Chapter 3 The Organization Very Personal Much Like Extended

CHAPTER 3

THE ENVIRONMENT AND CORPORATE CULTURE

CHAPTER OUTLINE

Are You Fit for Managerial Uncertainty?

I. The External Environment

A. General Environment

B. Task Environment

II. The Organization–Environment Relationship

IV. Types of Cultures

A. Adaptability Culture

B. Achievement Culture

C. Involvement Culture

D. Consistency Culture

New Manager Self-Test: Cultural Preference

ANNOTATED LEARNING OBJECTIVES

After studying this chapter, students should be able to:

1. Define an organizational ecosystem and how the general and task environments affect an

organization’s ability to thrive.

An organizational ecosystem is a system formed by the interaction among a community of

organizations in the environment. An ecosystem includes organizations in all the sectors of the

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2. Explain the strategies that managers use to help organizations adapt to an uncertain or

turbulent environment.

The environment creates uncertainty for organization managers. Uncertainty means that

managers do not have sufficient information about environmental factors to understand and

3. Define corporate culture and give organizational examples.

Culture can be defined as the set of key values, beliefs, understandings, and norms shared by

members of an organization. It can be analyzed at two levels. At the surface level are visible

4. Explain organizational symbols, stories, heroes, slogans, and ceremonies and their

relationship to corporate culture.

Fundamental values and corporate culture cannot be observed directly, but they can be

understood through the visible manifestations of symbols, stories, heroes, slogans, and

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5. Describe four types of cultures and how corporate culture relates to the environment.

The adaptability culture is characterized by values that support the company’s ability to rapidly

detect, interpret, and translate signals from the environment into new behavior responses. This

culture emerges in an environment that requires fast response and high-risk decision making.

The achievement culture is a results-oriented culture that values competitiveness, aggressiveness,

6. Define a cultural leader and explain the tools a cultural leader uses to create a high-

performance culture.

A cultural leader is a manager who uses signals and symbols to influence corporate culture.

Cultural leaders influence culture by articulating a vision for the organizational culture that

employees can believe in, and heeding the day-to-day activities that reinforce the cultural vision.

exemplify high-performance in his or her own work activities.

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LECTURE OUTLINE

ARE YOU FIT FOR MANAGERIAL UNCERTAINTY?

Organizations in uncertain environments find that everything seems to be constantly changing.

Such an environment requires that new managers possess the quality of “mindfulness”—being

open-minded and thinking independently. This exercise helps students determine their levels of

mindfulness, indicating whether they would likely perform better in stable or unstable

environments.

I. THE EXTERNAL ENVIRONMENT Exhibit 3.1

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

A. General Environment

1. The dimensions of the general environment include international, technological,

sociocultural, economic, natural, and legal-political.

a. The international dimension represents events originating in foreign countries

and opportunities for American companies in other countries. This dimension

b. The technological dimension includes scientific and technological advancements

in a specific industry as well as in society at large. Technology has created

c. The sociocultural dimension represents the demographic characteristics, norms,

customs, and values of the general population. Important sociocultural

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d. The economic dimension represents the general economic health of the country

or region in which the organization operates. Components of the economic

e. The legal-political dimension includes federal, state, and local government

regulations and political activities designed to influence company behavior.

Government regulations influence organizations through a variety of legislation

such as Occupational Safety and Heath Administration (OSHA), the

Environmental Protection Agency (EPA), fair trade practices, and others.

Exhibit 3.2

f. The natural dimension is different from other sectors of the general environment

because it has no voice of its own. It includes all elements that occur naturally on

Discussion Question #5: Why do you think many managers are surprised by environmental

changes and hence are less able to help their organizations adapt?

NOTES________________________________________________________________________

______________________________________________________________________________

B. Task Environment

1. 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.

Discussion Question #4: Contemporary best-selling management books often argue that

customers are the most important element in the external environment. Do you agree? In what

company situations might this statement be untrue?

