CONTEMPORARY DEVELOPMENTS IN MANAGEMENT

CHAPTER 3

THE ENVIRONMENT OF MANAGEMENT

AND CORPORATE CULTURE

A. THE EXTERNAL ENVIRONMENT

ORGANIZATIONAL ENVIRONMENT IS THE COMBINATION OF ALL

ELEMENTS EXISTING OUTSIDE THE ORGANIZATION’S BOUNDARIES THAT
HAVE THE POTENTIAL TO AFFECT THE ORGANIZATION SEE PAGE 8. THE
ORGANIZATION’S EXTERNAL ENVIRONMENT CAN BE FURTHER
CONCEPTUALIZED AS HAVING TWO LAYERS:

I. THE GENERAL ENVIRONMENT THAT AFFECTS THE ORGANIZATION

INDIRECTLY AND COMPOSED OF:

1. INTERNATIONAL DIMENSION

REPRESENTING EVENTS AND OPPORTUNITIES ORIGINATING IN FOREIGN

COUNTRIES.

2. TECHNOLOGICAL DIMENSION

THE DIMENSION THAT INCLUDES SCIENTIFIC AND TECHNOLOGICAL

ADVANCEMENTS IN THE INDUSTRY AND SOCIETY AT LARGE.

3. SOCIOCULTURAL DIMENSION

THE DIMENSION REPRESENTING DEMOGRAPHIC CHARACTERISTICS,

NORMS, CUSTOMS AND VALUES OF THE POPULATION WITHIN WHICH THE
ORGANIZATION OPERATES.

4. ECONOMIC DIMENSION

THE DIMENSION OF THE GENERAL ENVIRONMENT REPRESENTING THE

OVERALL ECONOMIC HEALTH OF THE COUNTRY OR REGION IN WHICH
THE ORGANIZATION FUNCTIONS.

5. LEGAL – POLITICAL DIMENSION

THE DIMENSION OF THE GENERAL ENVIRONMENT THAT INCLUDES

FEDERAL, STATE, MUNICIPAL AND OTHER LOCAL REGULATIONS AND
POLITICAL ACTIVITIES DESIGNED TO CONTROL COMPANY BEHAVIOR.
THERE ARE ALSO PRESSURE GROUPS SUCH AS ASSOCIATIONS, UNIONS
AND SOCIAL ORGANIZATIONS WHICH ACT AS PRESSURE GROUPS IN THIS
DIMENSION.

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II. TASK ENVIRONMENT

TASK ENVIRONMENT INCLUDES INDUSTRIAL SECTORS THAT HAVE

DIRECT RELATIONSHIP WITH THE ORGANIZATION’S ACTIVITIES.

1. CUSTOMERS

PEOPLE AND OTHER ORGANIZATIONS IN THE ENVIRONMENT WHO

ACQUIRE GOODS OR SERVICES FROM THE ORGANIZATION. THAT WOULD
INCLUDE INDUSTRIAL CUSTOMERS, AS WELL AS INDIVIDUAL CONSUMERS
AND THE INTERMEDIARY ORGANIZATIONS IN THE CHANNELS OF
DISTRIBUTUION.

2. COMPETITORS

OTHER ORGANIZATIONS IN THE SAME INDUSTRY OR TYPE OF BUSINESS

THAT PROVIDE GOODS OR SERVICES TO THE SAME SET OF CUSTOMERS.

3. SUPPLIERS

PEOPLE AND ORGANIZATIONS INCLUDING INTERMEDIARY CHANNELS OF

DISTRIBUTION WHO PROVIDE THE RAW MATERIALS FOR THE
ORGANIZATION USES IN ORDER TO PRODUCE ITS OUTPUT.

4. LABOR MARKET

THE PEOPLE WHO ARE AVAILABLE TO BE HIRED BY THE ORGANIZATION.

