VII.

Changing Environment of Organization and Implications

1. Organization and Social Environment

2. The Manager and His Environment
3. Organizations, Management, and National Environment

ORGANIZATION AND SOCIAL ENVIRONMENT

ORGANIZATIONAL ENVIRONMENT

 External environment refers to force and institutions outside organization that potentially affect
an organizations performance
 General and Specific Environment
 Specific Environment that is directly relevant to achievement of an org’s goal
 Customers, competitors, suppliers, pressure groups
 General environment broad external conditions that may affect the org
 Economic conditions, political/legal conditions, socio cultural conditions, demographic
conditions, technological and Global conditions

Specific Environment

Customers: It is the customer who absorbs organizational outputs

They represent potential uncertainty to an organization, their taste can change, and they can become
dissatisfied with organization’s product or service.

Competitors: Organizations cannot afford to ignore its competitors.

Managers must be prepared to respond to competitor’s policies regarding pricing new products,
services offered and other incentives it is giving to customers.

Suppliers: Any party that provides input for the business. E.g. financial institutions are provider
of money; colleges are suppliers of human resources
Managers need to have steady and reliable flow of inputs to meet the goals
Pressure groups: Managers must recognize the special interest groups that attempt to influence
organization

General Environment

Economic conditions: It includes the impact of economic factors like Interest rates, inflation,
changes in disposable income and the stage of general business cycle e.g. when consumer’s incomes fall
their confidence about job security declines, they will postpone purchasing anything that is not
necessary.
Political/legal conditions: Federal, state and local government influence what org can and
cannot do
Socio-cultural conditions: Managers must adapt their practices to the changing expectations of
the society and their life style
Demographic Conditions: Trends in the physical characteristics of population such as gender,
age, level of education, income, and geographical location
 Technological: It is changing the ways the org are operating, so businesses must address this
issue and its impact on performance of org.

Environmental Uncertainty

 The degree of change and complexity in an org’s environment

 Degree of change: If the components of in an org’s environment changes frequently we call it
dynamic environment
 If the change is minimal we call it stable
 Environmental complexity: number of components in an org’s environment and extent of an
org’s knowledge about its environmental components
 Complexity is measured in terms of the knowledge and an org needs to have about its
environment
 Fewer competitors, customers, suppliers governmental institutes, less complex environment
and thus less uncertainty

Stakeholder

 Any party that is affected by org’s decisions and policies and that can influence organization

SOCIAL ENVIRONMENT

Among the elements of the social environment that have been linked to health are family
structure, the educational system, social networks, social class, work setting, and level ofprosperity.

Family structure, for example, is known to affect children's physical and mental health.
On average, children in single-parent families do not do as well on measures of development,
performance, and mental health as children in two-parent families. Children's relationships with their
parents, social support, nurturance, and sense of self efficacy have been shown to be related to their
mental and physical health and even to their future economic productivity (Schor and Menaghan, 1995).

Education has an effect on health status separate from its influence on income. Years of formal
education are strongly related to age-adjusted mortality in countries as disparate as Hungary, Norway,
and England and Wales (Valkonen, 1989). Although most research is based on years of formal schooling,
evidence suggests a broader relationship that includes the preschool period. An assessment at age 19 of
participants in the Perry Preschool Study, which randomized children into a Head Start-like program,
showed that participation in the preschool program was correlated with better school performance,
attending college, and avoiding involvement with the criminal justice system (Weikart,
1989). Critical periods for education, particularly at young ages, may prove to be important in
determining health. In addition, studies show that maternal educational attainment is a key determinant
of child welfare and survival (Zill and Brim, 1983).

"Social networks" is a term that refers to an individual's integration into a self-defined

community and the degree of connectedness to other individuals and to institutions.
There is a strong inverse correlation between the number and frequency of close contacts and mortality
from all causes, with odds ratios of 2:1 or higher and a clear "doseresponse" relationship (Berkman and
Syme, 1979). Although it is possible to see the impact of social networks on health, the pathways
responsible for those effects are not yet known.
 Social class is another well-described determinant of health, independent of income.
Major studies have been done in Britain, where social class is defined more explicitly than in the United
States. In the Whitehall study of British civil servants, Marmot et al. (1987) demonstrated a clear
relationship between social class (based on job classification) and mortality. The relationship persists
throughout the social hierarchy and is unchanged after adjusting for income and smoking. The effect of
social class may raise uncomfortable issues in the United States but is important to consider in dealing
with issues of health and equity.

