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Management
Fourteenth Edition
Chapter 3
Managing the External
Environment and the
Organization’s Culture
Copyright © 2018 Pearson Education, Inc.
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Learning Objectives
3.1 Contrast the actions of managers according to the
omnipotent and symbolic views.
3.2 Describe the constraints and challenges facing
managers in today’s external environment.
Develop your skill at scanning the environment so you
can anticipate and interpret changes taking place.
3.3 Discuss the characteristics and importance of
organizational culture.
Know how to read and assess an organization’s culture.
3.4 Describe current issues in organizational culture.
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The Manager: Omnipotent or Symbolic?
• Omnipotent view: managers are directly
responsible for an organization’s success or
failure
• Symbolic view: much of an organization’s
success or failure is due to external forces outside
managers’ control
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Managerial Constraints
• In reality, managers are neither all-powerful nor
helpless. But their decisions and actions are
constrained.
• External constraints come from the organization’s
environment and internal constraints come from
the organization’s culture
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The External Environment
• Those factors and forces outside the organization
that affect its performance
– Economic
– Demographic
– Political/Legal
– Sociocultural
– Technological
– Global
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Copyright © 2018 Pearson Education, Inc.
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The Economic Environment
• Managers need to be aware of the economic
context so they can make the best decisions for
their organizations.
• Change in $, interest rates, unemployment, ….
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The Global Economy and the Economic
Context
• The lingering global economic challenges began
with the turmoil in the U.S. housing market.
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Economic Inequality and the Economic
Context
• Polls show that in many countries, people believe
that the gap between the rich and poor is
problematic.
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The Demographic Environment
• Age is a particularly important demographic since
the workplace often has different age groups all
working together
– Baby Boomers
– Gen Y (Millennials)
– Post-Millennials
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How the External Environment Affects
Managers
• Jobs and Employment: the impact of external
factors on jobs and employment is one of the most
powerful constraints managers face
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Assessing Environmental Uncertainty
• Environmental uncertainty: the degree of
change and complexity in an organization’s
environment
– Change: stable to dynamic
– Complexity: simple to complex
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Copyright © 2018 Pearson Education, Inc.
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Managing Stakeholder Relationships (1)
• Stakeholders: any constituencies in the
organization’s environment that are affected by an
organization’s decisions and actions
These groups have a stake in or are significantly
influenced by what the organization does. In turn,
these groups can influence the organization.
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Copyright © 2018 Pearson Education, Inc.
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Benefits of Good Stakeholder Relationships
• Improved predictability of environmental changes
• Increased successful innovations
• Increased trust among stakeholders
• Greater organizational flexibility to reduce the
impact of change
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Organizational Culture
• Just as each individual has a unique personality,
an organization, too, has a personality.
• An organization’s culture can make employees
feel included, empowered, and supported or it can
make them feel the opposite.
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What is Organizational Culture?
• Organizational culture: the shared values,
principles, traditions, and ways of doing things that
influence the way organizational members act and
that distinguish the organization from other
organizations
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Contrasting Organizational Culture
• At Tesla Motors, the focus is product innovation
(innovation and risk taking).
• In contrast, Southwest Airlines has made its
employees a central part of its culture.
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Strong Cultures
• Strong cultures: organizational cultures in which
the key values are intensely held and widely
shared
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Where Culture Comes From and How it
Continues
• The original source of the culture usually reflects
the vision of the founders.
• Once the culture is in place, certain organizational
practices help maintain it.
• The actions of top managers also have a major
impact on the organization’s culture.
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How Employees Learn Culture
• Stories (200 TL-nova)
• Rituals (annual awards ceremony for its sales
representatives)
• Material Artifacts and Symbols (how employees
dress, the types of automobiles provided to top
executives > porsche - unilever)
• Language (guests x customers)
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How Culture Affects Managers
• Because an organization’s culture constrains what
they can and cannot do and how they manage, it’s
particularly relevant to managers.
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Creating an Innovative Culture
• Challenge and involvement
• Freedom
• Trust and openness
• Idea time
• Playfulness/humor
• Conflict resolution
• Debates
• Risk taking
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Creating a Sustainability Culture
• For many companies, sustainability is developed
into the organization’s overall culture.
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Review Learning Objective 3.1
• Contrast the actions of managers according to
the omnipotent and symbolic views.
– Omnipotent view: Managers are directly responsible for
the organization’s success or failure.
– Symbolic view: Much of the organization’s success or
failure is due to external forces outside of the
manager’s control.
– The two constraints on managers' discretion are
organizational culture (internal) and the environment
(external).
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Review Learning Objective 3.2
• Describe the constraints and challenges facing
managers in today’s external environment.
– The external environment includes those factors and forces
outside the organization that affect its performance).
– The main components of the external environment are
economic, demographic, political/legal, sociocultural,
technological, and global.
– These components can constrain and challenge managers
because they have an impact on jobs, environmental
uncertainty, and stakeholder relationships.
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Review Learning Objective 3.3
• Discuss the characteristics and importance of
organizational culture.
– The seven dimensions of culture are: attention to detail, outcome
orientation, people orientation, team orientation, aggressiveness,
stability, innovation, and risk taking.
– The stronger the culture, the greater the impact on the way
managers plan, organize, lead, and control.
– The original source of the organizational culture reflects the
founder’s vision.
– Culture is transmitted through stories, rituals, material symbols,
and language.
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Review Learning Objective 3.4
• Describe current issues in organizational
culture.
– The characteristics of an innovative culture are challenge and
involvement, freedom, trust and openness, idea time,
playfulness/humor, conflict resolution, debates, and risk taking.
– A customer responsive culture has five characteristics: outgoing
and friendly employees; jobs with few rigid rules, procedures, and
regulations; empowerment; clear roles and expectations; and
employees who are conscientious in their desire to please the
customer.
– Companies that achieve business goals and increase long-term
share-holder value by integrating economic, environmental, and
social opportunities into business strategies may develop
sustainability into the organization’s overall culture.
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Copyright © 2018 Pearson Education, Inc.
