Business Organization & Management Class Notes PDF

# Business Organization & Management: Innovative Management for a Changing World ## Chapter 1: Why Innovation Matters * To gain or keep a competitive edge, managers have renewed their emphasis on innovation. * Innovations are products, services, management systems, production processes, corporate...

# Business Organization & Management: Innovative Management for a Changing World ## Chapter 1: Why Innovation Matters * To gain or keep a competitive edge, managers have renewed their emphasis on innovation. * Innovations are products, services, management systems, production processes, corporate values, and other aspects of the organization are what keep companies growing, changing, and thriving. * Without innovation no company can survive over the long run. ## Definition of Management * Management is the attainment of organizational goals in an effective and efficient manner through planning, organizing, leading, and controlling organizational resources. ## 4 Management Functions 1. **Planning** is the management function concerned with defining goals for future organizational performance and deciding on the tasks and resources needed to attain them. * It defines where the organization wants to be in the future and how to get there. 2. **Organizing** is the management function concerned with assigning tasks, grouping tasks into departments, and allocating resources to departments. * Organizing follows planning and reflects how the organization tries to accomplish the plan. 3. **Leading** is the management function that involves the **use of influence** to motivate employees to achieve the organization's goals. * It involves motivating entire departments and divisions as well as those individuals working immediately with the manager. 4. **Controlling** is the management function concerned with **monitoring employees' activities**, and making corrections as needed to keep the organization on track toward its goals. * Trends toward employment and trust of employees have led many companies to place less emphasis on top down control and more emphasis on training employees to monitor and correct themselves. ## Organizational Performance * An organization is a social entity that is goal directed and deliberately structured. 1. **Social entity** means two or more people. 2. **Goal directed** means the organization is designed to achieve some outcome or goal such as make a profit. 3. **Deliberately structured** means tasks are divided and responsibility for their performance is assigned to organization members. * The manager's responsibility is to coordinate resources in an effective and efficient manner to accomplish the organization's goals. * **Organizational effectiveness** is the degree to which the organization achieves its stated goals or succeeds in accomplishing what it tries to do. * **Organizational efficiency** refers to the amount of resources used to achieve an organizational goal. (How you use resources available to you) * It is based on how much raw materials, money, and people are necessary for producing a given volume of output. * **_The ultimate responsibility of managers is to achieve high performance._** -which is the organization's ability to attain its goals by using resources in an efficient and effective manner. ## Management Skills 1. **Conceptual skill** is the cognitive ability to see the organization as a whole and the relationships among its parts. * It involves the manager's thinking, information processing, and planning abilities, and means the ability to think strategically-to take the broad, long-term view. * Conceptual skill are especially **_important for top managers._** 2. **Human skill** is the manager's ability to work with and through other people and to work effectively as a group member. * It is demonstrated in the way a manager motivates, facilitates, coordinates, leads, communicates, and resolves conflicts. * As globalization, workforce diversity, uncertainty, and societal turbulence increase, human skills become even more crucial. * Human skill is **_important for managers at all levels,_** and particularly those who work with employees directly on a daily basis. 3. **Technical skill** is the understanding of and proficiency in the performance of specific tasks. * This includes mastery of the methods, techniques, and equipment involved in specific functions such as engineering, manufacturing, or finance. * Technical skill also includes specialized knowledge, analytical ability, and competent use of tools and techniques to solve problems in that specific discipline. * Technical skill is **_most important at lower organizational levels_** and becomes less important than human and conceptual skills as managers are promoted. ## When Skills Fail * During turbulent times, managers must use all their skills and competencies to benefit the organization and its stakeholders. * **_Many companies falter_** because managers fail to listen to customers, misinterpret signals from the market, or can't build a cohesive team and execute a strategic plan. * Managers fail to comprehend and adapt to the rapid pace of change in the world around them. * A related problem is top managers who create a **_climate of fear_** so that people are afraid to tell the truth: bad news gets hidden and market signals are missed. * Other management missteps include **_poor communication and failure to listen,_** treating people as instruments, suppressing dissent, and the inability to build a management team characterized by mutual trust and respect. ## Management Levels in the Organizational Hierarchy 1. **Top managers** are at the top of the managerial hierarchy and are **_responsible for the entire organization_** (president, chairperson, executive director, CEO, and executive VP) they are concerned with **_long-range planning_**. 