The health effects of work-related factors are seen in studies of job decision latitude, autonomy,
and cardiovascular mortality (Karasek and Theorell, 1990). Involuntary unemployment negatively affects
both mental and physical health. Economic prosperity is also correlated with better health. Throughout
history, the poor have, on average, died at younger ages than the rich. The relationship between
prosperity and health holds across the economic spectrum. For every decile, quintile, or quartile of
income, from lowest to highest, there is a decline in overall age-adjusted mortality. In international
comparisons by the Organization for Economic Cooperation and Development, the difference in income
between the highest and lowest deciles of income shows a stronger relationship with overall mortality
rates than does median income (Wilkinson, 1992, 1994).

Physical Environment

The physical environment affects health and disease in diverse ways. Examples include
exposures to toxic substances that produce lung disease or cancers; safety at home and work, which
influences injury rates; poor housing conditions and overcrowding, which can increase the likelihood of
violence, transmission of infectious diseases, and mental health problems; and urban-rural differences in
cancer rates.

Behavior

In the field model framework, behavior is a response to the other determinants and can be seen
as an "intermediate" determinant of health. It is shaped by many forces, particularly the social and
physical environments and genetic endowment, as previously described. Behaviors related to health
care, such as adherence to treatment regimens, are influenced by these forces as are behaviors that
directly influence health, such as smoking. Health

The person tend to comply with the preventive measures but when time goes by
he/she may failed in complying the said measures

Lack of initiative among people

Cultural norms (hilot or “quack doctors”)

Lack in practicing those measures

Lack of cooperation among community members

Failed to comply with the measures (taking medications) due to financial strain, lack of knowledge
Lack of time and manpower of the health team to plan and disseminate information
Ineffective collaboration such as:
· Creating policies and regulations that support nutrition and physical activity
· Partnering with local communities to create healthier environments for residents
· Working with schools to help our kids stay healthy
· This website, which can help people take small steps to begin to eat better and move more

Social and Cultural Environment

 Business is an integral part of the social system.

 Social factors are among the most important factors which affect business.
 The type of products to be manufactured and marketed, the marketing strategies to be
employed, the way the business should be organized and governed, the value and norms it
should adhere to etc. all influenced by the social structure and culture of a society.

What is Culture?
 Culture may be defined as the behavior of man as a member of society.
 It is the habit acquired by belief, knowledge of arts, moral, law and
 It is socially sanctioned behavior of people.

Cultural Factors/ Social Structure

Religion and Caste:

 Different people have their own religious convictions, beliefs, sentiments, customs, rituals,
festivals etc.
 The cost of ignoring certain religious aspects could be effect organizational existence in
international business.
 Religion may also influence the attitude towards work and wealth.
 Religion also plays a role in deciding in weekly holiday, other holidays and working hours.
 Many business decisions in India and in several other countries are based on astrological
advices.

Language

 Differences in the language are a very important problem area in business.

 Same words of a language have different meanings or connotations in different places.
 Non-verbal communications create equally perhaps even more difficult problems.

Consumer preferences, Habits, Beliefs, Consumption

 What is liked by people of one culture may not be liked by those of other culture.
 Many companies modify their products and promotion strategies to suite the tastes and
preferences or other characteristics of the population of the different countries.
 Consumption habits and demand patterns vary greatly from one market to another.
 The values and beliefs associated with colour vary significantly between different cultures.
Family System

 Family is a social institution.

 Concerns itself with love, sexual relationship, marriage, socialization of the child etc.
 Nuclear families have now become common in our society replacing the traditional joint family
system.
 Women now enjoy equal status with men and most of them supplement family income by their
own earnings.
 Children have become spenders instead of earners.
 With big families being broken up, family businesses are slowly turning into limited companies.

Customs

 The customs of marriage, naming ceremony of child, festivals, dress sense etc. have significant
effect on business.
 These have implications for many types of business like textiles, jewelry, catering, consumer
durables etc.

