ORGANIZATIONAL CULTURE AND ENVIRONMENT

(Chapter-3

Organizational Culture
Organizational Culture: It is described as the
shared values, principles, traditions, the way
of doing things that influence the way
organizational members act.

Values: These are the preferred modes of

actions that employees adopt over the
converse actions,
 Omnipotent Vs Symbolic View of
Management
Omnipotent View: The view that managers are
directly responsible for an organizations success or
failure.

Symbolic View: The view that much of an

organizations success or failure is due to external
forces outside managers control.

What Reality Suggests: In reality managers are

neither all powerful nor helpless; they have to work
under various constraints.

Org Environment Managerial Org Culture

Discretion
 Organizational Culture
Organizational culture refers to shared values,
principles, traditions, and ways of doing things that
influence the way organizational members act. An
organization may have a strong or weak culture:

Strong culture: Organizational culture in which

the key values are intensely held and widely
shared.

Weak culture: Organizational culture in which

key values are limited to a group of employee,
usually among the members of top management.
 Dimensions of Strong and Weak Culture
Strong Culture
Values widely shared
Culture conveys consistent
messages about what is
important.
Most employees can tell stories
about company history/heroes.
Employees strongly identify with
culture
Strong connection exists
between shared values and
behaviors .
Weak Culture
Values limited to few people
usually top management
Culture sends contradictory
messages about what is
important.
Employees have little
knowledge of company history or
heroes.
Employees have little
identification with culture.
There is little connection
between shared values and
behaviors.
 Dimensions of Organizational Culture
Attention to
details

Innovation &
Risk Taking Outcome
orientation
Organizational
Stability Culture
People
orientation
Aggressive-
ness
Team
orientation
 Dimensions of Organizational Culture
Attention to detail: Degree to which employees are
expected to exhibit precision, analysis and attention
to detail.
Outcome Orientation: Degree to which managers
focus on results or outcomes rather than on how
these outcomes are achieved.
People Orientation: Degree to which management
decisions take into account the effects on people in
the organization.
Team Orientation: Degree to which work is
organized around teams rather than individuals.
 Dimensions of Organizational Culture
Aggressiveness: Degree to which employees are
aggressive and competitive rather than cooperative.
Stability: Degree to which organizational decisions
and actions emphasize maintaining the status quo.
Innovation and Risk Taking: Degree to which
employees are encouraged to be innovative and to
take risks.
 Where Culture comes From?
Important ingredients of organizations culture:

Philosophy of Top Mgt

Selection Org
Organizations Culture
Criteria
Founders Socialization
 How Employees Learn Culture
Employees learn organizations culture in a number
of ways; the most common are appended below:

Stories: Stories contain a narrative of significant

events or people, including organization founders
acts, achievements, rule breaking events, and
reactions to past mistakes.

Rituals: Corporate rituals are repetitive sequence of

activities that express and reinforce the important
values and goals of the organization. These rituals
may include collective celebration of some
achievement, high profile awards to high achievers in
a specially organized ceremony.
 How Culture Effects Managers
A managers decisions are influenced by the culture in
which he/she operates. An organizations culture influences
and constrains the way managers plan, organize, lead and
control; details are appended below:
Planning:
The degree of risk that plans should contain.
Whether plans should be developed by individuals or teams.
Degree of environmental scanning in which mgt engages

Organizing:
How much autonomy should be designed into employee job.
Whether tasks should be done by individuals or teams.
The degree to which managers interact with each others.
 How Culture Effects Managers
Leading:
The degree to which managers are concerned with increasing
employee job satisfaction.
What leadership styles are appropriate.
Whether all disagreements even constructive ones should
be eliminated.

Controlling:
Whether to impose external controls or to allow employees to
allow their own actions.
What criteria should be emphasized in employee performance
evaluations.
What repercussions will occur from exceeding ones budget.
 Ethical Culture
Ethical culture: A culture composed of values,
traditions, and practices which are perceived to be
ethical is called an ethical culture. Following are the
suggestions of creating an ethical culture:

Be a visible role model

Communicate ethical expectations
Provide ethics training
Visibly reward ethical acts and punish unethical ones.
Provide protective mechanisms so that employees
can discuss ethical dilemmas and report unethical
behavior without fear.
 Innovative Culture
An innovative culture is the one and is the desire of
every organization; it has following characteristics:

Challenge & involvement: Employees should be

involved in, motivated by and committed to long term
goals and success of the organization.

Freedom: Employees should be allowed to

independently define their work, exercise discretion
and take initiative in day to day activities.

Trust & openness: Employees should be supported

and respectful to each other.

Idea time: Employees should have time to elaborate

on new ideas before taking action.
 Innovative Culture
Playfulness/humor: The workplace should be
spontaneous, natural and full of fun.

Conflict resolution: Employees should be

empowered to make decisions and resolve issues, in
the best interest of organization.

Debates: Employees should be allowed to express

their opinions and put forth ideas for consideration
and review.