HUMAN RESOURCE AGENCIES, HEADHUNTERS, AND OTHER EMPLOYER’S
CONSULTANTS WHICH PROVIDE HUMAN RESOURCE SERVICES ARE SOME
OF THE OTHER COMPONENTS OF THE LABOR MARKET.

5. FINANCIAL INSTITUTIONS

BANKS, OTHER DEPOSIT TAKING INSTITUTIONS, INVESTMENT HOUSES,

INSURANCE COMPANIES, PENSION AND OLD AGE FUNDS ARE INCLUDED IN
THIS CATEGORY.

ACTUALLY ALL OF THE ABOVE ORGANIZATIONS PLUS THE GOVERNMENT

ENTITIES TOGETHER WITH SOME OF THE INTERNATIONAL INSTITUTIONS
FORM THE SUBJECT ORGANIZATION’S INTEREST GROUPS.

• ENVIRONMENTAL UNCERTAINTY

WHY DO ORGANIZATIONS CARE SO MUCH ABOUT FACTORS IN THE

EXTERNAL ENVIRONMENT? THE REASON IS THAT THE ENVIRONMENT
CREATES UNCERTAINTY AND THE MANAGEMENT MUST RESPOND BY
DESIGNING THE ORGANIZATION TO ADAPT TO THE ENVIRONMENT OR TO
INFLUENCE THE ENVIRONMENT.

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UNCERTAINTY MEANS THAT MANAGERS DO NOT HAVE SUFFICIENT
INFORMATION ABOUT ENVIRONMENTAL FACTORS TO UNDERSTAND AND
PREDICT ENVIRONMENTAL NEEDS AND RELATIVE CHANGE. SO TWO
BASIC STRATEGIES FOR COPING WITH HIGH ENVIRONMENTAL
UNCERTAINTY ARE:

1. TO ADAPT THE ORGANIZATION TO CHANGES IN THE ENVIRONMENT

2. TO INFLUENCE THE ENVIRONMENT TO MAKE IT MORE COMPATIBLE
WITH ORGANIZATIONAL NEEDS.

IN ORDER TO REALIZE THESE STRATEGIES, THERE ARE SOME

SUBSTRATEGIES SUCH AS:

a. IN ADAPTING TO THE ENVIRONMENT

• BOUNDARY SPANNING ROLES: THE ROLES ASSUMED BY PEOPLE OR

DEPARTMENTS THAT LINK AND COORDINATE THE ORGANIZATION
WITH KEY ELEMENTS IN THE EXTERNAL ENVIRONMENT FACE TO
FACE OR THROUGH MARKET RESEARCH.

USING COMPETITIVE INTELLIGENCE PROFESSIONALS AND

COMPUTERIZING A COMPANY’S NETWORK FOR THIS PURPOSE ARE
EFFECTIVE WAYS USED BY SUCH BIG COMPANIES AS MOTOROLA,
XEROX AND AT&T.

• FORECASTING AND PLANNING FOR ENVIRONMENTAL CHANGES ARE

MAJOR ACTIVITIES THAT WOULD REDUCE THE RISK OF
UNCERTAINTY. THESE ACTIVITIES SPOT TRENDS THAT ENABLE
MANAGERS TO PREDICT OR EVEN CREATE FUTURE EVENTS.

• DESIGNING AND ESTABLISHING A FLEXIBLE STRUCTURE TO

EFFECTIVELY RESPOND TO CHANGES IN THE ENVIRONMENT IS
IMPORTANT. A FLEXIBLE STRUCTURE IS:

- AN ORGANIC STRUCTURE WHERE THERE IS A FREE FLOW OF

WORK, FEW RULES AND REGULATIONS, ENCOURAGEMENT OF
EMPLOYEES TEAMWORK AND DECENTRALIZED DECISION
MAKING PROCESS. THIS THE OPPOSITE OF:

- MECHANICAL STRUCTURE WHERE THERE ARE RIGIDLY

DEFINED TASKS, MANY DIFFERENT RULES AND REGULATIONS,
LITTLE TEAMWORK AND A CENTRALIZED DECISION MAKING
PROCESS.