Demographic Transition

 In the first stage of transition, death rates were high on account of poor diets and absence of
effective medical aid.
 In the second stage, death rates were less on account of improved diets, and improvement of
transport.
 In the third stage of transition people started to shift from rural areas to industrial and
commercial centers.
 These changes affect the business organizations in terms of availability of skilled labor, wage
policy etc.
Savings

 Savings habits of consumer also affect the organization.

 It may favorably affect some organization and on the other hand it may adversely affect the
other business organization.
 Increased saving habits of the consumer leads to the capital formation and even it boosts the
banking sector.

Etiquettes

 The ways of meeting and greeting people methods of showing respect, ways of conducting
meetings etc affect business organization.

Cultural Transmission

 The elements of culture are transmitted among the members of the society , from one
generation to the next and to new the new members admitted into the family.
 Many cultural behaviors are handed down by one’s parents, teachers and other elders.
 In the cultural transition, it is obvious that certain old elements are dropped as new ideas and
traits are acquired.
Impact of Culture on Business

1. Culture determines Goods and Services

 Culture broadly determines the type of goods and services a business should produce.
 The type of food people eat, the clothes they wear, the beverages they drink and the building
material they use, vary from culture to culture and from time to time with in the same culture.
2. People’s attitude to Business
 Attitude of people towards business is largely determined by their culture.
 Business systems are a product of beliefs and customs of society in which they exist.
 People’s attitudes are based on how well businesses contribute to society.
3. Attitude to Work
 Motivation, morale and other related aspects of human resource management are based on the
workers attitude to their work.
4. Culture creates people
 The concept of culture is of great significance to business because it is the culture which
generally determines the activities of the people
5. Collectivism and Individualism
 The spirit of collectivism and individualism is related to such personnel aspects as employee
morale, multiplicity of trade unions and inter and intra-union rivalries.
 It is said that “our culture Stresses individualism.
6. Ambitions and complacent
 An individual’s ambition to grow or remain complacent depends on cultural factors.
Majority of our people are known to be complacent
7. Education
 The close interface of business and higher education is a new development.
 Industrial societies of today are knowledge and Educational oriented.
 Education is considered as one of the social overheads that has been accorded due priority
among the developmental activities.

“In order to effectively adopt, create and also to confirm a culture, the business people should have a
thorough knowledge of the cultural environment.”

 The business managers should develop sensitivity to the culture of the society in which
they operate. This will help in making quick decisions.

The Societal (General) Environment

In the broadest sense, the environment is everything external to the organization’s boundaries.
However, it may be useful to think of the environment in two ways

1. The societal environment which affects the organizations in a given society

2. The specific task environment which affects the individual organization more directly
Business Environment

What is Business?

Business comprises of diverse set of activities to be carried out in planned manner and with a
purpose like to earn profit by selling goods and services, to satisfy customers’ need/ want/ demand, to
discharge obligation to employees and stakeholders, to return something worth to the society”

What is a Business Environment?

“Comprises of the complex factors, largely if not totally beyond the control of management in
which a particular enterprise operates”.

“Consist of set of internal factors and of external factors which affect an enterprise and its
management”.

- Internal Environment
- External Environment
o Micro
o Macro

Macro env.

Internal Environment

– Generally regarded as the set of controllable factors, because a good management can
alter or modify such factors.
– A no. of such internal factors influences the organizational decision.
– Could be the potential source of differentiation.
–
1. Value System

Value system of founders and directors affect a business firm in following ways-
 Nature of business
 Policies
 Objectives
 CSR

2. Mission & Objectives

These guide Priorities, Philosophy, and Policies

3. Management Structure & Nature

- Organizational Structure
- Responsibilities of BoD
(Including Independent directors)
- Extent of professionalism
- Hare holding pattern

4. Internal power relationships

- Level of support enjoyed by the top management

- BoD relationships
5. HR

-- Quality -- Quantity

6. Misc.

-R&D capabilities
-Marketing resources
-Financial resources

Micro Environment

 Consists of the factors in firm’s immediate external environment affecting performance of that
firm.

