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1
EXECUTIVE DIPLOMA IN HUMAN
RESOURCE MANAGEMENT
ASSIGNMENT
MODULE : 1 – Principle & Practice of Management
SUBMITTED BY : EDHRM 27-02 (Matrix Number Only)
CLASS : EDHRM 27
LECTURER : Prof. Dr. Abdul Jumaat Mahajar
SUBMISSION DATE : 20 December 2009
MARK :_____________________________
2
Assignment Question : The Organization Environment and culture : How it affect the worker’s productivity
CONTENT Introduction Research
What is Organizational Culture The Organizational Environment Relationship Internal Environment – Organizational Culture Why do Organization Culture matters? How does Organization Culture affects Employee’s productivity Environment & Culture – Types of Culture
Conclusion List of References : Acknowledgement
3
Introduction
An organizations’ success will depend on the people, as the people is the
life to any organization. Many factors influenced an organization, and the main
factors influencing the people within the organization would be the environment
and the culture.
Each element within each factor will affect on the productivity of the workers that
will reflect on the organization’s including the organization’s image, market
share, profit, etc.
In this report, we will discuss on how an organization’s environment and culture
will affect the employee’s productivity.
We will zoom in to the factors that influence and contribute on the success of an
organization.
What is Organizational Environment
An organizational environment consist of 2 environment – internal and external .
The external organizational environment include all elements existing outside
the boundary of the organization that have the potential to affect the
organization, as follows:
• Competitors
• Resources
• Technology
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• Economic Conditions
The External Organizational Environment consist of 3 layers namely; General
environment, Task Environment and Internal Environment
GENERAL ENVIRONMENT
This environment is the layer of the external environment that affects the
organization indirectly. It includes social, economic, legal/political, international,
natural and technological factors that influence all organizations about equally.
These events do not directly change day-to-day operations, but it do affect all
organizations eventually
Socio-cultural Dimension
This dimension represents the demographic characteristics norms, customs,
and values of the population within the organizational operate.
Important socio-cultural characteristic includes geographical distribution and
population density, age and education levels.
Today’s demographic profiles are the foundation of tomorrow’s workforce and
consumer.
Economic Dimension
Represents the general economic health of the country or region in which the
organization operates. Consumer purchasing power, the unemployment rate,
5
and interest rates are part of an organization’s economic environment. It has
become exceedingly complex and creates enormous uncertainty for managers
as the organizations today are operating in global environment
Legal-Political Dimension
Legal Political dimension includes government regulations at the local, state and
federal levels, as well as political activities designed to influence company
behavior Pressure groups i.e. interest group that works within the legal political
framework to influence companies to behave in socially responsible ways has to
be recognized
International Dimension
Referring to the portion of the external environment that represents events
originating in foreign countries and opportunities for companies in other
countries.
The international environment provides new competitors, customers, and
suppliers and shapes social, technological and economic trends. The global
environment represents a complex, ever changing and uneven playing field
compared with the domestic environment. Organization, which focuses only
about the domestic environment, must learn new rules to remain competitive
and economic factors not only in their home countries but in other countries as
well,
6
Natural Dimension
The natural dimension includes all elements that occur naturally on earth,
including plants, animals, rock, and natural resources such as air, water and
climate Organizations have become increasingly sensitive to the earth’s
diminishing natural resources as in response to pressure group from
environmental advocates., and as a result, the natural dimension of the external
environment is growing to its importance.
The natural dimension is different from other sectors of the general environment
because it has no voice of its own. Organization need to meet needs in the
natural environment may come from other sectors, such as government
regulation, consumer concerns, bad press in the media, competitor’s action or
even employees.
For example, environmental groups advocate various action and policy goals
that include reduction and clean up of manmade pollution, development of
renewable energy resources and sustainable use of scarce resources such as
water, land and air.
More recently, there has been a strong concern about climate change such as
global warming caused by greenhouse gases, most notably carbon dioxide.