Risk taking: Managers should tolerate uncertainty

and ambiguity and employees should be rewarded for
risk taking.
 Creating A Customer-Responsive Culture
A customer responsive culture has following
characteristics:
Characteristics Suggestions for Managers
Type of employees Hire people with personalities & attitudes
consistent with customer service friendly,
attentive, enthusiastic, patient, good listener.
Type of job Design job so that employees have as much
environment control as possible to satisfy customers, without
rigid rules and procedures.
Empowerment Give employees discretion to make day to day
decisions on job related activities.
Role clarity Reduce uncertainty about what employees can
and cannot do by continual training on product
knowledge, listening, & other behavioral skills.
Consistent desire Clarify organizations commitment to doing
to satisfy & delight whatever it takes, even if it is outside ones normal
customers. job requirements.
 Spirituality and Organizational Culture
Workplace Spirituality: A feature of a culture where
organizational values promote a sense of purpose through
meaningful work that takes place in the context of
community.
Such an organization recognizes that people have a mind
and a spirit who seek to find meaning & purpose in their
work and desire to connect with other human beings and be
part of the community. A spiritual organization has following
five characteristics:
Strong sense of purpose
Focus on individual development
Trust and openness
Employee empowerment
Toleration of employee expression
 Influence of External Environment
External environment: It refers to the factors and forces
outside an organization that affect the organizations
performance. It has two components specific
environment and general environment:

Specific environment: External forces that have a

direct impact on managers decisions and actions and
are directly relevant to the achievement of an
organizations goal. Main forces that make up specific
culture are:
o Customers
o Suppliers
o Competitors
o Pressure groups
 Influence of External Environment
General environment: General environment includes
the broad external conditions that may affect an
organization. During various managerial functions,
these factors should be kept in mind, which are:

Economic conditions
Political/Legal, conditions
Socio-cultural conditions
Demographic conditions
Technological conditions
Global conditions
 How Environment Affects Managers
Environmental uncertainty: It is the degree of
change and complexity in an organizations
environment change is either slow or predictable.

Environmental complexity: It refers to the number of

components in an organizations environment and the
extent of the organizations knowledge about those
components competitors, customers, suppliers,
Govt agencies.
 Environment Uncertainty Matrix
Degree of Change
Stable Dynamic
Cell 1: Cell 2:
Stable & predictable environment. Dynamic & unpredictable environment
Few components in environment. Few components in environment.
Components are mostly similar Components are similar but are
remain basically the same. continually changing.
Minimal need for sophisticated Minimal need for sophisticated
knowledge of components. knowledge of components.

Cell 3:
Stable and predictable environment.
Many components in environment.
Components are not similar.
High need for sophisticated
knowledge of components.
Cell 4:
Dynamic & unpredictable environment
Many components in environment.
Components are not similar and are
continually changing.
High need for sophisticated
knowledge of components
 Stakeholders of an Organization
Any constituencies in an organizations environment
that are effected by the organizations decisions and
actions. Some of the most common stakeholders are:
Employees
Customers
Social and political action groups
Competitors
Trade & industry associations
Governments
Media
 FOUNDATION OF PLANNING ch 4
Planning Process

Planning refers to defining an organizations goals,

establishing an overall strategy for achieving those
goals, and developing plans to integrate and
coordinate work activities.

In formal planning, specific goals covering specific

time period are defined and communicated to all
involved.

It is concerned with both ends and means to ends.

MANAGERS AS DECISION MAKERS (Chapter-6)
Decision Making
It is a process of making a choice between two or
more alternatives. A decision is usually required to be
made under following conditions:

To avail an opportunity
To solve a problem

Problem: It is a discrepancy between existing and

desired state.

Rational Decision Making: A type of decision making

in which choices are logical and consistent. Such
decision making maximizes value for the majority.
 Rational Decision Making Process
1. Defining/Identification of problem. A problem is a
discrepancy between an existing and a desired state of
affairs. Many poor decisions can be traced to the
decision maker overlooking a problem or wrongly
defining the problem.

2. Identification of decision criteria. The decision maker

determines what is relevant in making the decision. Any
factors not identified in this step are considered
irrelevant to the decision maker.

3. Allocate weights to criteria. Different weights are

allocated to the criteria in order to give them the correct
priority in the decision.
 Rational Decision Making Process
4. Development of alternatives. Due consideration to
be given to all available options to arrive at correct
decision.
5. Analysis of alternatives. Strengths & weaknesses of
each alternative become evident as they are compared
with the criteria and weights established.
6. Selection of best alternative. Selecting the best
alternative with the highest total score.
7. Implementation of an alternative. Implementing the
decision.
8. Evaluation of Decision Effectiveness. Evaluating the
benefits/improvement/resolution of problem.
 Decision Making Process
Problem identification: Sales reps need new computers

Criteria identification: Memory, Display quality, Battery life,

Warranty, Carrying weight.

