Organizational Environments and Cultures PDF

Learning Unit 1: Part II Organizational Environments and Cultures  What is business? a specific activity business organization or firm generally, activity of production that transform various inputs/ factors of production into diverse outputs in the fo...

Learning Unit 1: Part II Organizational Environments and Cultures  What is business? a specific activity business organization or firm generally, activity of production that transform various inputs/ factors of production into diverse outputs in the form of goods & services to meet particular needs of people in society a mechanism for deciding allocation of resources available to society between various possible uses (or competing wants & needs), methods of production & distribution of output (who goes what), in a situation of scarcity where not all wants can be satisfied (Wetherly & Otter, 2011)  Three basic forms of business i. market (private sector) ii. government (public sector) iii. the voluntary (third sector): o provides an alternative decentralized mechanism for allocating resources where the purpose is to meet certain categories of need rather than making profit  What is business? (cont’d) business system as a whole: o not just in terms of economic organizations e.g. businesses o range of organizations that interact to shape the pattern of economic activity, including trade unions, professional bodies, consumer groups, regulatory agencies & other governmental bodies ✓ All businesses operate in a changing, & in some ways, unique environment that is the source of both threats & opportunities  Types of environment 1. Internal environment: events & trends inside an organization that affect management, employees & organizational culture 2. External environments: all events outside a company that have the potential to influence or affect it 2 types of external organizational environments (A) General environment: affects all organizations (B) Specific environment: unique to each company (A) General environment: affects all organizations a) Economy: e.g. more products are bought & sold in a growing economy → hire more employees, increased production, take out loan to purchase equipment b) Technology: knowledge, tools & techniques used to transform inputs (raw materials, information, etc) into outputs (products & services) c) Sociocultural trends: (i) demographic characteristics: no. of people with particular population characteristics – gender, age, marital status (ii) general behavior, attitudes & beliefs of people in a particular society: affect demand for a business’s products & services d) Political/ legal trends: legislation, regulations & court decisions that govern & regulate business behavior/ responsibilities e.g. recruit, hire or firing employees  (B) Specific environment: unique to each co. a) Customers: Companies cannot exist without customer support. Monitoring customers’ changing wants & needs is critical to business success. b) Competitors: Is the company doing a better job of satisfying customer wants & needs than competitors? Managers perform a competitive analysis (who are the competitors, anticipate competitors’ moves, determine competitors’ strengths & weaknesses) c) Suppliers: provide material, human, financial, informational resources Supplier dependence Buyer dependence degree to which a company degree to which a supplier relies on a supplier relies on a buyer (i) Opportunistic behavior: a transaction in which one party in the relationship benefits at the expense of the other. A high degree of buyer or seller dependence can lead to opportunistic behavior (ii) Relationship behavior: establishment of mutually beneficial, long-term relationship between buyers & suppliers  (B) Specific environment (cont’d) d) Industry regulation: regulations & rules that govern business practices & procedures of specific industries, businesses & professions o to protect consumers, workers or society as a whole e) Advocacy groups: citizens (generally share the same point of view) who band together to try to influence business practices of specific industries, businesses & professions  What is environmental change? Environmental change: rate at which a company’s general & specific environments change i. In stable environments, the rate of environmental change is slow ii. In dynamic environments, the rate of environmental change is fast ✓ companies often experience both stable & dynamic environments  Punctuated equilibrium theory explains both stability & change companies go through long periods of stability (equilibrium), followed by short, complex periods of dynamic, fundamental change (revolutionary periods) & then a new equilibrium (stability) Change Period of stability Period of rapid change Period of stability Time  Environmental complexity number & intensity of external factors in the environment that affect organizations i. simple environment: has few environmental factors ii. complex environment: many environmental factors organizations need to adapt in a way that is consistent with the degree of complexity in their environments for survival complex environments cause organization becomes complex systems capable of high levels of adaptation via learning & emergent behaviour  Organizational resources Anything that can be used to produce value Two types of resources: i. Tangible resources: organizational assets that can be seen, touched, quantified e.g. machinery, money, products ii. Intangible resources: organizational assets that are hard to quantify e.g. knowledge, skills, stakeholder relationship, brand  Organizational resources (cont’d) Resource scarcity: abundance or shortage of critical organizational resources in an organization’s external environment ❑ different in each industry & change over time ✓ Capability of using various resources leads to a sustainable competitive advantage  Environmental uncertainty extent to which managers can understand or predict external environmental changes & trends affecting their businesses o change is very common: some changes simply involve variations of existing trends; some may even be destructive & result in devolution Environmental change, env. complexity & resource scarcity High env. change & complexity + resource scarcity uncertainty