Environment-Structure Open Systems - Environment OE – Adaptation to Environment – Structure Different Organizations – Different Levels of Environmental Uncertainty Environment – Everything outside the boundaries General and Specific General – PESTLEC – May Affect (WTO, Growth Rate, Planned Sectoral Expenditure, Labour Law Reforms Specific – Directly Relevant to OE

Organization Supplier Customer Union Regulator Association Government The Specific Environment

Environment-Uncertainty Perceived versus Objective Environment Perception of environmental uncertainty determines structure Uncertainty Different parts of an organization perceive uncertainty differently Different organizations perceive uncertainty differently in the same environment It is the perceived environment that counts Different parts of an organization perceive uncertainty differently Different organizations perceive uncertainty differently in the same Design

Mechanistic structures: designed to induce people to behave in predictable, accountable ways –Emphasis on the vertical command structure –Roles are defined narrowly –Promotion is slow and steady –Best suited to organizations that face stable, unchanging environments  Organic structures: promote flexibility, so people initiate change and can adapt quickly to changing conditions Less emphasis on vertical command structure Roles are defined loosely Status conferred by ability to provide creative leadership Encourages innovative behavior Suited to dynamic environments

CharacteristicMechanisticOrganic Task DefinitionRigidFlexible CommunicationVerticalLateral FormalizationHighLow InfluenceAuthorityExpertise ControlCentralizedDiverse Burn & Stalker Continuum Effective structure adjusts to environment

Lawrence & Lorsch: Environment & Structure Investigated how companies in different industries differentiate and integrate their structures to fit the environment –Three industries that experienced different levels of uncertainty: The plastics industry The food-processing industry The container or can-manufacturing industry

Lawrence & Lorsch: Environment & Structure  Measure of External Environment = Degree of Uncertainty (rate of change in environment, time taken to get feedback from environment, clarity of information that management held about environment)  Measure of Internal Environment = Differentiation and Integration  H0: More successful organizations within each industry will have a better match between the two compared to less successful ones

Lawrence & Lorsch: Environment & Structure  Sub-Parts of organization deals with sub-parts of organization  Basic reason for differentiation was for departments to deal more effectively with sub-environments  Hypotheses: Complex, diverse, turbulent environment = High differentiation, high integration  Plastics: Successful firms highly differentiated, sales and R&D functions less complex than production

Findings: Lawrence and Lorsch Multiple specific environments Different degrees of uncertainty Sub-units meet the demands of sub environments Differentiate to deal with specific problems Integrate to move towards organizational goals

Integrated Findings Three key dimensions: capacity, volatility, complexity Capacity = Potential for growth (eg automobile industry in India in 1980s) Volatility = Degree of instability in environment (stable or dynamic) Complexity = Number of diverse elements, ease of entry, number of competitors, specific environment)

Stable Dynamic Complex Simple Abundant Scarce

Akin to perfect competition Slow but random changes Placid Randomized Slow changes Clustered threats, Utilities, Long Range Planning Placid Clustered Oligopolistic, dominated by few who can influence Steel, Colas, competitive, series of tactical plans Disturbed Reactive Most dynamic and highest uncertainty, inter- related changes, ‘Future Shock’ Turbulent Field

Power-Control & Structure Size, Strategy, Technology, Environment = 50-60% Rest?

Organizational Conflict Clash between goal directed behavior Negative connotation Research suggests that some conflict can actually improve organizational effectiveness –Can overcome inertia and lead to learning and change

Beyond a certain point, conflict becomes a cause for organizational decline –Inability to reach consensus and indecision –Too much time spent on bargaining rather than acting swiftly to resolve problems On balance, organizations should be open to conflict and recognize its value Organizational Conflict

Pondy’s Model of Organizational Conflict Conflict is a process that consists of five sequential stages

Managing Conflict Escalation of conflict may affect ‘culture’ Managing conflict is an important priority Functional and Dysfunctional Conflict – A balance Choice of conflict resolution method depends on the source of the problem

Managing Conflict: Resolution Strategies Acting at the level of structure: Because task interdependence and differences in goals produce conflict, alter the level of differentiation and integration to change relationships Increase the number of integrating roles Assign top managers to solve conflict Rethink the hierarchy/reporting chain

Acting at the level of attitudes and individuals Establish a procedural system that allows parties to air their grievances Important for conflict between management and unions –Use a third-party negotiator –Exchange/rotate/terminate individuals –CEOs can also use their power to resolve conflicts and motivate units to cooperate

Organizational Power? the ability of one person or group to overcome resistance by others to achieve a desired objective or result –Conflict and power are intimately related