• MERGERS AND JOINT VENTURES ARE ALSO OTHER EFFECTIVE

STRATEGIES THAT WOULD REDUCE UNCERTAINTY.

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b. IN INFLUENCING THE ENVIRONMENT

THE FOLLOWING SUBSTRATEGIES OR ACTIONS MUST BE UTILIZED:

• ADVERTISING AND PUBLIC RELATIONS IN MANAGING DEMANDS OF

THE FIRM’S PRODUCTS AND SERVICES AS WELL AS COMPETITION

• POLITICAL ACTIVITY / LOBBYING ARE ATTEMPTS TO INFLUENCE

GOVERNMENT LEGISLATION AND REGULATIONS.

• WORKING TOGETHER WITH OTHER ORGANIZATIONS, JOINING

TRADE ASSOCIATIONS MADE UP OF ORGANIZATIONS WITH SIMILAR
INTERESTS AND GOALS TO INFLUENCE THE ENVIRONMENT.

III. THE INTERNAL ENVIRONMENT: CORPORATE CULTURE

1. CULTURE

THE MOST IMPORTANT ELEMENT OF AN ORGANIZATION’S INTERNAL

ENVIRONMENT IS CORPORATE CULTURE.

CULTURE IN GENERAL TERMS, IS THE SET OF KEY VALUES, BELIEFS,

THOUGHTS, UNDERSTANDINGS, ATTITUDES AND NORMS THAT MEMBERS
OF AN ORGANIZATION SHARE.

THE CONCEPT OF CULTURE HELPS MANAGERS UNDERSTAND THE HIDDEN,

COMPLEX ASPECTS OF ORGANIZATIONAL LIFE.

CULTURE IS A PATTERN OF SHARED VALUES AND ASSUMPTIONS ABOUT

HOW THINGS ARE DONE WITHIN THE ORGANIZATION. THIS PATTERN IS
LEARNED BY MEMBERS AS THEY COPE WITH EXTERNAL AND INTERNAL
PROBLEMS AND TAUGHT TO NEW MEMBERS AS THE CORRECT WAY TO
PERCEIVE, THINK AND FEEL.

CULTURE CAN BE ANALYZED AT TWO DIFFERENT LEVELS:

a. THE SURFACE LEVEL (VISIBLE LEVEL)

THERE ARE THOSE VISIBLE ARTIFACTS WHICH CAN BE SEEN, HEARD AND
WATCHED AND THAT WOULD INCLUDE:

• MANNER OF DRESS
• PATTERNS OF BEHAVIOR
• PHYSICAL SYMBOLS
• ORGANIZATIONAL CEREMONIES
• SLOGANS
• OFFICE LAYOUT

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b. THE DEEPER LEVELS WHICH ARE INVISIBLE HAVE TWO LAYERS:

• EXPRESSED VALUES AND BELIEFS, WHICH ARE NOT OBSERVABLE

BUT CAN BE DISCERNED FROM HOW PEOPLE BEHAVE, EXPLAIN AND
JUSTIFY WHAT THEY DO. THESE ARE VALUES THAT MEMBERS OF
THE ORGANIZATION HOLD AT A CONCIOUS LEVEL. THEY CAN BE
INTERPRETED FROM;

..THE STORIES,
..LANGUAGE AND
..SYMBOLS THAT

ORGANIZATION MEMBERS USE TO REPRESENT THEM.

• BUT SOME VALUES BECOME SO DEEPLY EMBEDDED IN A CULTURE

THAT MEMBERS ARE NO LONGER CONCIOUSLY AWARE OF THEM.
THEY ARE THE ESSENCE OF CULTURE AND SUBCONCIOUSLY GUIDE
BEHAVIOR AND DECISIONS.