Technological Dimension
This dimension includes scientific and technological advancements in the
industry and society .This dimension creates massive changes for organization
in all industries in the recent year. For example, 20 years ago, many
organizations does not use desktop computers, but now, it is a necessity and
7
computer networks, internet access, handheld devices, videoconferencing
capabilities , cell phones and laptops are the minimum tools for doing business.
More systems are being network to be able to perform virtual transactions, and
organization are moving towards automated and computerized system in many
areas within the organization be it in Human Resource, Finance & Accounts,
Sales & Marketing and Operations.
Task Environment
Task environment includes those sectors that have direct working
relationship with the organization, among them customers, competitors,
suppliers and the labor market that directly influenced its basic operations and
performance. It includes competitors, suppliers, customers and labor market.
Customers
People and organizations in the environment that acquire goods or services
from the organization are customers.
As recipients of organizations output, customers are important because they
determine the organization’s success. Patients are the customer of hospital,
students the customer of schools, and traveler the customers of airlines.
Competitors
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The other organizations in the same industry or type of business that provides
goods or services to the same set of customers are referred a s competitor.
Suppliers
Suppliers provide the raw materials in the organization uses to produce its
output. A
Many companies are using fewer suppliers and trying to build good relationships
with them so that they will receive high quality parts and materials at lower
prices. The relationship between manufacturers and suppliers has traditionally
been an adversarial one, but managers are finding that cooperation is the key to
saving money, maintaining quality and speeding products to market.
Labor Market
Labor market represents people in the environment who can be hiring to work
for the organization. Ever organization needs a supply of trained, qualified
personnel, Unions, employee associations and the availability of certain classes
of employees can influence the organization’s labor market. Labor market forces
affecting organizations right now with
1) The growing need for computer literate knowledge workers
2) The necessity for continuous investment in human resource through
recruitment, education and training to meet the competitive demands of
the borderless work
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3) The effects of international trading blocs , automation outsourcing and
shifting facility locations on labor dislocation, creating unused labor pools
in some areas and labor shortages in others
Changes in these various sectors of the general and task environments can
create tremendous challenges, especially for organizations operating in
complex, rapidly changing industries.
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The Organization – Environment Relationships
The reason why organization care so much about factors in the external
environment is that the environmental creates uncertainty for organizations
managers and they must respond by designing the organization to adapt to the
environment
Environmental Uncertainty
Organizations must manage environmental uncertainty to be effective.
Uncertainty means that managers to not have sufficient information about
environmental factors to understand and predict environmental needs and
changes.
Internal environment
This refers to environment that includes elements within the organization’s
boundaries. It is composed of current employees, management and corporate
culture, which define employee behavior in the internal environment and how
well the organization will adapt to the external environment.
Adapting to the environment
IF an organization faces increased uncertainty towards competition, customers,
suppliers or government regulations, managers in an organization can use
several strategies to adapt to these changes, including boundary-spanning
roles, inter-organizational partnership and mergers or joint ventures.
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Boundary-Spanning Roles
Boundary-spanning roles and departments link and coordinate the organization
with key elements in the external environment.
Boundary spanners serve two purposes for the organization:
• Detect and process information about changes in the environment, and
they represent the organization’s interest to the environment. Employees
in engineering or research and development scan for new technological
developments, innovations and raw materials, People in departments
such as marketing and purchasing span the boundary to work with
customers and suppliers ,both face to face and through market research.
Some organizations are staying in touch with customers through the
internet, such as monitoring websites, communicating with customers on
company web sites and contracting with market research firms that
monitor the rapidly changing marketplace trends.
• Competitive intelligence. It refers to activities that to get as much
information as possible about one’s rivals. Competitive intelligence
specialists use web sites, commercial database, financial reports, market
activity, news clippings, trade publications, personal contacts and
numerous other sources to scan an organization’s environment and spot
potential threats or opportunities.
