MODULE: ORGANIZATIONAL ENVIRONMENT AND CULTURE

ORGANIZATIONAL ENVIRONMENT

Organizational Environment Defined

Organization environment consists of all internal and external factors that affect the organization as a whole.

An organizational environment is composed of forces or institutions surrounding an organization that affect

performance, operations, and resources.

DIVISIONS OF ORGANIZATIONAL ENVIRONMENTS

The factors that affect the organization are divided into two groups:
 Internal Environment
 External Environment

Internal Environments
An organization's internal environment consists of the entities, conditions, events and other factors within the
organization that influence choices and activities.
Internal environments are significant because they affect how people think, feel, and do at the workplace.

Factors within the organization that are considered internal environment factors arc employee behavior, formal
structure of the organization, organizational culture, mission statement, philosophy of management and
leadership styles, and organizational climate.

The formal structure of the organization is the hierarchical arrangement of people and tasks.

Organizational culture is the organization s personality. This is composed of values, rites and rituals, social
network and heroes or model.
Mission statement describes what the organization stands for and why it exists. It states the overall purpose
of the organization. It also answers the following questions: Who will be served? What will be produced?
Where will the production be?, What ideology will be followed?
Organizational climate refers to the overall tone of the workplace and the morale of the employees.
Philosophy of management is the managers' personal beliefs and values about the people and work.

External Environments
External environments are the factors outside an organization that have the ability to influence or affect it.

Two kinds of external environments that affect organizations are:

* General Environment
 * Specific Environment

General environment consists of the following:

* Economy
* Technological component
* Socio-cultural component
* Political/legal component

Economy. A country's economic condition affects the operations of a company. A progressive economy means
more jobs, more production, more money to spend and this is favorable to the growth of the organization.
Economy influences business decisions and managers use economic statistics and indices to project future
business activities.

Technological component. Technology here pertains to knowledge, tools, and techniques used to transform
inputs (raw materials, information, labor, equipment) to outputs (products or services). Technological evolution
helps companies to produce efficiently and provide better goods and services to consumers

Socio-cultural component. This pertains to the demographic features and peoples' behavior, attitudes and
beliefs. This component influence organizations in two ways:

* Changing demographics such as number of people with particular skills, population segments
- single or married, old or young, men or women, aboriginals or disabled- affect how the
businesses are being run.
* Changes in behavior, attitudes, and beliefs of people affect the demand for products or
services provided by the organization.

Political and Legal component. This includes legislations, regulations, and court decisions that govern and
regulate the conduct of business. Managers and employees should be educated about laws and regulations that
affect the business.

Specific Environment - consists of factors that indirectly influence organizations

Specific environment components that influence businesses are:

* Customer
* Competitor
* Supplier
* Industry regulation
* Advocacy groups

Customer component. The customers are the lifeblood of businesses. No company can exist without customers.
Managers should monitor customers in two ways:

• Reactive customer monitoring - is identifying and addressing customer trends and problems after they
 happen. Example is listening to customer complaints.
• Proactive customer monitoring - is attempting to sense events, trends and problems before they occur
or before costumer complaints.

Competitor component. Competitors are companies in the same industry selling the same products or services to
customers.

Supplier component. They are the people who provide resources (human, materials, financial, information) to
other companies. Supplier and buyer are dependent on each other.

Industry regulation component. This component consists of regulations and rules governing practices and
procedures of specific industries, businesses and professions.

Advocacy groups. These are concerned citizens, sharing the same point of view on a particular issue, who
gathered together to tiy to influence the business practice of specific industries, businesses, and professions.

Organizational Culture

The different types of culture are as follows:

• Normative Culture: The organization has a predefined norms and procedures. Rules and regulations
exist are per given parameters. The employees strictly observe the policies of the organization and no
employees risk to break the rules.

• Pragmatic Culture: Customer satisfaction is the main motive of die employees in a pragmatic
culture. The employees tried so hard to satisfy his clients expecting greater business opportunities
from their side. The organizations have no set rules to follow and treat their clients as Gods.

• Academy Culture: Organizations following academy culture recruit skilled individuals and delegate
roles and responsibilities based on their back ground, educational qualification and work experience.
Organizations widi this type of culture give importance in training their employees. The trainings are
usually conducted at die workplace aiming to improve the professional competence of their employees
who usually stay with the organization for longer periods. Examples of organizations practicing such
culture are educational institutions and hospitals.

• Baseball team Culture: This culture considers the employees as the most treasured assets of the
organization. The individuals always have an upper edge and they do not bother much about their
organization. Advertising agencies, event management companies, financial institutions are examples
of organizations following such a culture.

* Club Culture: Organizations following a club culture are hiring individuals according to their
specialization, educational qualification and interests. The tasks given to them are those they can do
best Regular appraisals are conducted and deserving employees are promoted.

* Fortress Culture: Certain organizations follow this type of culture where their employees are not
very sure about their career and permanency. The employees are fired if the organization is not
 performing well and they suffer the most when the organization is at a loss. Stock broking industries
follow such a culture.

* Tough Guy Culture: In a tough guy culture, the employees' performances are reviewed regularly and
their works are totally at a watch. The employees are under constant lookout in such a culture.

* Bet your company Culture: Organizations which follow bet your company culture take decisions
which involve a big amount of risk and the consequences are also unpredicted. The principles and
policies of such an organization are created to address sensitive issues and it takes time to get the
results.

* Process Culture: The processes and procedures of the organization are considered most important in
this type of culture. Feedbacks and performance reviews do not matter much. The employees follow
the rules and regulations and work according to the creeds of the workplace. All government
organizations follow such a culture

Factors Affecting Organization Culture

* The individual working with the organization. The attitudes, mentalities, interests, perception and even
the thought process of the employees affect the organization culture.
* The sex of the employee also affects the organization culture. Organizations where male employees
dominate the female counterparts follow a culture where late sitting is a normal feature. The male
employees are more aggressive than the females who instead would be caring and softhearted.
* The nature of the business also affects the culture of the organization. Stock broking industries,
financial services, banking industry are all dependent on external factors like demand and supply,
market cap, earning per share and so on. When the market crashes, these industries have no other
option than to terminate the employees and eventually affect the culture of the place.

* The organization's goals and objectives. The strategies and procedures designed to achieve the targets
of the organization also contribute to its culture. Example of which are the individuals working with
government organizations adhere to the set guidelines but do not follow a procedure of feedback thus
forming its culture
* The clients and the external parties to some extent also affect the work culture of the place.
Organizations as BPOs have their employees working in shifts to match the timing of their customers
or clients, and this form their culture.
* The management and its style of handling the employees.There are certain organizations where the
management allows the employees to take their own decisions and let them participate in strategy
making. The employees get attached to their management and look forward to a long term association
with the organization.

Setbacks of an Organization Culture

* The culture of an organization is not formed in a single day. A culture is formed when individuals
follow certain values and adhere to guidelines over a considerable period of time.
* Adjustment problems arise when new employees find it difficult to adjust to the prevailing work
culture.
* Culture in certain cases can also become a liability to an organization.
* An individual working in any particular culture for quite some time would develop certain habits and
mindset.
* An employee finds it difficult to implement new ideas and concepts in a culture which has been
practiced for several years.
* One should always remember that no culture is more important than employees.