The Environment and Corporate Culture
Cha
pter
3
Copyright © 2005 by South-Western, a division of Thomson Learning. All rights reserved.
2
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.
3
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.
4
Organizational Environments
Management
Empl
oyee
s Culture
Internal Environment
Suppliers
Co
mp
etitors
CustomersL
abo
r M
arke
t
Legal/Political Economic
Technological
Socio-C
ulturalIn
tern
atio
nal
General Environment
Task Environment
Technological
Suppliers
Copyright © 2005 by South-Western, a division of Thomson Learning. All rights reserved.
5
International Dimension
● Provides New• Customers• Competitors• Suppliers
● Shapes:• Social trends• Technological trends• Economic trends
Copyright © 2005 by South-Western, a division of Thomson Learning. All rights reserved.
6
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.
7
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.
8
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 high-cost 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.
9
Economic Dimension
● General economic health● Consumer purchasing power● Unemployment rate● Interest rates
● Recent Trends● Frequency of mergers and acquisitions● Small business sector vitality
Copyright © 2005 by South-Western, a division of Thomson Learning. All rights reserved.
10
Task Environment
Sectors that have a direct working relationship with the organization
● Customers● Competitors● Suppliers● Labor Market
Copyright © 2005 by South-Western, a division of Thomson Learning. All rights reserved.
11
Labor Market Forces
Labor Market Forces Affecting Organizations today
● 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.
12
Adopting to the Environment
Boundary-spanning employees Inter-organizational partnerships Mergers or joint ventures
Copyright © 2005 by South-Western, a division of Thomson Learning. All rights reserved.
13
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
Copyright © 2005 by South-Western, a division of Thomson Learning. All rights reserved.
14
Interorganizational Partnerships
Shift in paradigm● 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.
Culture
The set of key values, beliefs, understandings and norms that members of an organization share
15
Copyright © 2005 by South-Western, a division of Thomson Learning. All rights reserved.
16
Levels of Corporate Culture
Visible1. Artifacts, such as dress, office
layout, symbols, slogans, ceremonies
2. Expressed values, such as “The Penney Idea,” “The HP Way”
3. Underlying assumptions and deep beliefs, such as “people are lazy and can’t be trusted”
Invisible
Culture that can be seen at the surface level
Deeper values and shared understandings held by organization members
Copyright © 2005 by South-Western, a division of Thomson Learning. All rights reserved.
17
Visible Manifestations
SymbolsStoriesHeroesSlogansCeremonies
Copyright © 2005 by South-Western, a division of Thomson Learning. All rights reserved.
18
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
Copyright © 2005 by South-Western, a division of Thomson Learning. All rights reserved.
19
Corporate Culture AdaptabilityAdaptive Culture Unadaptive Culture
Visible Behavior
Expressed Values
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.
Managers tend to behave somewhat insularly, politically, and bureaucratically. As a result, they do not change their strategies quickly to adjust to or take advantage of changes in their business environments.
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).
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.
Copyright © 2005 by South-Western, a division of Thomson Learning. All rights reserved.
20
Four Types of Corporate Cultures
Adaptability Culture
Achievement Culture
Consistency Culture
Involvement Culture
External
Internal
Flexibility Stability
Str
ateg
ic F
ocu
s
Needs of the Environment
Copyright © 2005 by South-Western, a division of Thomson Learning. All rights reserved.
Cultural Leader
21
● A manager who uses signals and symbols to influence corporate culture
Copyright © 2005 by South-Western, a division of Thomson Learning. All rights reserved.
22
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
Copyright © 2005 by South-Western, a division of Thomson Learning. All rights reserved.
23
High-Performance Culture
Creating and maintaining a high-performance culture in today’s turbulent environment and changing workplace is not easy.
– 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.