2. **Middle managers** work at the middle levels of the organization and are responsible for **_business units and major departments,_** with titles such as department head, division head, manager of quality control, and director of the research lab. * They are concerned with near-future planning. * Responsibilities of middle managers center on implementing strategies and policies defined by top managers. * Research shows that middle managers play a critical role in facilitating change and enabling organizations to respond in rapid shifts in the environment. * Successful middle managers are: * Constructively critical of the status quo * Have a significant personal power * Are versatile * Rate high in emotional intelligence 3. **Project managers** are responsible for temporary work projects that involve the participation of people from various functions and levels of the organization, and from outside the company. 4. **First-line managers** are at the first or second management level and are directly responsible for producing goods and services, with titles such as supervisor, line manager, section chief, and office manager. * Their focus is on accomplishing day-to-day objectives. ## Management Types-Horizontal Differences * Horizontal differences in management jobs occur across the organization in the different functional areas such as advertising, sales, finance, human resources, manufacturing, and accounting. 1. **Functional managers** are responsible for departments that perform a single functional task and have employees with similar training and skills. 2. **Line managers** are responsible for employees who make or provide a product or service. 3. **Staff managers** are in charge of departments such as finance and personnel that support line departments. 4. **General managers** are responsible for several departments that perform different functions. ## Becoming a New Manager * Becoming a new manager involves a transformation in the way people think of themselves. Specific aspects of this transformation include changing one's identity: - From a specialist who performs specific tasks to a generalist who coordinates diverse tasks; - From doing things oneself to getting things done through others; - From an individual actor to a network builder - From working independently to working in a highly interdependent manner ## Manager Roles * A role is a set of expectations for a manager's behavior. Managers' activities can be organized into ten roles. The ten roles are divided into three categories: **informational, interpersonal, decisional.** 1. **Informational** roles include the functions used to maintain and develop an information network. * The **monitor** role involves seeking current information from many sources. * The **disseminator** role is the opposite of the monitor role. The manager transmits information to others, both inside and outside the organization. * The **spokesperson** role pertains to making official statements to people outside the organization about company policies, actions, or plans. 2. **Interpersonal** roles refer to relationships with others and are related to human skills. * The **figurehead** role involves the handling of ceremonial and symbolic functions of the organization. * The **leader** role is the relationship with the subordinates including motivation, communication, and influence. * The **liaison** role is the development of information sources both inside and outside the organization. 3. **Decisional** roles come into play when managers must make choices. These roles often require both conceptual and human skills. * The **entrepreneur** role involves the initiation of change. Managers seek ways to solve problems or improve operations. * The **disturbance handler** role involves resolving conflict among subordinates, between managers, or between departments. * The **resource allocator** role pertains to allocating resources in order to attain desired outcomes. * The **negotiator** role involves formal negotiations and bargaining to attain outcomes for the manager's unit of responsibility. ## Innovative Management For The New Workplace ### Turbulent Forces * Dramatic advances in technology, globalization, shifting social values, changes in the workforce, and other environmental shifts have created a challenging environment for organizations. * The pace of life for most people and organizations is high-speed, and events *in one part of the world can dramatically influence business all over the globe.* * In general, events in today's world are turbulent and unpredictable, with both large and small crises occurring on a more frequent basis. ### New Workplace Characteristics * The old workplace was characterized by **routine, specialized tasks, and standardized control procedures.** * The organization was coordinated through the vertical hierarchy, with decision-making authority residing almost exclusively in upper-level managers. * The new workplace is characterized by **free-flowing work, flexibility, and flatter structures.** * Empowered employees make decisions based on widespread information. * The valued worker is one who learns quickly, shares knowledge, and is comfortable with risk, change, and ambiguity. * Work is often virtual, with managers having to supervise and coordinate people who never actually “come to work” in the traditional sense. ## Management and the New Workplace ### New Management Competencies * Managers must rethink their approach to organizing, directing, and motivating employees. Instead of “management-by-keeping-tabs,” managers employ an empowering leadership style. * Success in the new workplace depends on collaboration across functions and hierarchical levels as well as with customers and other companies. Team-building skills are crucial for today's managers. * An important management challenge is to build a learning organization by creating an organizational climate that values experimentation and risk-taking, applies current technology, tolerates mistakes and failure, and rewards nontraditional thinking and knowledge sharing. ## Business Organization & Management: The Evolution of Management ## Chapter 2: Management and Organization * An historical perspective on management provides a context or environment in which to interpret current opportunities