NOTES________________________________________________________________________

______________________________________________________________________________

b. Competitors are organizations in the same industry or type of business that

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d. The labor market represents people in the environment who can be hired to

work for the organization. Labor market factors that impact organizations

include:

• the growing need for computer-literate knowledge workers;

Exhibit 3.3

Discussion Question #2: Would the task environment for a cellular phone company contain the

same elements as that for a government welfare agency? Discuss.

NOTES________________________________________________________________________

______________________________________________________________________________

II. THE ORGANIZATION-ENVIRONMENT RELATIONSHIP

A. Environmental Uncertainty Exhibit 3.4

1. Environmental uncertainty must be managed to make the organization more effective.

Uncertainty means that managers do not have sufficient information about

2. When external factors change rapidly, the organization experiences very high

Discussion Question #3: What strategic issues have the potential to create environmental

uncertainty in the following four industries: (a) automobile; (b) social media; (c) newspaper;

and (d) medical services?

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NOTES________________________________________________________________________

______________________________________________________________________________

B. Adapting to the Environment

1. Managers continuously scan the business horizon for both subtle and dramatic

2. Boundary-spanning roles link to 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 interests to the environment.

a. People in departments such as marketing and purchasing span the boundary to

work with customers and suppliers through face-to–face and market research.

Exhibit 3.5

3. A popular strategy for adapting to the environment is by reducing boundaries and

increasing collaboration with other organizations through interorganizational

partnerships. Companies are joining together to become more effective and share

Discussion Question #6: Why are interorganizational partnerships so important for today’s

companies? What elements in the current environment might contribute to either an increase or

decrease in interorganizational collaboration? Discuss.

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NOTES________________________________________________________________________

______________________________________________________________________________

III. THE INTERNAL ENVIRONMENT: CORPORATE CULTURE Exhibit 3.6

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

NOTES________________________________________________________________________

______________________________________________________________________________

A. Symbols

1. A symbol is an object, act, or event that conveys meaning to others. Symbols

associated with corporate culture convey the organization’s important values.

B. Stories

1. A story is a narrative based on true events that is repeated and shared among

C. Heroes

D. Slogans

1. A slogan is a phrase or sentence that succinctly expresses a key corporate value.

E. Ceremonies

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1. A ceremony is a planned activity that marks up a special event and is conducted for

the benefit of an audience.

Discussion Question #8: Cultural symbols are usually noticed through sight, sound, touch, and

smell. For example, Costco displays a limited amount of low-priced merchandise in a no-frills,

self-service warehouse with concrete floors. What do these elements communicate as symbols

about its corporate culture?

NOTES________________________________________________________________________

______________________________________________________________________________

IV. TYPES OF CULTURE Exhibit 3.7

In considering what cultural values are important for the organization, managers consider the

A. Adaptive Culture

1. The adaptability culture is characterized by values that support the company’s

B. Achievement Culture

1. The achievement culture is a results-oriented culture that values competitiveness,

aggressiveness, personal initiative, cost cutting, and willingness to work long and

C. Involvement Culture

1. The involvement culture places high value on meeting the needs of employees and

values cooperation and equality. This culture has an internal focus on the

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D. Consistency Culture

1. The consistency culture values and rewards a methodical, rational, orderly way of

doing things. This culture uses an internal focus and a consistency orientation for a

stable environment

Discussion Question #10: As described in this chapter, Zynga CEO Mark Pincus is obsessed

with high performance, and demanding deadlines define the corporate culture. Describe how

this culture may be good for the short term but ultimately could hurt the organization’s long–

term sustainability.

NOTES________________________________________________________________________

______________________________________________________________________________

NEW MANAGER SELF-TEST: Cultural Preference

The fit between a new manager and organizational culture can determine success and

Instructions: The fit between new manager and organizational culture can determine success

and satisfaction. To understand your culture preference, rank the items below from 1 to 8 based

on the strength of your preference (1 = strongest preference).