EXAMPLES OF SUCH SUBCONCIOUS VALUES COULD CONSIST OF:

.. CLOSE SUPERVISION OF EMPLOYEES

.. LOW OR HIGH LEVEL OF FREEDOM GIVEN TO EMPLOYEES
.. DELEGATION OF RESPONSIBILITIES
.. TRUST AND COOPERATIVE WORK OR LACK OF THEM
.. EQUALITY

IN ANY CASE ALL THESE VALUES ARE PRIMARILY CREATED BY THE

FOUNDER AND THE OTHER LEADERS IN ORGANIZATION.

2. SOME DEFINITIONS OF VISIBLE AND UNVISIBLE VALUES

• SYMBOLS: A SYMBOL IS AN OBJECT, ACT OR EVENT THAT CONVEYS

MEANING TO OTHERS. SYMBOLS ARE ASSOCIATED WITH
CORPORATE CULTURE CONVEY THE ORGANIZATION’S IMPORTANT
VALUES, SUCH AS BIRTHDAY CELEBRATIONS, ORGANIZING PIC-NICS

• STORIES: NARRATIVES BASED ON TRUE EVENTS THAT ARE

REPEATED FREQUENTLY AND SHARED BY ORGANIZATIONAL
EMPLOYEES. ORGANIZATION OF SOCCER GAMES AMONG GROUPS.

• HEROES: A HERO IS A FIGURE WHO EXAMPLIFIES THE DEEDS,

CHARACTER AND ATTRIBUTES OF A STRONG CORPORATE CULTURE.
THEY ARE THE ROLE MODELS FOR EMPLOYEES TO FOLLOW AND
THEY USUALLY REPRESENT KEY VALUES.

• SLOGANS: A PHRASE OR A SENTENCE THAT CLEARLY REPRESENTS A

KEY CORPORATE VALUE. SLOGANS MAY CARRY SPECIAL MEANING
THAT ONLY EMPLOYEES COULD UNDERSTAND. ‘ YOU DON’T HAVE

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 TO PLEASE THE BOSS, YOU HAVE TO PLEASE THE CUSTOMER’.
‘EXCELLENCE THROUGH PEOPLE’ ENCOURAGES EMPLOYEE
INVOLVEMENT IN ALL DECISIONS, REGULAR FACE TO FACE
COMMUNICATION BETWEEN EMPLOYEES AND EXECUTIVES,
PROMOTION FROM WITHIN AND ALWAYS FOCUSING ON THE
POSITIVE BEHAVIOR OF WORKERS.

• CEREMONY: IT IS APLANNED ACTIVITY THAT MAKES UP A SPECIAL

EVENT AND IS CONDUCTED FOR THE BENEFIT OF AN AUDIENCE.
CEREMONIES ARE SPECIAL OCCASIONS THAT REINFORCE VALUED
ACCOMPLISHMENTS, CREATE A BOND AMONG PEOPLE BY
ALLOWING TO SHARE AN IMPORTANT EVENT AND CELEBRATE
HEROES.

3. ADAPTIVE VERSUS UNADAPTIVE CORPORATE CULTURES

ADAPTIVE CULTURE UNADAPTIVE CULTURE

VISIBLE BEHAVIOR

• MANAGERS PAY ATTENTION MANAGERS BEHAVE ALONE

TO CUSTOMERS AND INITIATE POLITICALLY AND IN A
CHANGE WHEN NEEDED TO BUREAUCRATIC MANNER. THEY
SERVE THEIR INTERESTS, DO NOT CHANGE THEIR WAYS
DESPITE SOME RISKS. QUICKLY TO ADJUST TO
EXTERNAL ENVIRONMENT

EXPRESSED VALUES

• MANAGERS CARE DEEPLY ABOUT MANAGERS CARE MAINLY ABOUT

CUSTOMERS, STOCKHOLDERS THEMSELVES, THEIR IMMEDIATE
AND EMPLOYEES. THEY VALUE WORK GROUP AND PRODUCTS
PEOPLE AND PROCESSES THAT ASSOCITED WITH THAT WORK
CAN CREATE USEFUL CHANGE. GROUP. THEY VALUE ORDERLY
ENCOURAGE INITIATIVES. AND RISK MANAGEMENT
PROCESS MORE HIGHLY THAN
LEADERSHIP INITIATIATIVES.

