1. The Environment and Corporate Culture CHAPTER 3

2. Copyright © 2008 by South-Western, a division of Thomson Learning. All rights reserved. 2 Learning Objectives Describe the general and task environments and the dimensions of each. Explain the strategies managers use to help organizations adapt to an uncertain or turbulent environment. Define corporate culture and give organizational examples. Explain organizational symbols, stories, heroes, slogans, and ceremonies and their relationship to corporate culture.

3. Copyright © 2008 by South-Western, a division of Thomson Learning. All rights reserved. 3 Learning Objectives (contd.) Describe how corporate culture relates to the environment. Define a cultural leader and explain the tools a cultural leader uses to create a high- performance culture.

4. Copyright © 2008 by South-Western, a division of Thomson Learning. All rights reserved. 4 Organizational Environment All elements existing outside the boundary of the organization that have the potential to affect the organization

5. Copyright © 2008 by South-Western, a division of Thomson Learning. All rights reserved. 5 External Environment ● General environment – affects indirectly ● Task environment - Affects directly - Influences operations and performances ● Internal environment – elements within the organization’s boundaries

6. Copyright © 2008 by South-Western, a division of Thomson Learning. All rights reserved. 6 Organizational Environments Exhibit 3.1

7. Copyright © 2008 by South-Western, a division of Thomson Learning. All rights reserved. 7 International Dimension ● Portion of the external environment that represents events originating in foreign countries as well as opportunities for U.S. companies in other countries.

8. Copyright © 2008 by South-Western, a division of Thomson Learning. All rights reserved. 8 Technological Dimension Scientific and technological advances – Specific industries – Society at large Impact – Competition – Relationship with Customers – Medical advances – Nanotechnology advances

9. Copyright © 2008 by South-Western, a division of Thomson Learning. All rights reserved. 9 Socio-Cultural Dimension Dimension of the general environment – Demographic characteristics – Norms – Customs – Values

10. Copyright © 2008 by South-Western, a division of Thomson Learning. All rights reserved. 10 Economic Dimension ● General economic health ● Consumer purchasing power ● Unemployment rate ● Interest rates ● Recent Trends ● Frequency of mergers and acquisitions ● Small business sector vitality

11. Copyright © 2008 by South-Western, a division of Thomson Learning. All rights reserved. 11 Legal-Political Dimension Dimension of the general environment that includes federal, state, and local government regulations and political activities designed to influence company behavior.

12. Copyright © 2008 by South-Western, a division of Thomson Learning. All rights reserved. 12 Task Environment Sectors that have a direct working relationship with the organization ● Customers ● Competitors ● Suppliers ● Labor Market

13. Copyright © 2008 by South-Western, a division of Thomson Learning. All rights reserved. 13 Labor Market Forces Labor Market Forces Affecting Organizations today ● Growing need for computer literate information technology workers ● Necessity for ongoing investment in human resources – recruitment, education, training ● Effects of international trading blocks, automation, outsourcing, shifting facility locations upon labor dislocations

14. Copyright © 2008 by South-Western, a division of Thomson Learning. All rights reserved. 14 Adapting to the Environment Boundary-spanning Inter-organizational partnerships Mergers and joint ventures

15. Copyright © 2008 by South-Western, a division of Thomson Learning. All rights reserved. 15 External Environment and Uncertainty Number of Factors in Organization Environment Adapt to Environment High Uncertainty Low Uncertainty High Low High Rate of Change in Factors in Environment Exhibit 3.3

16. Copyright © 2008 by South-Western, a division of Thomson Learning. All rights reserved. 16 Interorganizational Partnerships Shift in paradigm to a partnership orientation ● Trust, value added to both sides ● Equity, fair dealing, everyone profits ● E-business links to share information and conduct digital transactions ● Close coordination; virtual teams and people on site ● Involvement in partner’s product design and production ● Long-term contracts ● Business assistance goes beyond the contract

17. Copyright © 2008 by South-Western, a division of Thomson Learning. All rights reserved. 17 Culture The set of key values, beliefs, understandings, and norms that members of an organization share.

18. Copyright © 2008 by South-Western, a division of Thomson Learning. All rights reserved. 18 Levels of Corporate Culture Visible 1. Artifacts, such as dress, office layout, symbols, slogans, ceremonies 2. Expressed values, such as “The Penney Idea,” “The HP Way” 3. Underlying assumptions and deep beliefs, such as “people are lazy and can’t be trusted” Invisible Culture that can be seen at the surface level Deeper values and shared understandings held by organization members Exhibit 3.5

19. Copyright © 2008 by South-Western, a division of Thomson Learning. All rights reserved. 19 Visible Manifestations Symbols Stories Heroes Slogans Ceremonies

20. Copyright © 2008 by South-Western, a division of Thomson Learning. All rights reserved. 20 Environment and Culture A big influence on internal corporate culture is the external environment Cultures can vary widely across organizations Organizations within same industry reveal similar cultural characteristics

21. Copyright © 2008 by South-Western, a division of Thomson Learning. All rights reserved. 21 Corporate Culture Adaptability Adaptive CultureUnadaptive Culture Visible Behavior Expressed Values Managers pay close attention to all their constituencies, especially customers, and initiate change when needed to serve their legitimate interests, even if it entails taking some risks. Managers tend to behave somewhat insularly, politically, and bureaucratically. As a result, they do not change their strategies quickly to adjust to or take advantage of changes in their business environments. Managers care deeply about customers, stockholders, and employees. They strongly value people and processes that can create useful change (e.g., leadership initiatives up and down the management hierarchy). Managers care mainly about themselves, their immediate work group, or some product (or technology) associated with that work group. They value the orderly and risk-reducing management process much more highly than leadership initiatives. Source: John P. Kotter and James L. Heskett, Corporate Culture and Performance (New York, The Free Press, 1992), 51.

22. Copyright © 2008 by South-Western, a division of Thomson Learning. All rights reserved. 22 Four Types of Corporate Cultures Adaptability Culture Achievement Culture Consistency Culture Involvement Culture External Internal FlexibilityStability Strategic Focus Needs of the Environment Exhibit 3.7

23. Copyright © 2008 by South-Western, a division of Thomson Learning. All rights reserved. 23 High-Performance Culture A culture that Is based on a solid organizational mission or purpose Embodies shared adaptive values that guide decisions and business practices, and Encourages individual employee ownership of both bottom-line results and the organization’s cultural backbone

24. Copyright © 2008 by South-Western, a division of Thomson Learning. All rights reserved. 24 Cultural Leadership ● Articulates a vision that employees can believe in ● Defines and communicates central values that employees believe in ● Values are tied to a clear and compelling mission, or core purpose ● Heeds the day-to-day activities that reinforce the cultural vision – work procedures and reward systems match and reinforce the values