MANAGING THE

ENVIRONMENT AND
THE
ORGANIZATION’S
CULTURE

COPYRIGHT © 2016 PEARSON

EDUCATION, INC. 3 -1
 LEARNING OBJECTIVES
1. Contrast the actions of managers according to the omnipotent
and symbolic views.
2. Describe the constraints and challenges facing managers in
today’s external environment.
 Develop your skill at scanning the environment so you can
anticipate and interpret changes taking place.
3. Discuss the characteristics and importance of organizational
culture.
 Know how to read and assess an organization’s culture.
4. Describe current issues in organizational culture.

COPYRIGHT © 2016 PEARSON

EDUCATION, INC. 3-2
 READING AN ORGANIZATION’S CULTURE:
FIND ONE WHERE YOU'LL BE HAPPY

“A key to success in
management and in your
career is knowing how to
“read” an organization’s
culture so you can find one
in which you’ll be happy.”

COPYRIGHT © 2016 PEARSON

EDUCATION, INC. 3-3
 SCANNING THE ENVIRONMENT
 Do background work. Check out the company’s Web site.
 What impression do you get from it? Are corporate values listed? Mission
Statement?
 Observe the physical surroundings and corporate symbols.
 Notice visible symbols of organizational culture, such as, logos, signs, posters,
pictures, photos, style of dress, etc.
 How would you characterize the people who work there ? Are they
formal? Casual? Serious? Jovial? Open?

COPYRIGHT © 2016 PEARSON

EDUCATION, INC. 3 -4
 THE MANAGER:
OMNIPOTENT OR SYMBOLIC?
Omnipotent view of management: The view
that managers are directly responsible for an
organization’s success or failure.

Symbolic view of management: The view that

much of an organization’s success or failure is due
to external forces outside managers’ control.

COPYRIGHT © 2016 PEARSON

EDUCATION, INC. 3-5
 MANAGERIAL CONSTRAINTS

In reality, managers are neither all-powerful nor

helpless. But their decisions and actions are
constrained.

As you can see in Exhibit 3-1, external

constraints come from the organization’s
environment and internal constraints come
from the organization’s culture.

COPYRIGHT © 2016 PEARSON

EDUCATION, INC. 3-6
 EXHIBIT 3-1
CONSTRAINTS ON MANAGERIAL
DISCRETION

COPYRIGHT © 2016 PEARSON

EDUCATION, INC. 3-7
 THE EXTERNAL ENVIRONMENT:
CONSTRAINTS AND CHALLENGES

COPYRIGHT © 2016 PEARSON

EDUCATION, INC. 3-8
 THE EXTERNAL ENVIRONMENT
 The External Environment: Those factors and forces outside the
organization that affect it’s performance. The external environment
includes several different components.
 Economic – Encompasses factors such as interest rates, inflation,
changes in disposable income, stock market fluctuations, and
business cycle stages.
 Demographic – Concerned with trends in population characteristics
such as age, race, gender, education level, geographic location, income
and family composition.
 Political/Legal – Concerned with federal, state and local laws, and
global laws.

COPYRIGHT © 2016 PEARSON

EDUCATION, INC. 3-9
 THE EXTERNAL ENVIRONMENT (CONT.)

Technological – Concerned with scientific or

industrial innovations.
The Sociocultural – Concerned with societal and
cultural factors such as values, attitudes, trends,
traditions and lifestyles, beliefs, tastes, and patterns
of behavior.
Global – Encompasses issues associated with
globalization and a world economy.

COPYRIGHT © 2016 PEARSON

EDUCATION, INC. 3 - 10
 THE EXTERNAL ENVIRONMENT (CONT.)

The demographic component is concerned with

trends in population characteristics such as age,
race, gender, education level, geographic location,
income, and family composition.

The political/legal component looks at federal,

state, and local laws, as well as global laws and
laws of other countries. It also includes a country’s
political conditions and stability.

COPYRIGHT © 2016 PEARSON

EDUCATION, INC. 3 - 11
 EXHIBIT 3-2
COMPONENTS OF THE EXTERNAL
ENVIRONMENT

COPYRIGHT © 2016 PEARSON

EDUCATION, INC. 3 -12
 FACTORS IMPACTING GLOBAL BUSINESSES
 Like many global businesses, Nestlé is facing increased
commodity (raw materials) costs.
 Nestlé, the maker of products from Crunch chocolate
bars to Nescafé coffee to Purina pet foods, spends
more than $30 billion a year on raw materials.
 Commodity costs are just one of the many volatile
economic factors facing organizations. Managers need
to be aware of the economic context so they can make
the best decisions for their organizations.