Boundary spanning is an increasingly important task in organizations because
environmental shifts can happen so quickly in today’s world. Managers need
12
good information about their competitors, customers and other elements of the
environment to make good decisions. The most successful companies involve
everyone in boundary spanning activities.
Inter-organizational partnership
This strategy has gained is popularity over time. This is to reduce boundaries
and increase collaboration with other organizations. Companies are joining
together to become more effective and to share scarce and limited resources.
The partnership is based on trust and the ability of partners to work out win-win
solutions to conflicts so that everyone profits from the relationship. This is to
reduce costs and add value to both sides, rather than trying to get all the
benefits from each own company.
This new model is characterized by a high level of information sharing, including
e-business links for automatic ordering, payments and other transactions.
Mergers and Ventures
A merger occurs when two or more organization combined to become one.
Joint Ventures
Joint Ventures involve a strategic alliance or program by two or more
organizations. This typically occurs when a project is too complex, expensive or
uncertain for one firm to handle alone.
Joint ventures are on the rise as companies strive to keep pace with rapid
technological change and compete in the global economy.
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INTERNAL ENVIRONMENT- ORGANIZATION CULTURE
Henry Mintzberg said “Culture is the soul of the organization — the beliefs
and values, and how they are manifested. I think of the structure as the
skeleton, and as the flesh and blood. And culture is the soul that holds the
thing together and gives it life force.”
Organizational culture is describes a system of shared assumptions, values, and
beliefs that helps individuals understand which behaviors appropriate or
inappropriate within an organization. Cultures can be a source of competitive
advantage for organizations. Strong organizational cultures can be an
organizing as well as a controlling mechanism for organizations. Culture is
largely invisible to individuals.
Organizational culture is a young but fast-growing area within management.
Organizational culture is passed to new employees through the socialization
process, influences behavior at work, and operates at different levels.
It is shaped by four components: the founders’ values, the industry and business
environment, the national culture, and the senior leaders’ vision and behavior.
It influences organizational structure and the practices, policies, and procedures
implemented in pursuit of organizational goals, which in turn affect a variety of
group and social processes.
14
Organizational culture consists of three layers – observable artifacts, values and
basic assumptions.
.
Artifacts – visible and observable; acronyms, manner of dress, awards, myths
and stories,tangible aspects of organizational culture.
The artifacts reflecting such values might be an executive “open door” policy, an
office layout that includes open spaces and gathering areas equipped with pool
tables, and frequent company picnics.
Values are shared principles, standards, and goal, enduring belief in a mode or
conduct or end-state. Normally it is expressed in the form of Stories, Rituals
Material Symbols or Language.
Basic Assumptions is unobservable; represent the core of organizational
culture. It reflect beliefs about human nature and reality. They become, taken for
granted over time and are highly resistant to change.
15
These values have a strong influence on employee behavior as well as
organizational performance. In fact, the term organizational culture were made
popular in the 1980s when Peters and Waterman’s best-selling book In Search
of Excellence made the argument that company success could be attributed to
an organizational culture that was decisive, customer-oriented, empowering, and
people-oriented. From then onwards, organizational culture has become the
subject of numerous research studies, books, and articles
Even though it affects all employee behaviors, thinking, and behavioral patterns,
individuals tend to become more aware of their organization’s culture when they
have the opportunity to compare it to other organizations. It is relating to the
second of the three facets that compose the P-O-L-C function of organizing.
The organizing function involves creating and implementing organizational
design decisions. The culture of the organization is closely link to organizational
design. For instance, a culture that empowers employees to make decisions
could prove extremely resistant to a centralized organizational design,
hampering the manager’s ability to enact such a design. However, a culture that
supports the organizational structure (and vice versa) can be very powerful.
Why Does Organizational Culture Matter?
Culture, or shared values within the organization, may be related to
increased performance.
