Organizational Behavior - II

Session 4: Org Environment & Lifecycle

Prof Anjana Karumathil

What Comprises an Organization’s Environment?

Forces or institutions that surround an organization and impact its performance, operations and resources at disposal.

Sociocultural forces
Government
General Economic conditions
Technology

Task
Industry
Markets
Internal
Customers
Human resources

Employees
Leadership
Org culture
Why is The Environment Important?

No organization is 100% self-sufficient. Every organization requires some level of support from the environment.

Environment is the source of goods and resources that an organization needs to succeed.

Environment offers opportunities and threats for organizations to capitalize on.

It shapes strategic decisions that executives may make to implement organizational strategy.
Environmental Change Occurs in Two Dimensions
#1 – Complexity : The number and heterogeneity of external elements impacting an organization’s operations

#2 - Stability : The level of dynamism in the environment

Simple environment Complex environment

 Small number of predictable  Multiple, complex technologies

external factors influencing  Expensive infrastructure
organizational operations  Changing government regulation
 Significant impact of global events
 Competition for scarce resources
Framework to Assess Environmental Uncertainty

Source: Daft (2018), “Understanding the Theory and Design of Organizations”, pg. 261.
Organizations’ focus around managing environments has evolved

18th - 19th century 20th century The Present

 4IR or Industry 4.0

 1st
industrial revolution  2nd and 3rd industrial revolution
 BANI environment
 Structures were mostly mechanistic  Organizations increased size and
 Blurring physical and digital boundaries
 Autocratic leadership complexity
using technologies like AI
 Highlight: stability  Use of scientific management techniques
 Technology-driven society
 Clear roles for managers and line workers
 ‘Smart’ megatrends
 Highlight: efficiency
 Highlight: chaos
What a BANI environment means for organizations
Brittle Anxious Non-linear Incomprehensible

Shorter product lifecycles Restlessness from unpredictable Tested solutions are ineffective; Complex events defy existing logic
world events need to build new knowledge
Stress & burnout among workers
COVID, Ukraine war Cause & effect relationships no
Absence of interpersonal work longer work
relationships from virtual working Slow decision making, hesitation
to commit

Some key HR trends

Increased global talent mobility

Redesign organizations to facilitate hybrid working

Increased focus on analytics-based HR

Interorganizational Networks and Ecosystems
Long-term resource transactions, flows and linkages occurring among two or more organizations.

Organizational ecosystems are built when interorganizational networks interact with their environments.

Conflict and collaboration coexist in organizational ecosystems.

“No man is an island entire

of himself”

John Donne (1695)

Source: Daft (2018), “Understanding the Theory and Design of Organizations”, pg. 174.
Four approaches to interorganizational relationships

Source: Daft (2018), “Understanding the Theory and Design of Organizations”, pg. 177.
Resource Dependence Theory

Organizations focus on certainty, autonomy and building power by controlling resources.

They attempt to minimize their dependence on other organizations for the supply of important resources and influence the environment to
make resources available.

Resource type Resource value Discretion over resource

Physical, social, Criticality to business, Level of control over buyers &

technical availability suppliers
Building Power Through Managing Dependencies

Interlocking directorates

Joint Ventures & Strategic Alliances

Lobbying with government and politicians

Source: De (2003), “The incidence and performance effects of interlocking directorates in emerging market
business groups”.

Source: Forbes (2019)