Allocation of weights to criteria: Memory/storage: 10; Battery

life: 8; Carrying weight: 6;
Warranty: 4; Display quality: 3

Development of alternatives: Dell, HP, Apple, Toshiba etc.

Analysis of each type/alternative: With the help of weights.

Selection of best alternative: Which gets max points

Implementation of decision: Putting in action

Evaluation of Decisions Effectiveness: How good are results

Decision Making in Managerial Functions
Planning: A manager may make following decisions:
What are long term objectives?
What strategies would be best?
What are short term objectives?
How difficult should individuals goals be?

Organizing: A manager may make following decisions:

How many employee should be directly reporting?
How much centralization should be there in org?
How should job/tasks be designed/arranged?
When should a different structure be implemented?
Decision Making in Managerial Functions
Leading: A manager may make following decisions:
How to handle employees with low motivation?
What is the most effective leadership style?
How will a specific change affect a workers
performance.
When is the right time to stimulate conflict?
Controlling: A manager may make following decisions:
What activities need to be controlled?
How to control those activities?
When is performance deviation significant?
What type of MIS should be in place?
 How Decisions are Actually Made
(Rationality Vs Bounded Rationality)
Rationality: A rational decision is the one which is
made after complete diagnosis and research.
Rational decision making creates maximum value for
the majority of people. Subject to availability of time
and other resources, managers try to collect all
relevant information to ascertain the factual position.
Such decisions are made as a result of complete fact-
finding/research and following a sequential model.
Decisions Making Bounded Rationality
Bounded Rationality: It is also a rational decision
making but limited (bounded) by an individuals ability
to process information. Since capacity of human being
for solving complex problems is too small to meet the
requirement of rationality, individuals operate within
confines of Bounded Rationality.
When faced with a complex problem, most people
respond by reducing the problem to a level at which it
can be readily understood (just satificing level).
Escalation of commitment: An increased
commitment to a previous decision despite evidence
that it may have been a poor decision.
 Decisions Making Role of Intuition
Intuitive decision making: It refers to decision making on
the basis of experience, gut feelings and accumulated
judgement.

Intuitive decision making can complement both rational

and bounded rationality. Intuition depends on following:

Experience-based decisions based on past experience

Affect-initiated decisions based on feelings/emotions
Cognitive-based decisions based on skills/knowledge/
training
Subconscious mental processing based on data
stored in subconscious mind.
Values or ethics based decisions based on ethical
values or culture.
 Decisions Making Styles
Linear thinking style:
A decision making style in which decision maker prefers
using external data and facts required to make
decision and processes information through rational,
logical thinking to guide decisions and actions.

Non-linear thinking style:

A decision making style which is characterized by a
persons preference for internal sources of information
and processing this information with internal insights,
feelings and hunches (guess).
 Types of Decisions
Programmed decisions: Repetitive decisions that
can be handled using a routine approach. These
decisions are applicable for simple and structured
problems.

Non-programmed decisions: Unique and non-

recurring decisions that require a custom-made
solution. These decisions are applicable for complex
and unstructured problems.
 Types of Problems
Structured problem: It is a problem which is
straight forward, familiar, easily defined and for which
information is complete.

Unstructured problem: It is a problem which is

new/ unfamiliar, unusual, and for which information
is ambiguous or incomplete.
 Decisions Making Conditions
Certainty:
An ideal situation in which decisions can be made
accurately because outcome of every decision is
known.
A finance controller can decide where to deposit
provident funds amount to get maximum profit due to
known outcome.

Risk:
A situation in which decision maker can make
decision based on assessment/estimation. Here
outcome is not known with surety.
In a political instability like we have in Pakistan, sales
manager cannot have 100% surety about sales target.
 Decisions Making Conditions
Uncertainty:
A situation in which decision maker has neither
certainty nor reasonable probability estimates
available.
 Decisions Making Biases and Errors
Decision makers use different styles and also make use
of rules of Thumb or heuristics partially based on
intuition, to simplify their decision making. Although,
managers make intelligent use of these rules of
thumb, they prove to be unreliable. Twelve errors &
biases have been identified:

1.Overconfidence have un-realistic view of themselves

2.Immediate gratification want immediate rewards/benefits

3.Anchoring effect fixation on first information/impression

4.Selective perception perceiving things on the basis of self

abilities/limitations/interests/errors.
 Decisions Making Biases and Errors
5. Confirmation accepting things on face value information
that affirms managers preconceived views.

6. Framing only looking at the information that suits their

interests, while excluding others.

7. Availability deciding on the basis of recent events which is

fresh in their memory.

8. Representation deciding on the basis of similar situation /

similar/matching events.
 Decisions Making Biases and Errors
9. Randomness creating meanings out of random events
which occur accidently/unexpectedly.

10. Sunk costs incorrectly fixating on past events which have

suffered sunk cost problems.

11. Self serving attributing successes to themselves and

failures to outside environment.

12. Hindsight false belief of decision maker that he/she

knows the outcome of events, even if symptoms are showing
different results/outcomes.