16
An organization’s culture may be one of its strongest assets or its biggest
liability. In fact, it has been argued that organizations that have a rare and hard-
to-imitate culture enjoy a competitive advantage. In a survey conducted by the
management-consulting firm Bain & Company in 2007, worldwide business
leaders identified corporate culture to be as important as corporate strategy for
business success.
This comes as no surprise to leaders of successful businesses, who are quick to
attribute their company’s success to their organization’s culture.
Researchers found a relationship between organizational cultures and company
performance, along with respect to success indicators such as revenues, sales
volume, market share, and stock prices. At the same time, it is important to have
a culture that fits with the demands of the company’s environment. To the extent
that shared values are proper for the company in question, company
performance may benefit from culture.
For example, if a company is in the high-tech industry, having a culture that
encourages innovativeness and adaptability will support its performance.
However, if a company in the same industry has a culture characterized by
stability, a high respect for tradition, and a strong preference for upholding rules
and procedures, the company may suffer because of its culture. In other words,
just as having the “right” culture may be a competitive advantage for an
organization, having the “wrong” culture may lead to performance difficulties,
may be responsible for organizational failure, and may act as a barrier
preventing the company from changing and taking risks.
17
In addition to having implications for organizational performance, organizational
culture is an effective control mechanism dictating employee behavior.
Culture is a more powerful way of controlling and managing employee behaviors
than organizational rules and regulations. For example, when a company is
trying to improve the quality of its customer service, rules may not be helpful,
particularly when the problems customers present are unique. Instead, creating
a culture of customer service may achieve better results by encouraging
employees to think like customers, knowing that the company priorities in this
case are clear: Keeping the customer happy is preferable to other concerns,
such as saving the cost of a refund. Therefore, the ability to understand and
influence organizational culture is an important item for managers
Understanding the organization’s culture may start from observing its artifacts:
its physical environment, employee interactions, company policies, reward
systems, and other observable characteristics. When you are interviewing for a
position, observing the physical environment, how people dress, where they
relax, and how they talk to others is definitely a good start to understanding the
company’s culture. However, simply looking at these tangible aspects is unlikely
to give a full picture of the organization, since an important chunk of what makes
up culture exists below one’s degree of awareness. The values and, deeper, the
assumptions that shape the organization’s culture can be uncovered by
observing how employees interact and the choices they make, as well as by
inquiring about their beliefs and perceptions regarding what is right and
appropriate behavior.
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How Organizational Culture affects Employee’s productivity
Many of us spend more time with those we work with than we do our families.
For us to be content and fulfilled people, that time must be valuable for more
than monetary form. We want to be engaged in our work. We yearn for work that
is enjoyable, meaningful and engaging. When we are engaged, we feel safer on
the job, more productive and more willing and able to delight Customers.
It is for these basic reasons that organizational culture matters. It is the right
thing for an organization to do - to think about the work environment, working
relationships and "how we do things here."
Focusing on building a sustainable organization, an organizational culture is one
way of showing that people are the organization's most valuable asset.
There are of course many other bottom line business reasons to focus on and
build organizational culture. Here are seven of those reasons.
A strong culture is a talent-attractor.
An organizational culture is part of the package that prospective employees look
at when assessing the organization. Gone are the days of selecting the person
an organization want from a large eager pool. The talent market is tighter and
those looking for a new organization are more selective than ever. The best
people want more than a salary and good benefits. They want an environment
they can enjoy and succeed in.
A strong culture is talent-retainer.
How likely are people to stay if they have other options and do not love where
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they are? Your organizational culture is a key component of a person's desire to
stay.
A strong culture engages people.
People want to be engaged in their work. According to a Gallup survey, at least
22 million American workers are extremely negative or "actively disengaged" -
this loss of productivity is estimated to be worth between $250-$300 Billion
annually. Your culture can engage people. Engagement creates greater
productivity, which can affect profitability.
A strong culture creates energy and momentum.
Build a culture that is vibrant and allows people to be valued and express
themselves and you will create a very real energy. That positive energy will
permeate the organization and create a new momentum for success. Energy is
contagious and will build on itself, reinforcing the culture and the attractiveness
of the organization.
