Environment-Structure
Open Systems - Environment
OE – Adaptation to Environment – Structure
Different Organizations – Different Levels of Environmental
Uncertainty
Environment – Everything outside the boundaries
General and Specific
General – PESTLEC – May Affect (WTO, Growth Rate,
Planned Sectoral Expenditure, Labour Law Reforms
Specific – Directly Relevant to OE
Supplier
Customer
Government
Organization
Union
Association
Regulator
The Specific Environment
Environment-Uncertainty
Perceived versus Objective Environment
Different parts of an organization perceive
uncertainty differently
Uncertainty
Different organizations perceive uncertainty
differently in the same environment
It is the perceived environment that counts
Different parts of an organization perceive
uncertainty differently
Design
Different organizations perceive uncertainty
differently in the same
Perception of environmental uncertainty determines
structure
• Mechanistic structures: designed to induce people to behave
in predictable, accountable ways
– Emphasis on the vertical command structure
– Roles are defined narrowly
– Promotion is slow and steady
– Best suited to organizations that face stable, unchanging
environments
Organic structures: promote flexibility, so people initiate change and
can adapt quickly to changing conditions
Less emphasis on vertical command structure
Roles are defined loosely
Status conferred by ability to provide creative leadership
Encourages innovative behavior
Suited to dynamic environments
Burn & Stalker
Characteristic
Mechanistic
Organic
Task Definition
Rigid
Flexible
Communication
Vertical
Lateral
Formalization
High
Low
Influence
Authority
Expertise
Control
Centralized
Diverse
Continuum
Effective structure adjusts to environment
Lawrence & Lorsch: Environment & Structure
•
Investigated how companies in different industries
differentiate and integrate their structures to fit the
environment
–
Three industries that experienced different levels of
uncertainty:
• The plastics industry
• The food-processing industry
• The container or can-manufacturing industry
Lawrence & Lorsch: Environment & Structure

Measure of External Environment = Degree of Uncertainty
(rate of change in environment, time taken to get feedback
from environment, clarity of information that management
held about environment)

Measure of Internal Environment = Differentiation and
Integration

H0: More successful organizations within each industry will
have a better match between the two compared to less
successful ones
Lawrence & Lorsch: Environment & Structure

Sub-Parts of organization deals with sub-parts of organization

Basic reason for differentiation was for departments to deal
more effectively with sub-environments
Hypotheses: Complex, diverse, turbulent environment = High
differentiation, high integration
Plastics: Successful firms highly differentiated, sales and R&D
functions less complex than production


Findings: Lawrence and Lorsch
•
•
•
•
•
Multiple specific environments
Different degrees of uncertainty
Sub-units meet the demands of sub environments
Differentiate to deal with specific problems
Integrate to move towards organizational goals
Integrated Findings
• Three key dimensions: capacity, volatility, complexity
• Capacity = Potential for growth (eg automobile
industry in India in 1980s)
• Volatility = Degree of instability in environment
(stable or dynamic)
• Complexity = Number of diverse elements, ease of
entry, number of competitors, specific environment)
Stable
Abundant
Simple
Complex
Scarce
Dynamic
Placid Randomized
Placid Clustered
Disturbed Reactive
Turbulent Field
• Akin to perfect competition
• Slow but random changes
• Slow changes
• Clustered threats, Utilities, Long Range Planning
• Oligopolistic, dominated by few who can influence
• Steel, Colas, competitive, series of tactical plans
• Most dynamic and highest uncertainty, interrelated changes, ‘Future Shock’
Power-Control & Structure
•
•
Size, Strategy, Technology, Environment = 50-60%
Rest?
Organizational Conflict
•
•
•
Clash between goal directed behavior
Negative connotation
Research suggests that some conflict can actually improve
organizational effectiveness
–
Can overcome inertia and lead to learning and change
Organizational Conflict
• Beyond a certain point, conflict becomes a cause for
organizational decline
– Inability to reach consensus and indecision
– Too much time spent on bargaining rather than acting swiftly
to resolve problems
• On balance, organizations should be open to conflict and
recognize its value
Pondy’s Model of Organizational Conflict
Conflict is a process that consists of five sequential
stages
Managing Conflict
Escalation of conflict may affect ‘culture’
Managing conflict is an important priority
Functional and Dysfunctional Conflict – A balance
Choice of conflict resolution method depends on the source of
the problem
Managing Conflict: Resolution Strategies
Acting at the level of structure:
Because task interdependence and differences in goals
produce conflict, alter the level of differentiation and
integration to change relationships
Increase the number of integrating roles
Assign top managers to solve conflict
Rethink the hierarchy/reporting chain
Acting at the level of attitudes and individuals
Establish a procedural system that allows parties to air their
grievances
• Important for conflict between management and unions
– Use a third-party negotiator
– Exchange/rotate/terminate individuals
– CEOs can also use their power to resolve conflicts and
motivate units to cooperate
Organizational Power?
•
the ability of one person or group to overcome resistance by
others to achieve a desired objective or result
–
Conflict and power are intimately related