COPYRIGHT © 2016 PEARSON

EDUCATION, INC. 3 - 13
 THE GLOBAL ECONOMY AND THE
ECONOMIC CONTEXT
 The lingering global economic challenges – once
described as the “Great Recession” by some analysts –
began with the turmoil in the United States housing
market.
 As credit markets collapsed, businesses were impacted.
 Credit was no longer readily available to fund
businesses.
 Economic difficulties spread across the globe.
 The fragile economic recovery continues to be a
business constraint.

COPYRIGHT © 2016 PEARSON

EDUCATION, INC. 3 - 14
 ECONOMIC INEQUALITY AND THE
ECONOMIC CONTEXT
As economic growth has languished and sputtered,
and as people’s belief that anyone could prosper
declined, social discontent over growing income
gaps has increased.
Business leaders must realize that societal attitudes
in the economic context have the potential to
create constraints.

COPYRIGHT © 2016 PEARSON

EDUCATION, INC. 3 - 15
 The Demographic
Environment

COPYRIGHT © 2016 PEARSON

EDUCATION, INC. 3 – 16
 THE DEMOGRAPHIC ENVIRONMENT (CONT.)

 The size and characteristics of a country’s population can have a

significant effect on what it’s able to achieve in politics, economics, and
culture.
 Baby Boomers – Born between 1946 and 1964, one of the largest and
most influential demographic groups in history.
 Gen Y or (Millennials) – Children of Baby Boomers, born between 1978
and 1994, making an impact on technology and the workplace.
 Post-Millennials – The youngest group identified age group—basically
teens and middle-schoolers. They have also been called the iGeneration
because advances in technology have customized everything to the
individual.

COPYRIGHT © 2016 PEARSON

EDUCATION, INC. 3 - 17
 ASSESSING ENVIRONMENTAL
UNCERTAINTY
 Environmental uncertainty refers to the degree of
change and complexity in an organization’s
environment.
 The first dimension of uncertainty is change.
1. Organizations are stable, minimal change
2. Organizations are dynamic, frequent change
 Organizational Complexity refers to the number of
components in an organization’s environment and the
extent of the organization’s knowledge about those
components.

COPYRIGHT © 2016 PEARSON

EDUCATION, INC. 3 - 18
 EXHIBIT 3-3
ENVIRONMENTAL UNCERTAINTY MATRIX

COPYRIGHT © 2016 PEARSON

EDUCATION, INC. 3 - 19
 MANAGING STAKEHOLDER
RELATIONSHIPS
 The nature of stakeholder relationships is another way in
which the environment influences managers. The more
obvious and secure these relationships, the more influence
managers will have over organizational outcomes.
 Stakeholders – Any constituencies in an organization’s
decisions and actions.
 Exhibit 3 - 4 identifies some of the organization’s most
common stakeholders which includes both internal and
external constituent groups.

COPYRIGHT © 2016 PEARSON

EDUCATION, INC. 3 - 20
 EXHIBIT 3-4
ORGANIZATIONAL STAKEHOLDERS

COPYRIGHT © 2016 PEARSON

EDUCATION, INC. 3 - 21
 THE BENEFITS OF GOOD STAKEHOLDER
RELATIONSHIPS
Improved predictability of environmental
changes
Increased successful innovations
Increased trust among stakeholders
Greater organizational flexibility to reduce
the impact of change

COPYRIGHT © 2016 PEARSON

EDUCATION, INC. 3 -22
 ORGANIZATIONAL CULTURE:
CONSTRAINTS AND CHALLENGES
Just as each individual has a unique personality —
traits and characteristics influence the way we act
and interact with others. An organization, too, has
a personality, which is referred to as organizational
culture.
An organization’s culture can make employees feel
included, empowered, and supported or it can
make them feel the opposite.

COPYRIGHT © 2016 PEARSON

EDUCATION, INC. 3 - 23
 ORGANIZATIONAL CULTURE
 Organizational Culture —The shared values, principles,
traditions, and ways of doing things that influence the way
organizational members act and that distinguish the organization
from other organizations.
 Cultural Values and practices evolve over time.
 Organizational Culture is:
 Perception — based on employee experience within the
organization.
 Descriptive — how members describe it.
 Shared — employees share perception and experiences.
 Research suggests seven dimensions of culture that seem to
capture the essence of an organization’s culture. These
dimensions are shown in Exhibit 3-5 and range from low to high.

