1
CHAPTER 4
ENVIRONMENT, ORGANIZATIONAL CULTURE AND DIVERSITY
BMO prides itself to ensuring a workplace where the voice of every
colleague is listened to and encouraged. The bank’s core values create
and inclusive organizational culture:
 We care about our customers, shareholders, communities and each other
 We draw our strength from the diversity of our people and our businesses
 We insist upon respect for everyone and encourage all to have a voice
 We keep our promises and stand accountable for our every action
 We share information, learn, and innovate to create superior customer service.
What is the external environment of organizations?
 Competitive advantage is a core competency that clearly sets an
organization apart from competitors and gives it an advantage over them in
the marketplace. Competitive advantage in the demanding global economy
can be achieved only by continuously scanning the environment for
opportunities and taking effective action based on what is learned.
 Companies may achieve competitive advantage in many ways, including:
Products, Pricing, Customer service, Cost efficiency, Quality.
What is Competitive Advantage?
 The ability to do things better than one’s competitors
 Allows an organization to deal with market and environmental forces better than its
competitors
 An ability to consistently do something of high value that one’s competitors cannot
replicate quickly or do as well
THE BEARS THAT MEAN BUSINESS
THE BEARS THAT MEAN BUSINESS – John Sortino followed the pathways of entrepreneurship;
he started Vermont Teddy Bear Company in Burlington, Vermont after adding sunglasses to liven
up his son’s favorite teddy bear. “It is everyone working together which creates a successful
customer service program.”
2
The general environment — all of the background conditions in the external
environment of the organization including:
 Economics – health of the economy in terms of inflation, income
levels, gross domestic product, unemployment, and job outlook.
 Socio-cultural - customs and social values on such matters as human
rights, trends in education and related social institutions as well as
demographic patterns in society.
 Legal-political the philosophy and objectives of the political party or
parties running the government, as well laws and government
regulations.
 Technological - development and availability of technology and
scientific advancements.
 Natural environment - levels of public concern expressed through
environmentalist.
What is the external environment of organizations?
The specific (task) environment — actual organizations, groups, and persons with
whom an organization interacts and conducts business.
Includes important stakeholders such as:
1. Customers - specific consumer, client groups, individuals, and organizations that
purchase the organization’s goods and/or use its services.
2. Suppliers - specific providers of information, financial resources and raw materials
needed by the organization to operate
3. Competitors - specific organizations that offer the same or similar goods and
services to the same consumer or client groups.
4. Regulators - specific government agencies and representatives at the local, state,
and national levels that enforce laws and regulations affecting organization’s
operations.
5. Investors/owners - are the persons, groups and institutions directly affected by an
organization’s performance.
Environmental uncertainty is a lack of complete information regarding what exists
and what developments may occur in the external environment.
 Two dimensions of environmental uncertainty:
– Complexity
– Rate of change
Greater uncertainty requires more concentrated attention. An uncertain environment
has to be continually studies and monitored to spot emerging trends.
3
What is a customer-driven organization?
 External customers purchase the organization’s goods or utilize its services.
 Internal customers are the persons and groups within an organization who
depend on the results of others' work to do their own jobs.
Customers want:
– High quality.
– Low price.
– On-time delivery.
Key customer service lessons:
– Protect reputation for quality products.
– Treat customers right.
Customer relationship management establishes and maintains high standards of
customer service in order to strategically build lasting relationships with and add value
to customers.
Supply chain management is the strategic management of all operations relating to
an organization’s resource suppliers.
What is a quality-driven organization?
Quality organizations understand and respond to customer expectations of quality
products and services
Total quality management (TQM)
– Quality principles are an integral part of organization’s strategic objectives.
• Applying them to all aspects of operations.
• Committing to continuous improvement.
• Striving to meet customers’ needs by doing things right the first time.
Crosby’s “four absolutes” of management for total quality control:
1. Quality means conformance to standards. Workers must know exactly what
performance standards they are expected to meet
2. Quality comes from defect prevention, not defect correction. Leadership, training
and discipline must prevent defects in the first place
3. Quality as a performance standard must mean defect-free work. The only
acceptable quality standard is perfect work
4. Quality saves money. Doing things right the first time saves the cost of correcting poor
work.