and problems. * Studying management history is a way to achieve strategic thinking, see the big picture, and improve conceptual skills. The first step is to look at the social, political, and economic forces that have influenced the organizations and the practices of management. ### Social Forces * Social forces refer to those aspects of a culture that guide and influence relationships among people. - What do people value? - What do people need? - What are the standards of behavior among people? * These forces shape the social contract, the unwritten, common rules and perceptions about relationships among people and between employees and management. * A significant social force today is the changing attitudes, ideas, and values of Generation X and Y employees-young, educated, and technologically adept. * Career life cycles are getting shorter, with workers changing jobs every few years. * There is a growing force on work/life balance, reflected in telecommuting and other alternative work arrangements. ### Political Forces * Political forces refer to the influence of political and legal institutions on people and organizations. * Political forces include basic assumptions underlying the political system such as the desirability of self government, property rights, contract rights, and justice. * People are demanding empowerment, participation, and responsibility in all areas of their lives. ### Economic Forces * Economic forces pertain to the availability, production, and distribution of resources in a society; organizations require resources to achieve their objectives. * The economy of the US and other developed countries is shifting with the sources of wealth, distribution and decision-making. * The newly emerging economy is based largely on ideas, information, and knowledge; supply chains have been revolutionized by digital technology. * Management practices and perspectives vary in response to these social, political, and economic forces. During hard times, managers look for *new ideas to help them cope*. ### Classical Perspective * The classical perspective emerged during the 19th and 20th centuries, and emphasized a rational, scientific approach to the study of management. * The factory system of the 1800s faced challenges such as organizing managerial structure, training non-English speaking employees, scheduling, and resolving strikes. * These new problems and the development of large complex organizations demanded a new perspective on coordination and control. * The classical perspective contained three subfields, each with slightly different emphasis-scientific management, bureaucratic organizations, and administrative principles. ### Scientific Management * Frederick W. Taylor (1856-1915) Father of Scientific Management, developed scientific management, a subfield of the classical perspective that emphasized scientific changes in management to improve labor productivity. * However, because scientific management ignored the social context and workers' needs, it led to increased conflict and clashes between management and employees. -Taylor suggested decisions based on rules of thumb and tradition be replaced with precise work procedures developed after careful study of the situation. -In 1898, Taylor used the unloading of iron from rail cars and reloading finished steel to calculate the correct movements and tools needed to increase productivity. * Henri Gantt developed the Gantt Chart-a bar graph that measured planned and completed work. * Frank B. and Lillian M. Gilbreath pioneer time and motion study, which stressed efficiency and the best way to do a job. -Frank is known for work with brick layers, but surgeons were able to save countless lives through the application of time and motion study.. * Lillian pioneered the field of industrial psychology and made substantial contributions to human resource management. * Scientific management is important today, specifically the idea of arranging work based on careful analysis of tasks for maximum productivity. -It is used in developing standards for jobs, selecting workers with appropriate abilities, training workers, supporting workers, eliminating interruptions, and providing wage incentives. ### Bureaucratic Organization * The bureaucratic organization approach is a subfield of the classical perspective that looked at the organization as a whole. * Max Weber (1864-1920) introduced management on an impersonal, rational basis through defined authority and responsibility, formal recordkeeping, and separation of management and ownership. * Weber's idea of organization was the bureaucracy: a system that incorporated division of labor, hierarchy, rules and procedures, written decisions, promotion based on technical qualifications, and separation of ownership and management. * In bureaucracy, managers do not depend on personality for successfully giving orders, but rather on t he legal power invested in their managerial positions. * The term bureaucracy has a negative meaning in today's organizations and is associated with endless rules and red tape; however, ideally everyone gets equal treatment. * UPS has been successful because of its bureaucracy of rules and regulations, a well defined division of labor, and technical qualifications as a primary hiring criterion. ### Administrative Principles * The administrative principles approach focused on the total organization rather than the individual worker, delineating the management functions of planning, organizing, commanding, coordinating, and controlling. * Henri Fayol (1841-1925), identified 14 principles of that include the following 4. - Unity of Command: each employee should have only one boss. - Division of Work: specialized employees produce more with the same effort, - Unity of Direction: similar activities should be grouped under one manager. - Scalar Chain: a chain of authority, which extends from the top of an organization to the bottom. ### Humanistic Perspective * Mary Parker Follett and Chester Barnard advocated a more humanistic perspective on management that emphasized the importance