Suppliers
 If uncertainty (regular supply, quality, price) about suppliers exists, high inventory cost.
 JIT, WalMart
 Suppliers as partners
 Vertical integration
Public
 Media, Consumer action groups, NGOs, Citizens

Customers
 Profile
 Customer switching
 Relationship marketing

Competitors
 Mono/Duo/Oligopoly/Perfect competition
 Desire/Generic/Product form/Brand competition

Marketing Intermediaries
 Distribution channels
 Logistics, Warehouse
 Ad agencies, Market research firm, Consultancy

Micro Env.is….

 More controllable than the macro environment

 May be firm specific
 More intimately linked with firm than the macro environment

Macro Environment

• Part of external environment mainly responsible for creating opportunities as well as threats for
the firm, and is more uncontrollable than micro environment.
• Elements
 Economic
 Socio cultural
 Politico legal
 Natural
 Technological
 International
Economic Environment

Economic conditions
 Stage of economic cycle
 National Income-GDP, GNP
 Per capita Income
 Income distribution
 Inflation- CPI, WPI
 Growth rate
Economic policies
 Exim policies
 Monetary policies- availability and cost of credit
 Fiscal policies- taxation, public expenditure
 SEZ policies
Economic system
 Free market/ capitalist economy
 -USA, Japan, UK
 Controlled/ socialist economy -China
 Mixed economy-India
 THE MANAGER AND HIS ENVIRONMENT

The Manager’s Changing Role in a Teams Environment

By Larry Dean Conrad and Sheila E. Murphy

What is the impact of empowered teams on the role of managers? This viewpoint explores the
“advisor” or “advocate” role for managers who are considering the deployment of a team’s environment
in their organizations, and suggests why this new role should be viewed as beneficial to the manager as
well as the empowered staff.

The practice of creating “empowered teams” in the work place is rapidly gaining momentum in this
country, and is creating a management revolution. The wholesale downsizing of the private and public sectors over
the past several years has served as a sort of shock therapy to the work force. Job security is a thing of the past.
Employee loyalty has been shattered. Workloads are up dramatically, as we all have to do more with less.
Opportunities for advancement are limited. Our organizations have been forced to re-examine their basic goals
and operating principles in order to compete in a global economy while keeping the work force effective and
productive.
Much has been written about this state, and several movements have emerged to help address these
challenges, including the quality movement spawned by Dr. W. Edwards Deming and its Total Quality Service off-
shoot, the stewardship movement promoted by Peter Block, the entrepreneurial management movement based
on the writings of Osborne and Gaebler, and the reengineering movement of Hammer and Champy. One of the
common threads that run through all these management concepts is the need to get the most out of the work
force by establishing empowered teams. Many managers believe that this approach merely represents the latest
management fad that will pass, as have all the others, leaving the status quo. We believe this view to be short-
sighted at best and self-serving at worst.

Much has also been written about the team’s approach, most of it focusing on potential gains in
effectiveness, the quality improvements that are possible, the reduced overhead and competitive advantages that
can result, and the quality of- life gains for the work force. But what about the impact of empowered teams on
managers?
The literature generally focuses on managers as expendable, no longer needed in the new empowered-
team work force. In fact, management is routinely identified as the largest single obstacle to achieving the benefits
promised by a team’s environment. We suspect there are two reasons for this. First, an effective teams
environment does reduce the need for managers in the classic sense. (It’s worth noting that the managerial ranks
have already been thinned steadily as a result of downsizing over the last ten to fifteen years.) Second, there has
been too little focus on the role the manager should play in the new environment. The tendency to resist change
coupled with the failure to articulate effectively the new managerial role makes it understandable that managers
might resist the team’s movement.

The typical description of a team’s environment is one in which the manager stops making decisions,
stops giving orders, and becomes more of a coach. Unfortunately, this coaching concept may not be very well
defined in practical terms. In addition, there is no clear reason given for why a manager might see this change as
beneficial to his or her career. What will managers actually be doing in the new environment, and how can that job
prove to be a desirable, enriching experience?

Team’s environment
There are three kinds of teams typically discussed in the literature:
1. Quality circles— groups of employees who focus specifically on quality problems in delivery of the products or
services the organization produces;
2. Total Quality Service (TQS) teams—groups of employees who focus on business activities as a set of processes
that can be incrementally improved; and
3. Self (directed/self (managed teams— groups of employees who manage themselves collectively and assume
responsibility for many of the traditional managerial functions, such as performance appraisals, disciplinary
actions, and budgets.