1. The organization is very personal, much like an extended family. Score-1

2. The organization is dynamic and changing, where people take risks. Score-3

Scoring and interpretation: Each question pertains to one of the four types of culture in Exhibit

3.7. To compute your preference for each type of culture, add together the scores for each set of

two questions as follows:

Involvement culture — total for questions 1, 5: _2_

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preferences. A higher score means the culture would not fit your expectations, and you would

have to change your style and preference to be comfortable. Review the text discussion of the

four culture types. Do your cultural preference seems correct to you? Can you think of

companies that fit your culture preference?

V. SHAPING CORPORATE CULTURE FOR INNOVATIVE RESPONSE

Research shows that one factor that increases a company’s value the most is people and how they

are treated. Corporate culture has become increasingly important to managers as they recognize

its importance in attracting, motivating, and keeping good employees. Culture plays a key role

in creating an organizational climate that enables learning and innovative responses to threats

from the external environment, challenging new opportunities, or organizational crises.

A. Managing the High-Performance Culture Exhibit 3.8

1. Companies that succeed in a turbulent world are those that pay careful attention to

both cultural values and business performance. Cultural values can energize and

a. Companies that pay little attention to either values or business results are unlikely

to survive for long.

d. Companies that emphasize both culture and business performance will develop a

strong organizational culture that gives employees a sense of identity, holds the

company together during tough times, and helps it adapt quickly to a changing

environment. These companies represent the high-performance culture that:

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NOTES________________________________________________________________________

______________________________________________________________________________

B. Cultural Leadership

1. One-way managers change norms and values to build a high-performance culture is

through cultural leadership. A cultural leader defines and uses signals and symbols to

influence corporate culture by:

a. articulating a vision for the organizational culture that employees can believe in;

NOTES________________________________________________________________________

______________________________________________________________________________

Suggested Answers to End-Of-Chapter Discussion Questions

1. What are the characteristics of a flat world, a term used by Thomas Friedman to describe

today’s business environment? What challenges do they pose? How can you prepare to

manage in a flat world?

In his book The World Is Flat, Thomas Friedman challenges managers to view global markets as

a level playing field where geographical divisions are irrelevant. A flat world, Friedman argues,

2. Would the task environment for a cellular phone provider contain the same elements as that

for a government welfare agency? Discuss.

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There are three components of the task environment: competitors, suppliers, and customers. An

analysis of each of these components for the two organizations illustrates the differences in their

task environments.

3. What strategic issues have the potential to create environmental uncertainty in the following

four industries: (a) automobile; (b) social media; (c) newspaper; and (d) medical services

The forces influencing the environment are competitors, resources, technology, and economic

conditions. The general environment forces include natural, international, technological, social,

4. Contemporary best-selling management books often argue that customers are the most

important element in the external environment. Do you agree? In what company situations

might this statement be untrue?

Companies in the public and private sector must be customer driven to remain competitive.

5. Why do you think many managers are surprised by environmental changes and hence are

less able to help their organizations adapt?

Managers sometimes do not realize the need to carefully monitor the environment so that they

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6. Why are interorganizational partnerships so important for today’s companies? What

elements in the current environment might contribute to either an increase or decrease in

interorganizational collaboration? Discuss.

Interorganizational partnerships are important for today’s companies to survive and grow in the

7. Consider the factors that influence the environmental uncertainty (rate of change in factors

and number of factors in the environment) that are presented in Exhibit 3.4. Classify each of

the following organizations as operating in either (a) a low-uncertainty environment or (b) a

high-uncertainty environment: Hyundai, Facebook, a local Subway franchise, FedEx, a

cattle ranch in Oklahoma, and McDonald’s. Explain your reasoning.

In a high uncertainty environment, the external factors change rapidly whereas in a low

8. Cultural symbols are usually noticed through sight, sound, touch, and smell. For example,

Costco displays a limited amount of low-priced merchandise in a no-frills, self-service

warehouse with concrete floors. What do these elements communicate as symbols about its

corporate culture?