4. TYPES OF CULTURES

ONE WAY OF LOOKING INTO CORPORATE CULTURES IS THAT THERE

ARE FOUR BASIC TYPES OF CULTURES:

a. THE BASEBALL TEAM CULTURE

IT IS A HIGH RISK DECISION MAKING AND FAST FEEDBACK FROM THE

ENVIRONMENT TYPE OF CULTURE. DECISION MAKERS QUICKLY LEARN
WHETHER THEIR CHOICE WAS RIGHT OR WRONG. TALENT
INNOVATION AND PERFORMANCE ARE VALUED AND REWARDED.

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 THIS CULTURE IS FOUND IN FAST PACED, HIGH RISK COMPANIES
INVOLVED IN SUCH AREAS AS MOVIE PRODUCTION, ADVERTISING AND
SOFTWARE DEVELOPMENT WHERE THE FUTURE IS BET ON A NEW
PRODUCT AND PROJECT.

b. CLUB CULTURE

IT IS CHARACTERIZED BY LOYALTY, COMMITMENT AND FITTING INTO

THE GROUP. IT IS A STABLE AND SECURE ENVIRONMENT THAT VALUES
AGE, EXPERIENCE AND SENIORITY. CLUB CULTURES PROMOTE FROM
WITHIN AND MEMBERS ARE EXPECTED TO PROGRESS SLOWLY,
PROVING COMPETENCE AT EACH LEVEL.

c. ACADEMY CULTURE

HIRES YOUNG RECRUITS INTERESTED IN LONG TERM ASSOCIATION

AND A SLOW STEADY CLIMB UP IN THE ORGANIZATION. EMPLOYEES
DO NOT CROSS FROM ONE DIVISION TO ANOTHER. EXPERTISE IN ONE
SPECIFIC AREA IS IMPORTANT. MANY LONG ESTABLISHED, STABLE
ORGANIZATIONS SUCH AS UNIVERSITIES AND FIRMS LIKE, COCA COLA
OR IBM ARE GOOD EXAMPLES.

d. THE FORTRESS CULTURE

THEY EMERGE IN AN ENVIRONMENTAL SURVIVAL SITUATION LIKE

TEXTILE SECTOR FIRMS. THEY OFFER LITTLE JOB SECURITY OR
OPPORTUNITY FOR PROFESSIONAL GROWTH AND FIRMS USUALLY
DOWNSIZE TO FIT THE ENVIRONMENT. THIS IS A GOOD CULTURE FOR
THOSE WHO ARE LOOKING FOR CHALLENGE AND FAST DEVELOPMENT
AND REWARDS BUT IT IS NOT A SECURE ENVIRONMENT.

5. CULTURE GAP

A CULTURE GAP OCCURS WHEN THERE IS A DIFFERENCE BETWEEN AN

ORGANIZATION’S DESIRED CULTURAL NORMS AND VALUES AND
ACTUAL NORMS AND VALUES.

THIS MAY BE A COMMON PROBLEM FOR MERGERS AND ACQUISITIONS.

THE PROBLEM ARISES FROM THE INCOMPATIBILITY OF MERGING
COMPANIES OR INADAPTABILITY TO THE ENVIRONMENT. THAT IS
MOSTLY TRUE IN OVERSEAS INVESTMENTS.

MANAGERS SHOULD NOT FORGET THE FACT THAT, THE CULTURE AND
THE RESULTING HUMAN SYSTEMS OF ORGANIZATIONS ARE WHAT
MAKE OR BREAKE THE SUCCESS OF CORPORATE CHANGE AND LONG
TERM SUCCESS.

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ENVIRONMENTAL VARIABLES
SURROUNDING THE FIRM

Internal
Environment
(The Firm)

Task
Environment
(Industry)
Societal
Environment
(External

Forces)