A strong culture changes the view of "work."
Most people have a negative connotation of the word work. Work equals
drudgery, 9-5, "the salt mine." When you create a culture that is attractive,
people's view of "going to work" will change. Would you rather see work as
drudgery or a joy? Which do you think your employees would prefer? Which will
lead to the best results?
A strong culture creates greater synergy.
A strong culture brings people together. When people have the opportunity to
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(and are expected to) communicate and get to know each other better, they will
find new connections. These connections will lead to new ideas and greater
productivity - in other words, you will be creating synergy. Literally, 1 + 1 + right
culture = more than 10. How is that for leverage?
A strong culture makes everyone more successful.
Any one of the other six reasons should be reason enough to focus on
organizational culture. But the bottom line is that an investment of time, talent
and focus on organizational culture will give you all of the above benefits.
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Environment and Culture
A big influence on internal corporate culture is the external environment.
Cultures can vary widely across organizations; however, organizations within the
same industries often reveal similar cultural characteristics because they are
operating in similar environment The internal culture should embody what it
takes to succeed in the environment. F the external environment requires
extraordinary customer service, the culture should encourage good service, if it
calls for careful technical decisions making, and cultural values should reinforce
managerial decision-making.
Adaptive Culture
A study found that a strong corporate culture alone did not ensure business
success unless the culture encouraged healthy adaptation to the external
environment.
Adaptive corporate cultures have different values and behavior from unadaptive
corporate cultures.
For example, in adaptive cultures, managers are concerned about customers
and those internal people and processes that bring about useful change.
IN the unadaptive corporate cultures, managers are concerned about
themselves, and their values tend to discourage risk taking and change.
A strong culture alone is not enough, because and unhealthy culture may
encourage the organization to move resolutely in wrong direction. Healthy
cultures healp companies adapt to the environment.
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Types of culture
Considering what cultural values are important for organization, external
environment and company’s strategy and goals must be considered.
The right fit between culture, strategy and the environment is associated with
four categories or types of culture.
These categories are based on two dimension
• The extent to which the external environment requires flexibility or
stability
• The extent which a company’s strategic focus is internal or external.
The four categories associated with these differences are adaptability,
achievement, involvement and consistency.
Adaptability
Culture Achievement
Culture
Involvement
Culture
Consistency
Culture
External
Internal
Flexibility Stability
Str
aget
ic F
ocu
s
Needs of the Environment
23
Adaptability Cultures
Emerges in an environment that requires fast response and high risk-decision
making
Managers encourage values that support the company’s ability to rapidly detect,
interpret, and translate signals from the environment into new behavior
responses.
Employee have autonomy to make decisions and act freely to meet new needs
and responsiveness to customers is highly valued. Managers also actively
create change by encouraging and rewarding creativity, experimentation and
risk taking.
Achievement Culture
Suited to organization concerned with servicing specific customers in the
external environment but without the intense need for flexibility and rapid
change. This result-oriented culture values competitiveness, aggressiveness ,
personal initiative and willingness to work long and hard to achieve results. An
emphasis on winning and achieving specific ambitious goals is the flue that
holds the organization together. People who can survive in this culture are those
whose focused competitive, and driven to win.
The Involvement Culture
Emphasizes an internal focus on the involvement and participation of employees
to adapt rapidly to changing needs from the environmental.
This culture places high value on meeting the needs of employee and the
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organization may be characterized by a caring, family like atmosphere.
Manager emphasize values such as cooperation, consideration of both
employees and customers and avoiding status differences.
Consistency Culture
Used as an internal focus and a consistency orientation for a stable
environment. Following the rules and being thrifty are valued, and the culture
supports and reward in methodical, rational, orderly way of doing things.
Each of these four categories of culture can be successful. Most
organizations usually have values that fall into more than one category. The
relative emphasis on various cultural values depends on the needs of
environment and organization’s focus.