COPYRIGHT © 2016 PEARSON

EDUCATION, INC. 3 -24
 EXHIBIT 3–5
DIMENSIONS OF ORGANIZATIONAL CULTURE

COPYRIGHT © 2016 PEARSON

EDUCATION, INC. 3 – 25
 CONTRASTING ORGANIZATIONAL CULTURE

 In many organizations, one cultural dimension is often

emphasized more than others and essentially shapes the
organization’s personality and the way the organization
works.
 For example, Sony Corporation focuses on product
innovation and risk-taking. The company “lives and breaths”
innovations, and employees’ behaviors support that goal.
(Product Orientation).
 Conversely, Southwest Airlines focuses on it’s employees
and has made them a central focus of it’s culture. (People
Orientation).

COPYRIGHT © 2016 PEARSON

EDUCATION, INC. 3 - 26
 EXHIBIT 3-6
CONTRASTING ORGANIZATIONAL CULTURE

 Risk-taking and change  Risk-taking and change

discouraged rewarded
 Creativity discouraged  Creativity and innovation
 Close managerial supervision rewarded
 Work activities designed  Management trusts employees
around the individual employee  Work designed around teams

COPYRIGHT © 2016 PEARSON

EDUCATION, INC. 3 - 27
 CONTRASTING CULTURAL VALUES (CONT.)

Exhibit 3-6 illustrates how the dimensions of

culture can create significantly different
cultures.
Both Organization A and Organization B are
manufacturing firms, but each company
emphasizes a different dimension that have
shaped organizational culture.

COPYRIGHT © 2016 PEARSON

EDUCATION, INC. 3 - 28
 EXHIBIT 3-7
STRONG VERSUS WEAK CULTURES

COPYRIGHT © 2016 PEARSON

EDUCATION, INC. 3 - 29
 STRONG CULTURES
 All organizations have cultures, but not all cultures equally
influence employees’ behaviors and actions.
 Strong Cultures—Organizational cultures in which the key
values are intensely held and widely shared.
 The more employees accept the organization's key values
and greater their commitment to those values, the stronger
the culture. .

 The stronger the culture becomes, the more it affects the

way managers plan, organize, lead, and control.
 Strong Cultures are associated with high organizational
performance.

COPYRIGHT © 2016 PEARSON

EDUCATION, INC.
3 - 30
 Strong Cultures
Apple’s strong culture of
product innovation and
customer-service reflects the
core values of it’s visionary
cofounder, Steve Jobs. Jobs
instilled these core values in
all employees, from top
executives to sales associates,
such as the Genius Bar
employee shown here
training a customer at the
Apple Store in Manhattan.

COPYRIGHT © 2016 PEARSON

EDUCATION, INC. 3 - 31
 WHERE CULTURE COMES FROM AND
HOW IT CONTINUES
Exhibit 3-8 illustrates how an organization’s culture
is established and maintained.
Organizational Culture usually reflects the vision of
the founder.
The small size of most new organizations makes it
easier to establish organizational culture.
Once culture is established, organizational practices
help to maintain it.

COPYRIGHT © 2016 PEARSON

EDUCATION, INC. 3 - 32
 EXHIBIT 3-8
ESTABLISHING AND MAINTAINING
CULTURE

COPYRIGHT © 2016 PEARSON

EDUCATION, INC. 3 - 33
 HOW EMPLOYEES LEARN CULTURE
Employees “learn” an organization’s culture in a
number of ways. The most common are stories,
rituals, material symbols, and language.
Stories — organizational stories abut significant
events in the life of the company help keep culture
alive.
Rituals — repetitive sequences of activities that
express and reinforce important organizational
values and goals.

COPYRIGHT © 2016 PEARSON

EDUCATION, INC. 3 - 34
 HOW EMPLOYEES LEARN CULTURE
(CONT.)
Material Artifacts and Symbols — convey to
employees what is important and the kinds of
expected behaviors, ex. Risk-taking, etc.
Language — many organizations or units of an
organization use language to identify and unite
members of a culture. New employees are
frequently overwhelmed with acronyms and jargon
that quickly becomes a part of their language.