is high managers may not be at all confident that they can understand, predict & handle external forces affecting their businesses Low env. change & complexity + resources are plentiful uncertainty is low managers feel confident that they can understand, predict & handle external forces affecting their businesses  Future analysis commonly known as strategic foresight help people to think constructively & systematically about the future & advance our understanding of change & uncertainty in complex social-ecological systems (Hichert, Biggs, Vos, 2021) provides a basis for decision making that makes plans & strategies more resilient by actively managing uncertainty, giving organizations a greater ability to navigate an uncertain environment & meet the complex challenges of the future  Impact of future analysis (cont’d) i. Ability to adapt is crucial as developments are unpredictable ii. Aim to affect & change the future, based on our own needs & by using past experiences iii. Strategic scenario planning analysis may provide important information on future evolution (Petrakis & Konstantakopoulou, 2015)  Importance of analyzing external environment 1. Avoidance (as far as possible) for major surprises anticipate & prepare for changes in macro-environment not possible to analyze & prepare for all the sudden changes 2. Rapid identification of opportunities & threats continuing changes in macro-environment produce periodical golden opportunity: unique chance to develop a business venture rapid identification of an opportunity needs to be balanced by rapid identification of threats (Allen, 2001)  Importance of analyzing external environment 3. Improved planning & shorter response times overview of macro-environment helps companies to react rapidly & more effectively once opportunities & threats are identified (Allen, 2001) Importance of analyzing external environment 4. Better understanding & self-awareness for the organization aware of external changes helps to put the organization into perspective avoid business organization to be inward-looking which may result in short-term thinking, fire-fighting & reactive responses rather than proactive, planned response & longer-term plan (Allen, 2001)  Business confidence indices standardized confidence indicator that show managers’ level of confidence about future business growth based on opinion surveys e.g. overall business situation, production, order, inventory of raw materials & finished goods, profit margins, employment  Malaysia Business Confidence 1st quarter 2024: 94.3 2nd quarter 2024: 86.2 numbers above 100: increased confidence/ optimism in near future business performance numbers below 100: pessimism towards future performance Malaysian Institute of Economics Research (Trading Economics, 2024) https://tradingeconomics.com/malaysia/business-confidence  Business confidence indices ✓ can be used to monitor output growth & anticipate turning points/ curves in economic activity e.g. If the indices are dropping, a manager might decide o hire new employees o increase the production o take additional loads to expand the business Organizational Cultures  Task 1 In a group of six or more, discuss the questions below and post your discussion in eLEAP forum. What aspects of the university culture do you find most welcoming or challenging? Can you share a specific experience that illustrates the university's culture (positive or negative)?  Organizational culture values, beliefs & attitudes shared by organizational members key component in internal organizational environment We work harder. We have a commitment that I think would be exhausting to someone else. Kevin Plank CEO of Under Armour, Maryland, US (manufacturer of sportswear, footwear & accessories)  Creation & maintenance of organizational cultures primary source of organizational culture is the company founder The founder is in a better position than anyone else to say this is what our business is about, this is what we won’t give up. Prof. Zeynep Ton MIT Sloan School of Management, US Keys to an organizational culture that fosters success i. Adaptability: ability to notice & respond to changes in the organization’s environment ii. Consistent/ strong organizational culture: company actively defines & teaches organizational values, beliefs & attitudes iii. Company mission: company’s purpose or reason for existing is clear to everyone in the company Keys to an organizational culture that fosters success iv. Employee involvement Three levels of organizational culture symbolic artifacts (dress codes) workers’ & managers’ behaviors what people say how decisions are made & explained widely shared assumptions & belief values & beliefs expressed by people in the company buried deep below surface rarely discussed or thought about  Changing organizational cultures 1. Behavioral addition: process of having managers & employees perform new behavior 2. Behavioral substitution: process of having managers & employees perform new behaviors in place of another/ old behavior 3. Change of visible artifacts: visible signs of an organization’s culture e.g. office design & layout, dress code 4. Hire & select people with values & beliefs that fit with company’s Samsung desired culture  Changing organizational cultures (cont’d) Cultures are very difficult to change No guarantee that any one approach will change a company’s organizational culture o the best results are obtained by combining different approaches Ethics and Social Responsibility  Ethics What do you understand by ethics? Let’s discuss and post your view in eLEAP forum. Let’s watch a Youtube video on “What is Business Ethics? https://youtu.be/_sF1CEA-UUs?si=b3Bt-2tvAmfZezXb  Ethics Ethics: the set of moral principles or values that defines right & wrong for a person or group. Ethics essentially involves how we act, live, lead our lives & treat others. Our choices and decision-making processes and our moral principles and values that govern our behaviors regarding what is right and wrong are also part of ethics. Ethical behaviour is the behavior that conforms to a society’s accepted principles of right & wrong.  