of understanding human behaviors, needs and attitudes in the workplace, and social interactions and group processes. * Subfields within the humanistic perspective include the human relations movement, the human resources perspective, and the behavioral sciences approach. * Mary Parker Follett (1868-1933) stressed the importance of people rather than engineering techniques and addressed ethics, power, and empowerment. -Her concepts included facilitating rather than controlling employees and allowing employees to act according to the situation. * Chester I. Barnard (1886-1961) contributed the concept of the informal organization which occurs in all formal organizations and includes cliques and social groupings. -Barnard argued that organizations were not machines and that informal relationships are powerful forces that can help the organization. ### Human Relations Movement * The human relations movement is based on the idea that truly effective control comes from within the individual worker rather than from strict, authoritarian control. * This school of thought recognized and directly responded to social pressures for enlightened treatment of employees. * The human relations movement emphasized satisfaction of employees' basic needs as the key to increased worker productivity. * The Hawthorne Studies were a series of experiments on worker productivity started in 1924 at the Hawthorne plant of Western Electric Company. -The tests were originally designed to investigate the effects of illumination on output; however, many of the tests pointed to the importance of factors other than illumination in affecting productivity. * Early interpretations agreed that human relations, not money, caused increased output. Workers performed better when managers treated them positively. * New data showed that money mattered, but productivity increased because of increased feelings of importance and group pride employees felt when they were selected for the project. * One unintended contribution of the experiments was a rethinking of field research practices. -Researchers realized that the researcher could influence the outcome of an experiment by being too involved with research subjects-a phenomenon now known as the Hawthorn effect. ### Human Resources Perspective * The human resources perspective suggests jobs should be designed to meet higher-level needs by allowing workers to use their full potential. This perspective combines prescriptions for design of job tasks with theories of motivation. * Abraham Maslow (1906-1970), a psychologist, suggested a hierarchy of needs because he observed that problems usually stemmed an inability to satisfy needs. -The hierarchy started with physiological needs and progressed to safety, belongingness, esteem, and self-actualization. * Douglas McGregor (1906-1964) formulated his Theory X and Theory Y about workers, believing that the classical perspective was based on Theory X, a set of assumptions about workers that suggest workers: -Dislike work and prefer to be directed -Must be coerced to work -Want to avoid responsibility and have little ambition -Want security above everything * Theory Y was proposed as a more realistic view of workers, consisting of assumptions that: -The do not inherently dislike work -They will achieve objectives to which they are committed -They will accept and seek responsibility -They have intellect that could be applied to organizational goals * The intellectual potential of the average worker is only partially used **NEW MANAGER SELF-TEST: EVOLUTION OF STYLE** * New managers typically view their worlds through one or more mental frames of reference. * The structural frame of reference sees the organization as a machine that can be economically efficient and that provides a manager with formal authority to achieve goals. * The human resource frame sees the organization as people, with manager emphasis given to support, empowerment, and belonging. * The political frame sees the organization as a competition for resources to achieve goals, with manager emphasis on negotiation and hallway coalition building. * The symbolic frame of reference sees the organization as theater, with manager emphasis on symbols, vision, culture, and inspiration. * This exercise helps students determine through which frame(s) they view their organizations. ### The Behavioral Science Approach * The Behavioral Science Approach applies social science in organizational context, drawing from economics, psychology, sociology, and other disciplines. * For example, when Zappos.com conducts research to determine the best set of tests, interviews, and employee profiles to use when selecting new employees, it is using behavioral science techniques. ### Humanistic Perspective * One set of management techniques based in the behavioral sciences approach is organizational development (OD). * The techniques and concepts of organization development have been broadened and expanded to cope with the increasing complexity of organizations. * Other concepts that grew out of the behavioral science approach include matrix organizations, self managed teams, and ideas about corporate culture. * In recent years, behavioral science and OD techniques have been applied to help managers build learning organizations. * The rapid pace of change and the increased pressure of global competition have spurred even greater interest in improved behavioral approaches to management. ### The Quantitative Perspective * The Quantitative Perspective emerged after World War II. It applied math, statistics, and other quantitative techniques to managerial problems. * Operations research consists of mathematical model building and other applications of quantitative techniques to managerial problems. * Operations management refers to the field of management the specializes in the physical production of goods and services using quantitative techniques to solve manufacturing problems. * Some of the more commonly used methods are forecasting, inventory modeling, linear and nonlinear programming, queuing theory, scheduling, simulation, and