advocate of this view.

b. He argues that managers’ primary responsibility is to operate the business in the best
interests of the stockholders—the true owners of the organization.

2. The socioeconomic view is the view that management’s social responsibility

goes well beyond the making of profits to include protecting and improving society’s
welfare.

a. The argument behind this view is that corporations are not independent entities
responsible only to stockholders.

b. Also, modern organizations are no longer just economic institutions.

B. There are 10 major arguments for social responsibility, and they include the following:

a. Public expectations

b. Long-run profits

c. Ethical obligation

d. Public image

e. Better environment

f. Discouragement of further government regulation

g. Balance of responsibility and power

h. Stockholder interests

i. Possession of resources

j. Superiority of prevention over cures

C. There are six major arguments against social responsibility. These include:

a. Violation of profit maximization

b. Dilution of purpose
c. Costs

d. Too much power

e. Lack of skills

f. Lack of accountability

1. Social responsibility is an obligation, beyond that required by the law and economics,
for a firm to pursue long-term goals that are good for society.

2. Social obligation is the obligation of a business to meet its economic and legal
responsibilities.

3. Social responsiveness is the capacity of a firm to adapt to changing societal conditions.

SOCIAL RESPONSIBILITY AND ECONOMIC PERFORMANCE.

The question of whether socially responsible activities lower a company’s economic

performance has been addressed in numerous studies.

A. The majority of studies found a positive relationship between corporate social

involvement and economic performance, but some caution is necessary because of
methodological questions associated with trying to measure social responsibility and
economic performance.

MANAGERIAL ETHICS.

Ethics refers to the rules and principles that define right and wrong conduct. There are
ethical dimensions to managerial decisions and actions. Four Views of Ethics.

1. The utilitarian view of ethics states that ethical decisions are made solely on the basis
of their outcomes or consequences.

2. The rights view of ethics says that ethical decisions are concerned with
respecting and protecting individual liberties and privileges such as the rights of privacy,
freedom of conscience, free speech, life and safety, and due process.

3. The theory of justice view of ethics states that decision makers seek to impose and
enforce rules fairly and impartially.

4. Finally, the integrative social contracts theory proposes that ethical decisions should be
based on empirical (what is) and normative (what should be) factors. This view is based
on the integration of two “contracts”—the general social contract and a more specific
contract among members of a specific community that might be affected by a decision.
Toward Improving Ethical Behavior

What can be done to improve ethical behavior? There are a number of things
organizations can do to cultivate ethical behavior among members. Eight suggestions will
be explored.

1. The selection process for bringing new employees into organizations should be viewed
as an opportunity to learn about an individual’s level of moral development, personal
values, ego strength, and locus of control.

2. A code of ethics is a formal statement of an organization’s primary values and the

ethical rules it expects employees to follow. Also, decision rules can be developed to
guide managers in handling ethical dilemmas in decision making. Top management’s
leadership and commitment to ethical behavior is extremely important because it’s the
top managers who set the cultural tone.

4. Employees’ job goals should be tangible and realistic, because when goals are clear
and realistic, they reduce ambiguity and motivate rather than punish. Job goals are
usually a key issue in performance appraisal.

5. If an organization wants it employees to uphold high ethical standards, it must include

this dimension in its appraisal process. Performance appraisals should be comprehensive
and not just focus on economic outcomes.

6. Ethics training should be used to help teach ethical problem solving and to present
simulations of ethical situations that might arise. If it does nothing else, ethics training
should increase awareness of ethical issues

7. Independent social audits evaluate decisions and management practices in terms of the
organization’s code of ethics and can be used to deter unethical behavior.

8. Finally, organizations can provide formal protective mechanisms so that employees

with ethical dilemmas can do something about them without fear of reprisal.

Entrepreneurship

Practically everywhere you turn these days you’ll read or hear about entrepreneurs. If you
pick up a current newspaper or general news magazine or log on to one of the Internet’s
news sites, chances are you’ll find at least one story (and probably many more) about an
entrepreneur or an entrepreneurial business. Entrepreneurship is a popular topic! But
what exactly is it?

Entrepreneurship

is the process whereby an individual or a group of individuals uses organized effort and
means to pursue opportunities to create value and grow by fulfilling wants and needs
through innovation and uniqueness, no matter what resources are currently controlled. It
involves the discovery of opportunities and the resources to exploit them. Three
important themes stick out in this definition of entrepreneurship. First is the pursuit of
opportunities. Entrepreneurship is about pursuing environmental trends and changes that
no one else has seen or paid attention to. For example, Jeff Bezos, founder of
Amazon.com, was a successful programmer at an investment firm on Wall Street in the
mid-1990s. However, statistics on the explosive growth in the use of the Internet and
World Wide Web (at that time, it was growing about 2,300 percent a month) kept
nagging at him. He decided to quit his job and pursue what he felt were going to be
enormous retailing opportunities on the Internet. And the rest, as they say, is history.
Today, Amazon sells books, music, home improvement products, cameras, cars,
furniture, jewelry, and numerous other items from its popular Web site