Symbols are important to corporate culture because they are tangible objects, acts, or events that

9. Both China and India are rising economic powers. How might your approach to doing

business with Communist China, a communist country, be different from your approach to

doing business with India, the world’s most populous democracy? In which country would

you expect to encounter the most rules? The most bureaucracy?

China will have many more rules and much more bureaucracy than will India, as its government

tries to strictly control the activities of foreign businesses, as well as those of its own citizens.

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10. As described in this chapter, Zynga CEO Mark Pincus is obsessed with high performance,

and demanding deadlines define the corporate culture. Describe how this culture may be

good for the short term but ultimately could hurt the organization’s long–term sustainability.

Zynga represents itself as an organization that is focused primarily on bottom-line results and

pays little attention to organizational values. This approach is profitable in the long run, but the

Apply Your Skills: Experiential Exercise

Working in an Adaptability Culture

Although this exercise deals with culture in the workplace, some students may not have much

experience with workplace cultures, so it may be useful to ask students about norms on their

campus—a culture with which they may be more familiar. Are there styles of dress, books, bags,

Apply Your Skills: Small Group Breakout

Organizational Culture in the Classroom and Beyond

This exercise asks students to identify cultural norms from their own experiences in three

different settings, then discuss the identified norms in groups of four to six students and group

the norms by common themes and give each group of norms a title. Students will also discuss

the origins of norms, the difference between espoused norms and enacted norms, and

responsibility for establishing norms.

Apply Your Skills: Ethical Dilemma

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Competitive Intelligence Predicament

1. Go ahead and use the documents to the company’s benefit, but make clear to your boss that

you don’t want him passing confidential information to you in the future. If he threatens to

fire you, threaten to leak the news to the press.

This is probably not a good option, since Miquel would feel uncomfortable using the

2. Confront your boss privately and let him know you’re uncomfortable with how the documents

were obtained and what possession of them says about the company’s culture. In addition to

the question of the legality of using the information, point out that it is a public relations

nightmare waiting to happen.

This is probably the best initial option. Miquel should be up front with his boss and let him

3. Talk to the company’s legal counsel and contact the Society of Competitive Intelligence

Professionals for guidance. Then with their opinions and facts to back you up, go to your

boss.

Apply Your Skills: Case for Critical Analysis

Not Measuring Up

1. Do you think Zeitland’s desire for changes in culture are related to changes in the external

environment? Explain.

The task environment component of the external organizational environment includes

competitors, suppliers, customers, and the labor market. The organization also has an internal

2. What additional investigation might Wheeling and Zeitland undertake before settling on a

plan of action?

Wheeling and Zeitland undertake additional investigation before settling on a plan of action as

Cam’s score on his management skills and job performance had not improved despite Cam

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3. In which quarter of Exhibit 3.8 would you place Cam? What are some steps you would

recommend that Cam consider to better connect with the employees who report to him?

Cam could be placed in the first quarter of Exhibit 3.8 under Quadrant A as he meets the

On the Job Video Cases Answers

Camp Bow Wow

1. What aspects of Camp Bow Wow’s corporate culture are visible and conscious? What aspects

are invisible and unconscious?

Visible aspects of Camp Bow Wow’s culture include the company logo, the presence of dogs in

workspaces, the dress code, the camp imagery, and Heidi Ganahl’s life story, which is told and

retold during franchisee meetings. Founder Heidi Ganahl says that one of the unique things about

2. Why did Camp Bow Wow have to change its culture when it became a national franchise?

Camp Bow Wow’s early family-business culture was useful in the startup phase of Camp Bow

Wow’s growth. However, Founder Heidi Ganahl says her company required a different culture

3. What impact does Heidi Ganahl’s story have on employees at Camp Bow Wow?

The story of Heidi Ganahl is famous at all levels of the Camp Bow Wow organization.

Consumers and franchisees who come in contact with Camp Bow Wow learn about the company

by hearing the details of her story. Boulder franchisee Sue Ryan says that Ganahl’s story is

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