break-even analysis. * Information technology (IT) is the most recent subfield of the management science perspective, often reflected in management information systems. * IT has evolved to include intranets and extranets, and software programs that help managers estimate costs, plan and track production, manage projects, and allocate resources. * Most organizations have departments of information technology specialists to help them apply quantitative techniques to complex organizational problems. ### Recent Historical Trends * Elements of each of the three previously discussed management perspectives are still in use today. * **The most prevalent** is the human resources perspective. Major contemporary extensions of the human resource perspective include systems theory, the contingency view, and total quality management. #### Systems Theory * A system is a set of interrelated parts that function as a whole to achieve a common purpose. * A system functions by taking inputs from the external environment, transforming them, and then discharging the transformed input back into the environment. * Systems theory describes organizations as open systems that are characterized by entropy, synergy, and subsystem interdependence. * Subsystems are parts of a system that depend on one another to function. * Synergy means that the whole is greater than the sum of its parts. Individuals, groups, and organizations can accomplish more working together than working alone. * It is the relationship among the parts that form a whole system that matters. * Systems thinking enables managers to look for patterns of movement over time and focus on the qualities or rhythm, *flow, direction, shape, and networks of relationships that accomplish the performance of the whole.* #### Contingency View * The classical management perspective assumed a *universalist view; concepts that would work in one organization would work in another.* * In business education, an alternative view exists, known as the case view, in which each situation is believed to be unique and there are no universal principles. * One learns about management by experiencing a large number of *case problem situations*. * The contingency view states that the successful resolution of organizational problems depends on a manager's identification of key variations in the situation. * Management's job is to search for important contingencies in their industry, technology, the environment, and international cultures. #### Total Quality Management (TQM) * Total Quality Management (TQM) focuses on managing the total organization to deliver quality to customers. * The ideas of W. Edward Deming, “father of the quality movement” were scoffed at in America but embraced in Japan, which then became an industrial world power. * Japanese management shifted from an inspection-oriented approach to quality control, *emphasizing employee involvement in the prevention of quality problems*. * The prevention approach to quality control infuses quality values throughout every activity, with front-line workers intimately involved in the process. * There are four significant elements: - Employee involvement. TQM requires company-wide participation in quality control. - Focus on the customer. TQM companies find out what the customer wants. - Benchmarking. A process whereby companies find out how others do something better and imitate or improve it.. - Continuous improvement. The implementation of small, incremental improvements in all areas of the organization on an ongoing basis. ### Innovative Management thinking for A Changing World #### Contemporary Management Tools * Managers tend to look for fresh ideas to help them cope during difficult times.. * Recent challenges have left today's executives searching for any management tool that can help them get the most out of limited resources. * Innovative Management thinking for A Changing World * The 2009 Bain and Company survey identified benchmarking as the most popular tool for the first time in more than a decade, reflecting managers' concern with efficiency and cost-cutting in a difficult economy. * Three additional tools that ranked high were strategic planning, customer segmentation, and mission and vision statements. * Innovative Management thinking for A Changing World * Other popular management tools around the world in recent years include downsizing, outsourcing, supply chain management, total quality management, strategic alliances, and collaborative innovation. * Innovative Management thinking for A Changing World **Managing the Technology-Driven Workforce** * The shift to the learning organization goes hand-in-hand with the current transition to a technology driven workplace. * Our lives and our organizations have been engulfed by information technology. * Employees are being connected electronically, and may work in *virtual teams.* * In many factories machines have taken over routine work, freeing workers to use their minds. * Managers focus on opportunities rather than efficiencies, which require they be flexible, creative, and unconstrained by rigid rules and structured tasks. - Innovative Management thinking for A Changing World ### Technology in the Workplace. * Technology provides the architecture that supports and reinforces this new workplace. * **Supply chain management** refers to managing the sequence of suppliers and purchasers, covering all stages of processing from obtaining raw materials to distributing finished goods to consumers. -A supply chain is a network of multiple businesses and individuals that are connected through the flow of products or services. * **Customer relationship management (CRM)** involves collecting and managing large amounts of data about customers and making the available to employees, enabling better decision making and superior customer service. * **Outsourcing** means contracting out selected functions or activities of an organization to other organizations that can do the work more cost-efficiently. -Supply Chain for a -Retail Organization ## Business Organization & Management: The Environment and Corporate Culture ## Chapter 3: The General, Task, and Internal Environments ### The External Environment * The organizational environment includes all elements existing outside the boundary of the organization that have the potential to affect the organization. * The environment includes competitors, resources, technology, and economic conditions that *influence the organization.