The three types of teams share common conceptual underpinnings and build upon one another. Quality
circles were the first to gain popularity in the early 1980s, but are more or less considered passé today. Quality
circles recognize that the people who do the work are the ones who know best how to fix problems. TQS teams
build on and extend the quality circle concept to recognize that a problem may be the result of more systemic
issues, requiring a look at the entire business process to address the fundamental problem. Self-directed teams go
one step further to recognize that the processes themselves are affected by the organizational structures we build
and the mindsets of the people within them. Manz and Sims consider the latter two (TQS and self-directed teams)
a particularly powerful combination.
Each type of team involves some degree of change in the traditional perception of the manager as the
person who has the most expertise and who rightfully should make all the decisions. In quality circles and TQS
teams, the existing organizational structure is usually retained, leaving the existing power structure in place. Thus
these two team types are fundamentally evolutionary in nature. However, self-directed teams challenge the basic
power structure: the right of the manager to make decisions and to be in control. This makes them fundamentally
revolutionary in nature. We will focus on the new role of the manager within a self-directed team’s environment,
as we believe that is where the team’s movement is going.

Team’s management model

The teams approach is about treating people like adults, recognizing that work is a voluntary activity
(voluntary in that we are all free to quit and work elsewhere), and that everyone wants to enjoy and take pride in
her or his work. Dr. Deming makes this point a hallmark of his philosophy: work has intrinsic value and people want
to do a good job. We need to ensure that organizational processes support workers’ ability to do a good job and
ensure employees’ ability to affect the outcomes of their efforts. If the processes do not allow workers to do a
good job, or if workers are unable to affect the outcomes, they become disillusioned and disengaged. In treating
people like adults, the teams approach recognizes that each person has a critical role to play in the delivery of the
organizations products and services. It also recognizes that each person—once he or she is trained—is in the best
position to understand the details of any process and serves as the best source for identifying ways to improve
each process. The teams approach recognizes that a synergy occurs when everyone is working together towards a
shared goal and everyone understands the issues and challenges involved in meeting that goal.

The manager psyche

Too often managers have a vested interest in maintaining the status quo. Many have grown up in the
traditional hierarchical system and, indeed, have prospered by it. The unpleasant truth is that managers tend to
like to control others and enjoy the notoriety of being the decision-maker and the special status of being a
manager. Thus managers are often not thrilled at the prospect of giving up control and sharing decision-making
and the limelight with others. The team’s concept challenges managers’ views of themselves and their roles in the
organization. It can be a serious blow to managerial egos to recognize that teams can do the job, and often does it
better than they can. An early team training session—where a new team was being introduced to a pair of tools,
brainstorming and multi-voting—serves as a case in point. One of the participants was knowledgeable about the
topic being discussed and contributed a number of ideas in the round-robin technique being used. There were
many other contributions, however, and when it came time to vote for the best alternatives, he did not vote for a
single one of his own ideas! He was forced to admit his ideas had simply not been as good as those generated by
the rest of the team. This provided a powerful lesson in the power and value of a team’s environment.
The Manager’s New Role

Is there anything positive the environment has to offer managers from the old hierarchical structure? We
believe the answer is yes, but the role and environment are significantly different from the ones they have been
used to. A good way to underscore this is to abandon the title of “manager” and adopt something different, such as
“team advisor,” as suggested by Manz and Sims, or perhaps “case manager,” as suggested by Hammer and
Champy. “Advocate” is another possibility.