COPYRIGHT © 2016 PEARSON

EDUCATION, INC. 3 - 35
 EXHIBIT 3-9
TYPES OF MANAGERIAL DECISIONS AFFECTED
BY CULTURE

COPYRIGHT © 2016 PEARSON

EDUCATION, INC. 3 - 36
 Creating an
Innovative Culture

COPYRIGHT © 2016 PEARSON

EDUCATION, INC. 3 - 37
 EXHIBIT 3-10
CREATING A CUSTOMER-RESPONSIVE CULTURE

COPYRIGHT © 2016 PEARSON

EDUCATION, INC. 3 - 38
 CREATING A CUSTOMER-RESPONSIVE
CULTURE (CONT.)
Research shows that customer satisfaction is
directly related to customer spending and
consumption.
Satisfied customers will be repeat customers
for businesses.

COPYRIGHT © 2016 PEARSON

EDUCATION, INC. 3 - 39
 SPIRITUALLY AND ORGANIZATIONAL CULTURE

 Workplace Spiritually — A culture where organizational

values promote a sense of purpose through meaningful
work that takes place in the context of community.
 Organizations with a spiritual culture recognize that people:
Have a mind and spirit.
Seek to find meaning and purpose in their work.
Desire to connect with others and be a part of a
community.

COPYRIGHT © 2016 PEARSON

EDUCATION, INC. 3 - 40
 FIVE CULTURAL CHARACTERISTICS OF
SPIRITUAL ORGANIZATIONS
 Research indicates that Spiritual Organizations have five
characteristics:
1. Strong sense of purpose, culture built around meaningful
purpose.
2. Focus on individual development, recognize worth and
value of individuals.
3. Trust and openness, characterized by mutual trust, honesty,
and openness.
4. Employee empowerment, managers trust employees to
make good decisions.
5. Tolerance of employee expression, employees free to
express emotions.

COPYRIGHT © 2016 PEARSON

EDUCATION, INC. 3 - 41
 REVIEW OF LEARNING OBJECTIVE 3.1

 Contrast the actions of managers according to

the omnipotent and symbolic views.
1. Omnipotent View — Managers are directly responsible for
the organization’s success or failure.
2. Symbolic View — Much of the organization’s success or
failure is due to external forces outside of the manager’s
control.
3. The two constraints on managers' discretion are
organizational culture (internal) and the environment
(external).

COPYRIGHT © 2016 PEARSON

EDUCATION, INC. 3 - 42
 REVIEW OF LEARNING OBJECTIVE 3.2

 Describe the constraints and challenges facing

managers in today’s external environment.
1. The external environment includes those factors and
forces outside the organization that affect its performance.
2. The main components of the external environment are,
economic, demographic, political/legal, Sociocultural,
technological, and global.
3. Managers face constraints and challenges from these
components because they have an impact on jobs,
environmental uncertainty, and stakeholder relationships.

COPYRIGHT © 2016 PEARSON

EDUCATION, INC. 3 - 43
 REVIEW OF LEARNING OBJECTIVE 3.3
 Discuss the characteristics and importance of
organizational culture.
1. The seven dimensions of culture are: attention to detail,
outcome orientation, people orientation, team orientation,
aggressiveness, stability, innovation and risk taking.
2. The stronger the culture, the greater the impact on the
way managers plan, organize, lead, and control.
3. The original source of the organizational culture reflects
the founder’s vision.
4. Culture is transmitted through stories, rituals, material
symbols, and language.

COPYRIGHT © 2016 PEARSON

EDUCATION, INC. 3 - 44
 REVIEW OF LEARNING OBJECTIVE 3.4
 Describe current issues in organizational culture.
1. The characteristics of an innovative culture are challenge and
involvement, freedom, trust and openness, idea time,
playfulness/humor, conflict resolution, debates, and risk taking.
2. A customer responsive culture has five characteristics: outgoing
and friendly employees; jobs with few rigid rules, procedures,
and regulations; empowerment; clear roles and expectations;
and employees who are conscientious in their desire to please
the customer.
3. Spiritual organizations have five characteristics: strong sense of
purpose, focus on individual development, trust and openness,
employment, and toleration of employee expression.

COPYRIGHT © 2016 PEARSON

EDUCATION, INC. 3 - 45
COPYRIGHT © 2016 BY PEARSON 3 - 46
EDUCATION, INC.