3. ENVIRONMENTAL UNCERTAINTY - THOMPSON
The central core of the organization requires “technical
rationality.”
Norms of rationality require that the organization
attempt to “seal-off” or protect its technical core from
environmental influences.

4. INTERNAL STRATEGIES
Organizations regulate the flows of inputs and outputs to
their central technical cores through such internal
responses as buffering, smoothing (leveling), forecasting,
and rationing.

5. BUFFERING On the input side, buffering usually takes the form of
stockpiling critical resources whose supply is uncertain
or whose price fluctuates widely over time.
On the output side, buffering typically involves building
and keeping up warehouse and distribution inventories.
By buffering, environmental uncertainties are absorbed
because an organization’s technical core produces at a
constant rate. Other methods of buffering might include
preventative maintenance and recruiting and training.

6. SMOOTHING (LEVELING)
Where buffering absorbs environmental uncertainties,
smoothing involves efforts to manage environmental
uncertainties. Smoothing attempts to protect the technical
core by reducing uncertainties associated with cyclical
variations in product or service demand.
Examples might include differential costs of long distance
telephone calls that are lower during non-peak times,
discount airline fares for off-time flights.

7. FORECASTING When buffering and smoothing will not effectively protect
an organization’s technical core, organizations can often
reduce uncertainty and behave in a logical, rational manner
by developing accurate forecasting capabilities. To the
degree that environmental fluctuations can be predicted,
they can be treated as constraints and adapted to.

8. RATIONING Finally, when the organization finds that neither buffering,
smoothing, nor forecasting is sufficient to prevent
environmental penetration, organizations can turn to
rationing.
The allocation or assignment of resources
according to established priorities can be seen in
restaurant reservations, reserved seats at theaters, etc.,
and rationing (such as gasoline rationing during the
oil embargo). In general, rationing is a less than
satisfactory solution, because it indicates that the
organization is not fully serving its task environment.
It can be costly in terms of lost revenue and customer
goodwill (Atari, Cabbage Patch dolls, etc.)

9. EXTERNAL STRATEGIES
Besides strategies for dealing with uncertainty in their
internal environments, organizations also have strategies
for dealing with uncertainty in their external (general)
environments.
The actual relations, or interactions, between organizations
are the responsibility of boundary personnel. The boundary
spanners or gatekeepers, are important because they mediate
the flow of information, products or services, and personnel
between organizations in its environment.

11. ROLE OF THE BOUNDARY SPANNER

12. EXTERNAL STRATEGIES II
Thompson identified two direct strategies for managing
external dependencies such as suppliers, customers,
banks, etc.:
COMPETITIVE STRATEGIES
COOPERATIVE STRATEGIES

13. COMPETITION Refers to rivalry between two or more organizations which
is mediated by a third party. In the case of a manufacturer,
the third party might be a customer, distributor, supplier or
potential employee. In each instance, the third party must
select among alternative courses of action (For example,
which of several competing products to purchase).

14. COOPERATION There are three types of cooperative strategies
available to organizations:
1. Bargaining
2. Coopting
3. Coalescing

15. BARGAINING
In an effort to limit the uncertainty caused by competition,
organizations often respond by entering into cooperative
relationship. Bargaining refers to direct negotiations
between organizations for the exchange of goods and
services.
Such contractual arrangements, to the extent that they are
binding and enforceable, serve to reduce environmental
uncertainty. Examples might include long term contracts
with suppliers or customers, labor contracts, etc.

16. COOPTING Is the process of absorbing external elements into the
decision-making or policy-determination structure of
an organization as a means of averting threats to its
stability or existence. This allows for a reduction of
environmental uncertainty, but not its elimination.
Examples might include members of a Board of Directors
chosen from primary groups in the organization’s
environment (A banker, a major supplier, a Board member
from a competitor, etc.)

17. COALESCING Is the combination of two or more organizations (groups
or individuals) for a single purpose. It requires a joint
commitment for mutual action.
Examples might include mergers, joint ventures, inter-
locking directorates, price fixing, etc.

18. COSTS Competition, bargaining, cooptation, and coalescing
represent a continuum of “increasingly ‘costly’ methods
of gaining support in terms of decision making power.”
Competition is seen to be the least costly method, through
coalescing being the most costly.

19. INDIRECT STRATEGIES
Thompson also identified four different indirect strategies
for dealing with external environmental uncertainty:
Influencing government regulations and legislation
Trade associations and professional organizations
Lobbies
Political Action Committees

20. LAWRENCE & LORSCH
Studied ten firms in three industries: plastics, food and
containers. The three industries were deliberately
chosen as they differ significantly in the environmental
uncertainty associated with each one.
The underlying hypothesis was that internal environments
of the firms must match the external environmental
requirements. The better the match, the more successful
the firm.

21. DIFFERENTIATION & INTEGRATION
Differentiation and integration was posited as the variables
to examine to determine the state of the internal environment.
Differentiation, a la Lawrence & Lorsch, closely resembles the
traditional definition of horizontal differentiation, but in
addition to task segmentation, suggested that managers will
differ in their: (1) time frame, (2) interpersonal orientation,
and (3) goal orientation
Integration is the quality of collaboration needed to overcome
differentiation and achieve unity of effort among units.

22. LAWRENCE & LORSCH MODEL

23. DEPARTMENTAL DIFFERENTIATION BASED UPON SUBENVIRONMENT CHARACTERISTICS

24. TIME, GOAL & INTERPERSONAL ORIENTATIONS

26. INTEGRATION TECHNIQUES AND APPROPRIATE ENVIRONMENTS

27. LAWRENCE & LORSCH FINDINGS

28. STRUCTURE VS ENVIRONMENT

29. ENVIRONMENT AND ORGANIZATION DESIGN CHARACTERISTICS
Environment Design Characteristics
Degree of Degree of Quad- Decentral- Span of Formal- Complexity Design
Change Complexity rant ization Control ization Strategy
Simple I Low Few High Low Funct./
Stable Mech.
Complex II Low Many High High Funct./
Mech.
w/T/T.F.
Simple III High Few Low Low Product/
Dynamic Organic
Complex IV High Many Low High Matrix &
Combos