* * It does not include those events so far removed from the organization that their impact *is not perceived*. * The organizational environment can be conceptualized as having two layers surrounding the organization: *the general environment and the task environment.* * The organization also has an *internal environment* that includes the elements within the organization's boundaries. * It is composed of current employees, management, and *corporate culture*. ### General Environment * The general environment represents the outer layer of the environment and *will influence the organization over time but often is not involved in day-to-day operations*. * The dimensions of the general environment include *international, technological, sociocultural, economic, and legal-political.* 1. The international dimensions represent events originating in foreign countries and opportunities for American companies in other countries. * This dimension *influences all other aspects of the external environment.* * This provides new competitors, customers, and suppliers and *shapes social, technical, and economic trends*. * **_Today, every company has to compete on a global basis; the auto industry, for example has experienced profound shifts as China recently emerged as the world's largest auto market._** * **_Managers who are used to thinking only about the domestic environment must learn new rules to remain competitive._** 2. The technological dimension includes scientific and technological advancements in a specific industry as well as society at large. * **_Technology has created massive changes for organizations and industries._** Today, computer networks, internet access, videoconferencing, cell phones, and laptops are the minimum tools for doing business. * Advances in technology drive competition and *help innovative companies gain market share, and they have the potential to transform consumer expectations of an entire industry.* 3. The sociocultural dimension *represents the demographic characteristics, norms, customs, and values of the general population*. * **_Important sociocultural characteristics are population and geographical distribution, population density, age, and education levels._** * **_Today's demographic profiles are the foundation of tomorrow's workforce and customers._** * Forecasters see increased globalization of both consumer markets and labor supply with increasing diversity in organizations and consumer markets. 4. The economic dimension *represents the general economic health of the country or region in which the organization operates.* * **_Components of the economic dimension include consumer purchasing power, the unemployment rate, and interest rates._** * In the last few years, *the weakened U.S. economy has had a devastating effect on small business*. * Nevertheless, *there is still tremendous vitality in the small business sector of the economy*. 5. The legal-political dimension includes government regulations and political activities designed to influence company behavior. * **_Pressure groups are interest groups that work within the legal-political framework to influence companies to behave in socially responsible ways._** * For example, Walmart has been pushed to improve workers' wages and health care benefits. 6. The natural dimension *is different from other sectors of the government environment because it has no voice of its own.* * **_It includes all elements that occur naturally on earth, including plants, animals, rocks, and natural resources such as air, water, and climate._** * Influence on managers to meet needs in the natural environment may come from other sectors, *such as government regulation*, consumer concerns, the media, *competitors' actions, or even employees.* ### Task Environment * The task environment is the layer closest to the organization and includes those sectors that *have a direct working relationship with it*. * **The task environment includes customers, competitors, suppliers, and the labor market.** * Customers are those people and organizations in the environment that acquire goods or services from the organization. * Customers are important because *they determine the organization' success.* * Customers today have even greater power because *of the Internet, which poses threats as well as opportunities for managers*. - **Competitors** are organizations in the same industry or type of business that provide goods or services to the *same set of customers*. -Specific competitive issues characterize each industry. - **Suppliers** are people and organizations that *provide the raw materials that the organization uses to produce its output*. * Many companies are using fewer suppliers and building good relationships with them so that *they will receive high quality goods at lower prices.* * These companies are also finding that being cooperative, rather than *adversarial, is the key to saving money, maintaining quality, and speeding products to market*. - **The labor market** represents people in the environment available for hire by the organization. -Labor market factors that impact organizations include: * The growing need for *computer-literate knowledge workers* * The necessity for continuous investment in human resources through recruitment, education, and *training to meet competitive demands of the borderless world* * The effects of international trading blocs, automation, and shifting facility locations upon *labor dislocations, creating unused labor pools in some areas and labor shortages in others.