Chapter The Environment and Corporate Culture Organizational Environment All elements existing outside the boundary of the organization that have the potential to affect the organization Manager’s Challenge: IBM, p 77 Copyright © 2005 by South-Western, a division of Thomson Learning All rights reserved External Environment ● General environment – affects indirectly ● Task environment - ● Affects directly Influences operations and performances Internal environment – elements within the organization’s boundaries Copyright © 2005 by South-Western, a division of Thomson Learning All rights reserved Technological Organizational Environments General Environment Suppliers ee s oy Em pl Labor Market ation Inter n Copyright © 2005 by South-Western, a division of Thomson Learning All rights reserved ral al ic m no o Ec ultu re Suppliers Competitors ltu Cu Management o-C Customers Le ga l/P ol iti c i Soc al Technological Task Environment Internal Environment International Dimension ● Provides New • • • ● Shapes: • • • Customers Competitors Suppliers Social trends Technological trends Economic trends Copyright © 2005 by South-Western, a division of Thomson Learning All rights reserved Technological Dimension Scientific – – and technological advances Specific industries Society at large Impact – – – – Competition Relationship with Customers Medical advances Nanotechnology advances Copyright © 2005 by South-Western, a division of Thomson Learning All rights reserved Socio-Cultural Dimension Dimension of the general environment – – – – Demographic characteristics Norms Customs Values Copyright © 2005 by South-Western, a division of Thomson Learning All rights reserved Key Demographic Trends in U.S ● ● ● ● By 2050 non-Hispanic whites will make up only about half of the population, down from 74% in 1995; and 69% in 2004 Baby boomer generation is aging and losing interest in highcost goods Generation Y, rival them in size, will soon rival them in buying power The single father household is the fastest growing living arrangement, which rose 62% in 10 years Two-parent and single-mother households are still much more numerous Unprecedented demographic shift = married couple households slipped from 80% in 1950s to just over 50% in 2003 Couples with kids= 25%, with projection 20% by 2010 and 30% of homes inhabited by someone who lives alone Copyright © 2005 by South-Western, a division of Thomson Learning All rights reserved Economic Dimension ● General economic health ● ● ● ● Recent Trends ● ● Consumer purchasing power Unemployment rate Interest rates Frequency of mergers and acquisitions Small business sector vitality Copyright © 2005 by South-Western, a division of Thomson Learning All rights reserved Task Environment Sectors that have a direct working relationship with the organization ● ● ● ● 10 Customers Competitors Suppliers Labor Market Copyright © 2005 by South-Western, a division of Thomson Learning All rights reserved Labor Market Forces Labor Market Forces Affecting Organizations today 11 ● Growing need for computer literate information technology workers ● Necessity for ongoing investment in human resources – recruitment, education, training ● Effects of international trading blocks, automation, outsourcing, shifting facility locations upon labor dislocations Copyright © 2005 by South-Western, a division of Thomson Learning All rights reserved Adopting to the Environment 12 Boundary-spanning Inter-organizational partnerships Mergers or joint ventures Copyright © 2005 by South-Western, a division of Thomson Learning All rights reserved External Environment and Uncertainty High High Uncertainty Rate of Change in Factors in Environment Low Uncertainty Low Low High Number of Factors in Organization Environment 13 Copyright © 2005 by South-Western, a division of Thomson Learning All rights reserved Adapt to Environment Competitive Intelligence - CI What - Activities to get as much information as possible about one’s rivals Where - Web sites, commercial databases, financial reports, market activities, news clippings, trade publications, personal contacts Why – Spot potential threats or opportunities Ethical Dilemma: Competitive Intelligence Predicament, P 105 14 Copyright © 2005 by South-Western, a division of Thomson Learning All rights reserved Interorganizational Partnerships Shift in paradigm ● ● ● ● ● ● ● 15 Trust, value added to both sides Equity, fair dealing, everyone profits E-business links to share information and conduct digital transactions Close coordination; virtual teams and people on site Involvement in partner’s product design and production Long-term contracts Business assistance goes beyond the contract Copyright © 2005 by South-Western, a division of Thomson Learning All rights reserved Levels of Corporate Culture Culture that can be seen at the surface level Visible Artifacts, such as dress, office layout, symbols, slogans, ceremonies Invisible Expressed values, such as “The Penney Idea,” “The HP Way” Underlying assumptions and deep beliefs, such as “people are lazy and can’t be trusted” 16 Copyright © 2005 by South-Western, a division of Thomson Learning All rights reserved Deeper values and shared understandings held by organization members Visible Manifestations Symbols Stories Heroes Slogans Ceremonies 17 Copyright © 2005 by South-Western, a division of Thomson Learning All rights reserved Environment and Culture A big influence on internal corporate culture is the external environment Cultures can vary widely across organizations Organizations within same industry reveal similar cultural characteristics Experiential Exercise: Working in an Adaptive Culture, p 104 18 Copyright © 2005 by South-Western, a division of Thomson Learning All rights reserved Corporate Culture Adaptability Adaptive Culture Visible Behavior Managers pay close attention to all their constituencies, especially customers, and initiate change when needed to serve their legitimate interests, even if it entails taking some risks Expressed Values Managers care deeply about customers, stockholders, and employees They strongly value people and processes that can create useful change (e.g., leadership initiatives up and down the management hierarchy) Unadaptive Culture Managers tend to behave somewhat insularly, politically, and bureaucratically As a result, they not change their strategies quickly to adjust to or take advantage of changes in their business environments Managers care mainly about themselves, their immediate work group, or some product (or technology) associated with that work group They value the orderly and risk-reducing management process much more highly than leadership initiatives Source: John P Kotter and Jmaes L Heskett, Corporate Culture and Performance (New York, The Free Press, 1992), 51 19 Copyright © 2005 by South-Western, a division of Thomson Learning All rights reserved Four Types of Corporate Cultures Needs of the Environment Flexibility Strategic Focus External Internal 20 Adaptability Culture Involvement Culture Copyright © 2005 by South-Western, a division of Thomson Learning All rights reserved Stability Achievement Culture Consistency Culture Cultural Leadership ● Articulates a vision that employees can believe in ● ● ● Defines and communicates central values that employees believe in Values are tied to a clear and compelling mission, or core purpose Heeds the day-to-day activities that reinforce the cultural vision – work procedures and reward systems match and reinforce the values 21 Copyright © 2005 by South-Western, a division of Thomson Learning All rights reserved High-Performance Culture Creating and maintaining a high-performance culture in today’s turbulent environment and changing workplace is not easy 22 – Managers widely communicate their cultural values through their words and particularly their actions – Value statements that are not reinforced by management behavior are meaningless or even harmful for employees and the organization – Cultural leaders uphold their commitment to values during difficult times or crises Copyright © 2005 by South-Western, a division of Thomson Learning All rights reserved ... politically, and bureaucratically As a result, they not change their strategies quickly to adjust to or take advantage of changes in their business environments Managers care mainly about themselves, their... customers, stockholders, and employees They strongly value people and processes that can create useful change (e.g., leadership initiatives up and down the management hierarchy) Unadaptive Culture... technology) associated with that work group They value the orderly and risk-reducing management process much more highly than leadership initiatives Source: John P Kotter and Jmaes L Heskett, Corporate