Factors affecting organizational

structure

By – Gayatri Bhatta Shaktimayee Rout Sonali Subhadarshini

Unit – 3

Contents • Organizational environment

• Internal & External environment

• Task environment

• Components of Task environment

o Customers

o Suppliers

o Competitors

o Pressure groups

• General environment

• Components of General environment

o Technological elements

o Economic elements

o Legal political elements

o Socio cultural elements

o International elements

• Information technology

• Knowledge management

Organizational environment • The environment is infinite and includes everything outside the organization.

• However, the analysts considers only the aspects of the environment to which

the organization is sensitive and must respond to survive.

• Thus, organizational environment is defined as all elements that exist outside

the boundary of the organization and have the potential to affect all or part of

the organization.

• According to the analysts, organizational environment is of two types :

o Internal environment

o External environment

Internal environment

• An organization's internal environment is composed of the elements

within the organization, including current employees, management, and

especially corporate culture, which defines employee behaviour.

• It exposes the strengths and weaknesses found within the organization.

• Internal environment include the employee behaviour, organization's

culture, mission statement, and leadership styles.

External environment • The external environment comprises of all the entities that exists outside its boundary,

but have significant influence on its growth and survival.

• Organizational environment is defined as all elements that exist outside the boundary of

the organization and have the potential to affect all or part of the organization.

• It determines the opportunity and threat of an organization.

• It is also called as operating environment.

• Includes customers, public opinion, economic conditions, government regulations and

competition, suppliers.

Task & General environment

• External environment is divided into two parts :

o General environment or Mega environment

o Task environment or Specific environment

Task or specific environment• Refers to forces and institutions outside the organization with which an

organization interfaces in the course of conducting its business.

• Task environment of each organization is unique and changes with

conditions

• Forces and institutions are directly relevant to :

o Achievement of the organizational goals

o Direct and immediate impact on decisions and actions of the

management

Important constituents of task environment• Customers – refers to those individuals and organizations that purchases its products and services.

They posses potential uncertainty to an organization’s success because of their changing tastes,

preferences, lifestyle.

• Suppliers – those people or organizations that supplies raw materials, goods and services. Suppliers

also includes provider of financial inputs.

• Competitors – organizations the either offer or have a potential to offer rival products or services.

• Pressure groups – special interest groups that attempts to influence the actions of organizations.

E.g., MADD, PETA

General or Mega environment • Refers to broad trends and conditions in the society within

which an organization operates.

• Such elements are beyond the ability of a single organization

to affect or alter them.

• They cannot be influenced in short run.

Important constituents of general environment• Technological elements – refers to current state of knowledge about the production

of goods and services. Technological environment can positively or negatively affect

the overall success of an organization.

• Economic elements – economic factors such as inflation, rate of interest, changes in

per capita income, stock market fluctuation etc., affects the profitability and success

of an organization.

• Legal political elements – refers to the legal and governmental system within which

an organization must function.

Contd…• Socio cultural elements – includes customs, norms, behavior, societal values,

beliefs, etc. it is necessary to monitor the prevailing trend from time to time as such

changes might offer new opportunities or significant threat. (CSR, CG)

• International elements – the political, social, cultural and economic situations of

one country are significantly different from another. Development of a country

outside of an organization’s home country has great influence on the success of the

organization.

10 sectors affecting the organizational environment

Information TechnologyInformation technology (IT) is dramatically changing the business landscape.

• Areas which are affected by IT are :• Business Strategy : IT creates new opportunities for innovation in products and services.Key levers are :

o Resequencing: including parallel processing of data-bases (HRIS- human resourse

information system

o Simultaneity: making information instantly available in several systems (e.g., via OLE)

o Time extension: offering 24 hour a day; 365 days a year service

o Portability: taking service and products closer to the user

• Organization Culture :Newer types of IT such as electronic mail and groupware are creating significant changes in the way that information flows around group ware, and between them and their customers and suppliers. Organization are following a common notion, i.e., "information is power“.

Contd…Organization structure :IT ensures more flexible and fluid structures - networked structures, dispersed team and teams that come and go as needs change (as in the virtual corporation).IT enables a greater variety of structures

Management Processes :IT is rapidly entering the era where it supports unstructured management processes as well as highly routinized business processes. It provides more effective ways of accessing information from multiple sources, including use of external information on databases and the Internet.

Work :There are few offices where professional do not make use personal computers. Many jobs involving extensive information and knowledge based work, the use of the computer is often a core activity. Now a days organisation needs hybrid managers - people who are competent at both their discipline and IT.

The Workplace :IT diminishes the effect of distance, i.e., it can provide more flexibility in the office, allowing desk sharing and a degree of location independence within a building. It permits the dispersion of work teams, thus saving costs of relocation and travel.

Knowledge management• Knowledge management (KM) as an emerging set of strategies and approaches to create,

safeguard, and use knowledge assets (including people and information), which allows knowledge to flow to the right people at the right time so they can apply these assets to create more value for the enterprise.

• The success of a KM initiative depends on many factors. These are :o Leadership : Leadership plays a key role in ensuring success in almost any initiative within an

organization. Its impact on KM is even more pronounced because this is a relatively new discipline.

o Culture : Culture is the combination of shared history, expectations, unwritten rules, and social customs that compel behaviours. It is the set of underlying beliefs that, while rarely exactly articulated, are always there to influence the perception of actions and communications of all employees.

o Structure : It is a combination of a centralized and decentralized approach.o Information technology infrastructure : (ERP) Without a solid IT infrastructure, an

organization cannot enable its employees to share information on a large scale.

Knowledge management

Organizational structure

Centralization

Formalization

Complexity

Integration

Utilize

Share

Create

Organizational environment integration

Organizational structure favorable for KM• It is expected that when the organizational structure is less formalized, less centralized, more

complexity, and more integrated, KM is more favourable :

o Centralization effect on KM negatively.

o Formalization effect on KM negatively.

o Complexity effect on KM positively.

o Integration effect on KM positively.

• Decentralization facilitates internal communication, adoption of innovation, and higher levels of creativity.

• Formalization is the extent to which employee behaviour is guided by rules and procedures. Too much of rules leads to a barrier to KM.

• Complexity refers to the degree to which different functions are distinguished with respect to goals, task orientation, and degree of autonomy.

• Integration describes the degree to which the activities of separate players in the organization can be coordinated through formal coordination mechanisms.