Organization Theory

Structure, Design, and Applications

Third Revised Edition
Stephen P. Robbins and Mary Mathew

CHAPTER PART II THE DETERMINANTS: WHAT CAUSES STRUCTURE?

8 Environment and
Organizational Structure

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by Rajeesh
Rajeesh Viswanathan
Viswanathan
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© 2010
2010 Dorling
Dorling Kindersley
Kindersley India Pvt. Ltd.
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reserved. Jansons
Jansons school
school of
of Business
Business
Topics to be discussed:
• Defining and classifying organizational environment.
• Identifying the key dimensions of organizational environment.
• Linking mechanistic and organic structures to environmental
characteristics
• Understanding the population ecology model
• Describing the effect of environmental uncertainty on complexity,
formalization, and centralization.
 ENVIRONMENT
• The environment is everything outside an
organization’s boundaries.
• The environment is classified as specific(task) or
general
• The general environment encompasses conditions
that that might not have a direct impact on the daily
operations of a firm
• The specific environment is that part of the
environment that the organization interacts with
directly to achieve goals
 Environmental Dimensions
• Scarce-Abundant: The resource-based
constraints on growth
• Simple-complex: heterogeneity; the number
of dissimilar external elements
• Stable-Unstable: whether elements in the
environment are dynamic
• The complexity and unstability dimensions
lead to uncertainty regarding the environment
 Framework for Assessing
Environmental Uncertainty

5
 MECHANISTIC AND ORGANIC
STRUCTURES
• Based on the degree of uncertainty,
organizations tend to have mechanistic or
organic structures
– Low uncertainty: Mechanistic structures are characterized
by high complexity and formalization
– High uncertainty: Organic structures are relatively flexible
and adaptive
 POPULATION ECOLOGY
• Population ecology is the study of how the population
sizes of species change over time and space.
• In organization theory, similar groups of organizations are
considered as species
• It studies organizational diversity and adaptation within a
population of organizations where population is a set of
organizations engaged in similar activities

7
 ELEMENTS IN THE POPULATION-
ECOLOGY MODEL OF ORGANIZATIONS

Entrepreneurship External Fit Growth

8
THE ENVIRONMENT-STRUCTURE
RELATIONSHIP
Environment and Complexity
• Environmental uncertainty leads to higher horizontal complexity
(differentiation) and the use of integration devices (task forces, liaison
roles etc.) to deal with increased complexity.
Environment and Formalization
• Environmental certainty, especially stability, leads to higher formalization
as stable environments create a minimal need for rapid response, and
economies exist for organizations that standardize their activities
Environment and Centralization
• Environmental certainty, especially complexity, leads to decentralization
THE ENVIRONMENT-STRUCTURE
RELATIONSHIP