Many of the traditional managerial roles are not needed in the new team’s environment. Those managers
who define their role in the organization solely on the basis of control may not make the transition to the new
order. However, managers who define themselves on the basis of leadership, advocacy, facilitation, coordination,
the removal of barriers, and the development of staff should make the transition to teams smoothly since they
already possess the appropriate mindset for a team’s environment.
Leadership means providing direction for the organization—establishing a vision. People don’t want to be
managed; they want to be led. We assert that this has always been the most important role of management.
Teams have shown they can manage themselves on a day-today basis, thus freeing management’s time to
concentrate on moving the organization to where it needs to go. Whether we like it or not, change is a given in
today’s organizations. Nothing will kill an enterprise faster than stagnation.
Most of us can relate to the metaphor that life in the 90s is permanent “white water.” Forget the idea of shooting
the rapids and coming to an area of calm where we can collect our senses before attempting the next stretch of
rough water; we’re in an environment of constant change. Leadership has never been more important than it is
today, and teams can release managers from the imperatives of daily crises to focus on determining where the
winds of change will take the organization and how it can profit from those changes.
Advocacy and removal of barriers means battling the bureaucracy, forming partnerships, and overcoming
negativism to advance team goals. A leader in an organization needs to “clear the way” for progressive ideas to be
implemented. As Hammer and Champy point out, many barriers are erected against new ideas in any organization.
A worker comes up with a new idea that he feels has merit and takes it to his boss. If she likes it, she takes it to her
boss, and so on. Anyone along the chain of command has veto power; any single “no” can kill it. Conversely, look at
all the “yeses” that must be garnered in order for the idea to go forward. Is it any wonder our organizations stifle
creativity? There is a role for advocacy and removal of barriers that the team advisor can play. This role requires
someone
Who is articulate, who is skilled in consensus- building, which can help explain and sell an idea, who can line up the
necessary resources, and who can keep the idea from getting stalled in the bureaucracy.

Facilitation and coordination means helping the team find solutions to problems and coordinating
activities between teams. There is a role for facilitation and coordination that is crucial to the group process. The
team advisor can be tapped to assist the team as necessary, not by giving them the answers but by helping they
find the answers on their own, and to coordinate activities with others in the organization to ensure a smoothly
operating enterprise.

Development of staff means helping staff members continue to progress in their careers. There are many
development opportunities in the teams environment. Team members may be called on to perform functions and
roles they have had little or no experience with or expertise in: budgeting, conflict resolution, providing feedback,
and dealing with different communication styles and differing levels of interpersonal skills. Ongoing training is
needed to help develop members of the team. They also need access to someone who can serve a mentor role and
help them develop needed expertise. Team members can usually provide technical skills, but they will need help
from outside the team to develop these additional non-technical skills.

The above characteristics of the new “team advisor” position were also key in the traditional managerial
role, but were often compromised to deal with the crisis du jour. In the teams environment, the team advisor can
focus on these aspects and thereby improve the overall effectiveness of leadership in the operation of the
organization. Management focus is on the “what,” while the team focus is on the “how.” Thus occurs the following
seeming paradox: by giving up control (of individuals), management gains control (of the organization).
Conclusion

Managers in the traditional hierarchical structures have little to fear, per se, from the introduction of
teams. Change is coming to our organizations. It is being driven by the expediencies of downsized organizations
and increased competition. The old hierarchical command and control organizational structures are no longer
effective in today’s global market and enterprises. The work force is demanding and receiving a say in how their
organizations are run. Acceding to this is not altruism on the part of management, but rather recognition that
there is a better way of doing business. By giving up control of individuals, managers gain better control of the
organization. This is truly a win-win situation, as everyone comes out ahead. Those managers who are solely
control-oriented may not survive the transition—but their days were already numbered. Teams will only hasten
the process, as we transform our organizations into more enlightened institutions that treat people as adults who
have productive and innovative contributions to make.
Technological Environment

 Rate of tech change

 Techno Infrastructure
 Technical know how
 Strong driver of demand, especially replacement demand – GM strategy, Electronic goods
 Cost reduction – Ford
 Consumerism – Hamara Bajaj to 280 cc

Political Environment

 Political system (forms of govt)- Pure democracy, Republic, Theocracy, Totalitarianism

 Political philosophy- LPG
 Regulations and laws for general conduct of business
 Govt. policies
 Political stability
 Institutions

Significance of Business Environment

 In-cashing business opportunities

 Affect internal control
 Optimize scare resources
 Market relevant technology development
 Avoiding threats
 Competitors analysis, Sustainable competitive advantage
 Monitoring and forecasting
 Strategy formulation
 Power relationships and lobbying
 International trade
 Republic of the Philippines
Tarlac State University
Tarlac City

In Partial Fulfillment of the Requirements

on MPA 505- Organization and Management

VII. Changing Environment of Organization and Implications

Submitted to:

DR. NICANOR C. CAINGAT

Submitted by:

MR. FEDERICO ESTRADA JR.

August 19, 2010