Adapting Organization to Environment Uncertainty

8/13/2019 Adapting Organization to Environment Uncertainty

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Adapting Organization to

Environment Uncertainty


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Purpose

The purpose is to develop the framework forassessing environments and how organizationsrespond to it

Need to identify the organizational domain and the

sectors that influence the organization Need to explore two major environmental forces

the need for information and the need forresources

Organizations respond to these forces throughstructure design, and attempts to change & controlthe environmental elements


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An Organizations Environment

IndustrySector Raw

Materials

Sector

Human

ResourcesSector

Financial

Sector

MarketSector

Technology

Sector

Economic

Conditions

Sector

Government

Sector

Sociocultural

Sector

International

Sector

ORGANIZATIONAL

ENVIRONMENT


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Task Environment

Includes sectors with which organization interacts

directly and have a direct impact on organizations

ability to reach its goals

General Environment

Includes those sectors that might not have a direct

impact on the daily operations of the firm, but

indirectly influence it

An Organizations Environment

contd


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Environmental Uncertainty

Patterns/events occurring in the environment aredescribed along these dimensions:

Environment is stable or unstable

Homogeneous or HeterogeneousSimple or complex

The amount of resources available, how are theseresources concentrated or dispersed

These leads to two essential ways the environmentinfluences organization


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1) The need for information about the environment

2) The need for resources from the environment

Environmental Uncertainty deals primarily with theTask Environment

Uncertainty means that decision makers do nothave sufficient information about environment

factors. Task Environment can be analyzed along

dimensions such as stability or instability anddegree of complexity

Environmental Uncertainty


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Simple-Complex Dimension

It is the degree to which organization interacts

with different or similar, few or large number

of external elements of the environment


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Stable-Unstable Dimension

Refers to how far the elements are dynamic


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FrameworkSimple + Stable= Low Uncertainty

1. Small number of externalelements, & elements are similar

2. Elements change slowly

Examples: Soft Drink bottlers, Foodprocessors,

Complex + Stable= Low-

Moderate Uncertainty

1. Large number of externalelements & elements are dissimilar

2. Elements change slowly

Examples: Universities, Chemicalcompanies, Insurance companies

Simple + Unstable= High

Moderate Uncertainty

1. Small number of externalelements, elements are similar

2. Elements change frequently +Unpredictability

Examples: Toy Manufacturers,

fashion, Music Industry

Complex + Unstable=High

Uncertainty

1. Large number of externalelements + elements are dissimilar

2. Elements change frequently +unpredictability

Examples: Aerospace, aviation

industry, telecommunications


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Adapting to Environmental

Uncertainty

Environment Uncertainty represents important

contingency for organizational structure

Organizations with higher uncertaintyhavemore horizontal structure-encouraging cross-

functional communication & collaboration

Organizations need to have the right fit

between internal structure and external

environment


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An organization in certain environment be

managed and controlled differently from an

organization in an uncertain environment with

respect to:

Positions & departments

Organizational differentiation and integration Control processes

Future planning & forecasting

Adapting to Environmental

Uncertainty


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Positions and Departments

As the complexity and uncertainty increases,

the number of positions and departments also

increases

Concept of Buffering and Boundary

Spanning


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Differentiation and Integration

Organizational differentiation is the differencesin cognitive and emotional orientations among

managers in different functional departments,

and difference in formal structure among thesedepartments

As the env. Becomes more complex, depts.

Become highly specialized to handle & adapt Each department evolves different orientation

& structure to deal with specialized parts of the

environment (study-Lawrence & Lorsch)


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Differences in Goals and Orientations

Characteristics R&D Department Manufacturing

Department

Sales

Department

GOALS New developments,

Quality

Efficient

Production

Customer

Satisfaction

TIME HORIZON Long Short Short

INTERPERSONAL

ORIENTATION

Mostly Task Task Social

FORMALITY OF

STRUCTURE

Low High High


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Integration

Integration is the quality of collaboration

among departments

With high uncertainty, high differentiation,

integration becomes challenge

Frequent dynamic changes need more

horizontal coordination

Formal Integrators are required to coordinate

departments. ( project managers, coordinators,

brand managers)


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Environment Uncertainty and

Organizational Integrators

INDUSTRY PLASTICS FOOD CONTAINERS

Environmental

Uncertainty

High Moderate Low

Departmental

Differentiation

High Moderate Low

% management inintegrating roles

22% 17% 0%

Source: Based on Lorsch and Lawrence study


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LOW UNCERTAINTY

- Mechanistic structure

- Few departments

-No integrating roles

- Current operations orientation

LOW-MODERATE

UNCERTAINTY

- Mechanistic structure

-Many departments, someboundary spanning

- Few integrating roles

- Some planning

HIGH-MODERATE UNCERTAINTY

- Organic structure, participative

- Few departments, much boundaryspanning

- Few integrating roles

- Planning orientation, fast response

HIGH UNCERTAINTY

- Organic structure

- Many departmentsdifferentiated, extensive boundaryspanning

- Many integrating roles

- Extensive planning, high speedresponse

Framework for organizational

responses to uncertainty

STABLE

UNSTABL

E

SIMPLE COMPLEX


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Controlling Environmental

Resources

Adapting Organization to Environment Uncertainty

Documents

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