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CONCLUSION
The external environment and internal environment plays a major role in shaping
the task environment that is clearly defining the type of culture the organization
is adopting.
How an organization conduct the business, the way the business processes
were handled and the way internally the people within an organization
communicate and work together within a shared value and culture will affect the
productivity of the employees.
Each aspect of organizational culture can be seen as an important
environmental condition affecting the system and its subsystem. Increased
competition, globalization, mergers, acquisitions, alliances, and various
workforce departments have created a greater need for organizational culture.
Thus, it has become an important pattern for the organization's development.
Culture focuses attention on the human side of organizational life, and finds
significance and learning in even its most ordinary aspects. It clarifies the
importance of creating appropriate systems of shared meaning to help people to
shape the people’s behavior to work together toward desired outcomes.
Organizational culture is possibly the most critical factor determining an
organization's capacity, effectiveness, and longevity. It also contributes
significantly to the organization's brand image and brand promise.It also creates
energy and momentum. The energy will permeate the organization and create a
26
new momentum for success. In this competitive and globalized corporate
scenario, there is huge need of organizational development strategy at various
workforce departments, as this can improve the company's culture.
Culture enables people to see the goal alignment and motivates them to higher
levels of performance, as shared values make people feel good about the
organization and commit their capability and potential sincerely for the company.
Such strong culture acts like intrinsic motivator. Empowerment, decisiveness,
learning attitude, and team working are some of the attributes of strong
organizational culture. Culture at this level is the real driver for superior
performance and a definite source of competitive advantage that is very difficult
for competitors to emulate.
For example , Toyota’s lean production system is as much of tools, systems and
processes as it is of the culture of the people there. Many companies have tried
to copy the famed production system but none could do it with the same
effectiveness. The reason – companies could copy the management systems in
place but not the underlying cultural strength rooted deep in the business
philosophy of the company – understanding customer value, identifying value
stream, one piece flow, pull system and striving for excellence.
Culture and performance have mutually reciprocating relationship. If strong
culture helps building high performance company, the past performance and
successes shape influence peoples’ behavior which with time become part of
the culture.
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LIST OF REFERENCES Organizational Culture http://managementhelp.org/org_thry/culture/culture.htm Organizational Culture: Corporate Culture in Organizations http://humanresources.about.com/od/organizationalculture/Organizational_Culture_Corporate_Culture_in_Organizations.htm It’s a choice—organizational culture by design or by default http://www.culturestrategyfit.com/ Organizational Culture http://www.themanager.org/HR/Matching_People_with_Organizational_Culture.pdf ORganizational Culture http://cims.ncsu.edu/downloads/Research/71_WDWK_culture.pdf Environmental Factors affecting Firms ability to compete - a retail perspective - James Neblett http://www.iamot.org/conference/index.php/ocs/4/paper/viewFile/1094/474 Employee Motivation , the organizational Environment and productivity http://www.accel-team.com/_pdf/atPDF_02_extract.pdf Organizational Linkages Understanding the Productivity Paradox http://books.nap.edu/openbook.php?record_id=2135&page=54 Understanding Organizational Culture Principles of Management by Mason Carpenter, Talya Bauer, Berrin Erdogan http://www.flatworldknowledge.com/pub/1.0/principles-management/29076 Organizational Culture and its Importance Posted on April 1, 2006 by Linda Devis http://www.articleclick.com/Article/Organizational-Culture-and-its-Importance/375 Organizational Culture www.busi.mun.ca/jaya/2301/OB9F03.ppt Organizational Culture www.angelfire.com/ak6/organizational_behav/lecture10.pdf Patterns of organizational culture analysis http://ebooks.unibuc.ro/StiinteEDU/adulteducation/22.htm
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Organizational culture and performance http://www.alagse.com/hr/hr7.php Richard L.Daft (2008) New Era of Management (9th Edition),Vanderbilt University, South-Western Cengage Learning