4
Quality and continuous improvement -W. Edwards Deming emphasized:
 Constant innovation.
 Use of Statistical methods. The principles taught the Japanese - tally all
defects, analyze and trace them to the source, make corrections, and keep
a record of what happens afterward.
 Training in the fundamentals of quality assurance.
 Continuous improvement - The search for quality is closely tied to the
emphasis on continuous improvement-always looking for new ways to
improve on current performance
 Seeking ways to improve on current performance.
–
 Quality circles - is a group of workers (usually no more than 10) who meet on a
regular basis to discuss ways of improving the quality of their products or services.
The objective is to assume responsibility for quality and apply every member’s full
creative potential and to ensure that it is achieved.
•
33
Quality, technology, and design:
Lean production -Uses new technologies to streamline systems, allowing work to
be performed with fewer workers and small inventories.
Flexible manufacturing -Processes can be changed quickly to produce different
products or modifications of existing ones.
Agile manufacturing/mass customization -Permits quick production of
individualized products.
A good design - has eye appeal and is easy to manufacture with productivity.
Design for manufacturing emphasizes lower production costs and high-quality
results.
Design for disassembly involves taking into account how components will be
recycled.
What is organizational culture?
Organizational culture is the system of shared beliefs and values that develops
within an organization and guides the behavior of its members.
How to read an organization’s culture (SCORES)
S - How tight or loose is the structure?
C - Are decisions change oriented or driven by the status quo?
O - What outcomes or results are most highly valued?
R - What is the climate for risk-taking, innovation?
E - How widespread is empowerment, worker involvement?
S - What is the competitive style, internal and external?
5
Strong cultures:
– Commit members to do things that are in the best interests of the
organization.
– Discourage dysfunctional work behavior.
– Encourage functional work behavior.
The best organizations have strong cultures that:
– Are performance-oriented.
– Emphasize teamwork.
– Allow for risk taking.
– Encourage innovation.
– Value the well being of people.
What are core values?
Are underlying beliefs shared by members of the organization and that influence
their behaviour.
What is observable culture?
– What one sees and hears when walking around an organization.
Elements of observable culture:
– Stories – tales about events conveying core values.
– Heroes – people (past and present) who display core values.
– Rites and rituals – celebration of heroes and events displaying core value.
– Symbols – language and other symbols conveying core values.
What is the core culture?
– Underlying assumptions and beliefs that influence behavior and contribute
to the observable culture.
Core culture and values:
– Strong cultures have a small but enduring set of core values.
– Commitment to core values is a key to long-term success.
Important cultural values include:
– Performance excellence
– Innovation
– Social responsibility
– Integrity
– Worker involvement
– Customer service
– Teamwork
6
Value-based management:
– Describes managers who actively help to develop, communicate,
and enact shared values.
– Criteria for evaluating core values:
Relevance, Integrity, Pervasiveness, Strength.
Symbolic leadership
– Symbolic leaders use symbols well to establish and maintain a desired
organizational culture.
– Symbolic leaders behave in ways that espouse organization’s values.
Highlight and dramatize core values and observable culture.
Use rites and rituals to glorify performance.
Diversity:
– Describes differences among people at work.
– How diversity is handled in the workplace reflects the organization’s culture.
• Respect and inclusion.
• Disrespect and exclusion.
– A potential source of competitive advantage.
Characteristics of multicultural organizations:
 Pluralism - minority and majority cultures are influential in setting key values and
policies
 Structural integration - minority culture members are well represented
 Informal network integration - mentoring and support groups assist in the career
development of minority culture
 Absence of prejudice and discrimination - training
 Minimum intergroup conflict - – diversity does not lead to destructive conflicts.
Challenges faced by minorities and women:
– Glass ceiling
– Misunderstanding and lack of sensitivity
– Sexual harassment
– Pay discrimination
– Job discrimination
– Minorities may adapt by exhibiting biculturalism.
Diversity leadership approaches:
– Advancing action commits the organization to hiring and advancing
minorities and women.
– Valuing diversity commits the organization to education and training
programs.
– Managing diversity commits to changing the organizational culture.
7
Affirmative Action – create upward mobility for minorities and women.
Valuing Differences – build quality relationships with respect for diversity.
Managing Diversity – achieve full utilization of diverse human resources.