* ### The Organization-Environment Relationship #### Environmental Uncertainty * **Environmental Uncertainty** must be managed to make the organization more effective. * Uncertainty means managers do not have sufficient information about environmental factors *to understand and predict environmental needs and changes.* * Environmental characteristics that *influence uncertainty are the number of factors that affect the organization and the extent to which those factors change.* * When external *factors change rapidly, the organization experiences vary high uncertainty* (telecommunication firms, computer firms, and electronics firms). * When an organization deals with a few external factors that are stable, *managers experience low uncertainty* (soft drink bottles or food processors). ### External Environment and Uncertainty #### Adapting to the Environment * **Boundary-spanning roles** link and coordinate the organization with key elements in the external environment. * **Boundary-spanners** serve two purposes for the organization: they detect and process information about changes in the environment; and they represent the organization's interest to the environment. * **People in departments** such as marketing and purchasing span the boundary to work with customers and suppliers through face-to-face and market research.. * **Business intelligence** or using sophisticated software to search through large amounts of internal and external data to spot patterns, trends, and relationships that might be significant is a recent approach to boundary spanning.. * **For example, Verizon uses business intelligence to actively monitor customer interactions and fix problems almost immediately.** * **Competitive intelligence** refers to activities designed to get as much information as possible about one's rivals. * **For example, Harley-Davidson hires an outside research firm to search through massive amounts of data and reveal patterns that help decipher and predict competitors' actions.** - A popular strategy for adapting to the environment is by reducing boundaries and increasing collaboration with other organizations through inter-organizational partnerships. - Companies are joining together to become more effective and share scarce resources. - Many companies are engaged in e-business relationships with suppliers and partners, aided by digital network connections and the internet. - The new model is characterized by information sharing, including e-business linkages for automatic ordering, payments, and other business transactions. - Mergers and joint ventures also reduce uncertainty. - A merger occurs when two or more organizations combine to become one. - A joint venture is a strategic alliance between two or more organizations that occurs when the project is too complex, expensive, or uncertain for one firm to handle alone. ### The Internal Environment: Corporate Culture * The internal environment includes corporate culture, production technology, organization structure, and physical facilities. * Corporate culture is extremely important in an organization attempting to achieve a *competitive advantage*. * The internal culture must fit the needs *of the external environment and company strategy.* * **Culture is defined** as the set of key values, beliefs, understandings, and norms shared by members of an organization. * **Culture is a pattern of shared values and assumptions about how things are done within an organization.** * It can be analyzed at three levels, with each level becoming less obvious. * At the surface level are visible artifacts-the the things one can see, hear, and observe by watching members of the organization. * At a deeper level are the expressed values and beliefs, which are not observable but can be discerned from how people explain and justify what they do. * Some values become so deeply embedded in a culture that members are no longer consciously aware of them. #### Symbols * A symbol is a object, act, or event that conveys meaning to others. * Symbols associated with corporate culture convey the organization's important values. #### Stories * A story is a narrative based on true events that is repeated and shared among organizational employees. * Stories are told to new employees to keep the organization's primary values alive. #### Heroes * A hero is a figure who exemplifies the deeds, character, and attributes of a strong corporate culture. * Heroes are role models for employees to follow. #### Slogans * A slogan is a phrase or sentence that succinctly expresses a key organizational value. #### Ceremonies * A ceremony is a planned affair that makes up a special event and is conducted for the benefit of an audience. #### Levels of Corporate Culture ### Types of Culture * In considering what cultural values are important for the organization, managers *consider the external environment as well as the company's strategy and goals.* * Studies suggest that the right fit between *culture, strategy, and the environment is associated with four categories or types of culture, based on two dimensions.* * The *extent to which the external environment requires flexibility or stability* * The *extent to which a company's strategic forces is internal or external.* * A strong corporate culture alone does not ensure business success unless the culture encourages *healthy adaptation to the external environment*. * Healthy cultures help companies adapt to the environment. * A strong, but unhealthy, culture may encourage the organization to march resolutely in the wrong direction. #### Four Types of Corporate Culture #### Types of Culture 1. **The adaptability culture** is characterized by values that support the company's ability to rapidly detect, *interpret, and translate signals from the environment that requires fast response and high risk decision making.* 2. **The achievement culture** is a results oriented culture that values competitiveness, *aggressiveness, personal initiative, and willingness to work long and hard to achieve results*. * It is suited to organizations concerned with serving specific customers in the external environment *but without the intense need for flexibility and rapid change.* * An emphasis on winning and