Workplace Deviance Unethical behavior that violates organizational norms about right and wrong. Can be categorized by how deviant the behavior is, from minor to serious, & by the target of the deviant behavior, either the organization or particular people in the workplace. So, can you name a few of workplace deviance? Types of Workplace Deviance  Types of Workplace Deviance Production deviance: Unethical behavior that hurts the quality and quantity of work produced; E.g: Leaving early, taking excessively long work breaks, intentionally working slower, or wasting resources Property deviance: Unethical behavior aimed at company property or products. E.g. sabotaging, stealing, or damaging equipment or products, & overcharging for services & then pocketing the difference  Types of Workplace Deviance Political deviance: Using one’s influence to harm others in the company. E.g.: Making decisions based on favoritism rather than performance, spreading rumors about coworkers, or blaming others for mistakes they didn’t make. Personal aggression: Hostile or aggressive behavior toward others. E.g.: Sexual harassment, verbal abuse, stealing from coworkers, or personally threatening coworkers.  Task 2 (Eleap Forum) Discuss the questions below and post your discussion in eLEAP forum: If you are the manager/ boss at the workplace, a) What would you do if you find some workplace deviance in your workplace/organization? Post your reponses in eleap forum. b) What will influence your decision-making process in such situation. c) Discuss and post your view in eLEAP forum. Influences on Ethical Decision Making Ethical intensity, or the degree of concern people have about an ethical issue. Six factors must be considered when determining the ethical intensity of an action.  Six Factors That Contribute to Ethical Intensity Magnitude of consequences: The total harm or benefit derived from an ethical decision. The more people who are harmed or the greater the harm to those people, the larger the consequences. Social consensus: Agreement on whether behavior is bad or good. Probability of effect: The chance that something will happen that results in harm to others.  Six Factors That Contribute to Ethical Intensity Temporal immediacy: The time between an act & the consequences the act produces. Temporal immediacy is stronger if a manager has to lay off workers next week as opposed to three months from now. Proximity of effect: The social, psychological, cultural, or physical distance of a decision maker from those affected by his or her decisions. Thus, proximity of effect is greater when a manager lays off employees, he knows than when he lays off employees he doesn’t know. Concentration of effect: How much an act affects the average person  Principles of Ethical Decision Making Principle of long-term self-interest: An ethical principle that holds that you should never take any action that is not in your or your organization’s long-term self-interest Principle of religious injunctions: An ethical principle that holds that you should never take any action that is not kind and that does not build a sense of community Principle of government requirements: An ethical principle that holds that you should never take any action that violates the law, for the law represents the minimal moral standard  Principles of Ethical Decision Making Principle of individual rights: An ethical principle that holds that you should never take any action that infringes on others’ agreed-upon rights Principle of personal virtue: An ethical principle that holds that you should never do anything that is not honest, open, & truthful and that you would not be glad to see reported in the newspapers or on TV Principle of distributive justice: An ethical principle that holds that you should never take any action that harms the least fortunate among us: the poor, the uneducated, the unemployed A Basic Model of Ethical Decision Making  Social Responsibility Social responsibility o A concept originated in 1953 when Howard R. Bowen, known as “the father of corporate social responsibility” (CSR). o A business’s obligation to pursue policies, make decisions, & take actions that benefit society Two perspectives regarding to whom organisations are socially responsible (Milton Friedman): a) The shareholder model b) The stakeholder model  Two Perspectives Regarding Whom Organisations Are Socially Responsible Shareholder model a view of social responsibility that holds that an organization’s overriding goal should be profit maximization for the benefit of shareholders Stakeholder model theory of corporate responsibility that holds that management’s most important responsibility, long- term survival, is achieved by satisfying the interests of multiple corporate stakeholders Stakeholder Model of Corporate Social Responsibility (CSR)  Stakeholder Model of Corporate Social Responsibility (CSR) Primary stakeholder: Any group on which an organization relies for its long-term survival Secondary stakeholder: Any group that can influence or be influenced by a company & can affect public perceptions about the company’s socially responsible behavior  Corporate Social Responsibility (CSR) Corporate social responsibility (CSR): A self-regulating business model that helps a company be socially accountable to itself, its stakeholders, and the public. By practicing corporate social responsibility, also called corporate citizenship, companies are aware of how they impact aspects of society, including economic, social, and environmental. Engaging in CSR means a company operates in ways that enhance society and the environment instead of contributing negatively to them. Four types of CSR: Environmental responsibility; Ethical responsibility; Philanthropic responsibility; Financial responsibility https://www.investopedia.com/terms/c/corp-social-responsibility.asp  Corporate Social Responsibility (CSR) Through corporate social responsibility programs, philanthropy, and volunteer efforts, businesses can benefit society while boosting their brands. A socially responsible company is accountable to itself and its shareholders. CSR is commonly a strategy employed by large corporations. The more visible and successful a corporation is, the more responsibility it has to set standards of ethical behavior for its peers, competition, and industry. https://www.investopedia.com/terms/c/corp-social-responsibility.asp THANK YOU