Organizational Environment

This article focuses on the organizational environment. The success and effectiveness of an organization is dependent upon the interaction of the organizational system with its environment. Sociologists study the points and processes through which organizations and their environments interact. This article discusses the sociology of organizational environments in four parts: An overview of different types of organizational environments; a description of the field of organizational studies and theories of organizational environments; an exploration of the factors that determine the effectiveness of organizational environments; and a discussion of the issues associated with studying the organizational environments of transnational organizations. Understanding the ways organizations and their environments impact one another is a vital understanding for all those interested in the sociology of social interaction within groups and organizations.

Keywords Adaptability; Closed Systems; Open Systems; Organizations; Organizational Environment; Organizational Sociology; Social Systems

Social Interaction in Groups & Organizations > Organizational Environment

Overview

The success and effectiveness of an organization depends on the interaction of the system with its environment. The processes through which organizations and their environments interact are subjects of study for sociologists. Factors such as organizational decision-making, characteristics and structures are all affected by the environment. Understanding the ways organizations and their environments impact one another is a vital understanding for all those interested in the sociology of social interaction within groups and organizations. This article explores the sociology of organizational environments in four parts: An overview of different types of organizational environments; a description of the field of organizational studies and theories of organizational environments; an exploration of the factors that determine the effectiveness of organizational environments; and a discussion of issues associated with studying the organizational environments of transnational organizations.

Types of Organizational Environments

Social scientists debate the meaning and parameters of organizational environments. The dominant models of organizational environments include Paul Lawrence and Jay Lorsch's stable or uncertain organizational environments, Frederick Emery and Eric Trist's four organizational types (i.e., the placid, randomized environment; the placid, clustered environment; the disturbed, reactive environment; and the turbulent field environment), and Robert Duncan's simple-complex and static-dynamic models of organizational environment (Rosenzweig & Singh, 1991).

Stable of Uncertain Environments

In 1967, Paul Lawrence and Jay Lorsch divided organizational environments into two types: Stable or uncertain. Stable organizational environments are predictable. Under stable circumstances, organizations tend to be more efficient and successful when they incorporate hierarchical structures of management, reporting, and accountability. Uncertain organizational environments are characterized by constant change and unpredictability due to new technologies or growth. Under unstable circumstances, organizations tend to be more efficient and successful when they adopt a decentralized leadership and management structure. Organizations with uncertain environments often require the use of specialized skill sets and communication strategies to handle new and unexpected situations.

According to Lawrence and Lorsch, most organizational environments are uncertain and characterized by rapid change. Lawrence and Lorsch based their theories of organizational environments on their study of a wide range of organizations across industries and business sectors. Lawrence and Lorsch's extensive research led them to develop the contingency theory of organizational environments and management. The Lawrence-Lorsch theory of organizational contingency explains that, ultimately, uncertainty and rapid change dictate how the organization should be managed (Lawrence & Lorsch, 1967).

The Emery-Trist Levels of Organizational Environments

In 1965, Frederick Emery and Eric Trist developed four models of organizational environments. The Emery-Trist levels of organizational environments include four main organizational types: The placid, randomized environment; the placid, clustered environment; the disturbed, reactive environment; and the turbulent field environment.

  • The placid, randomized environment refers to the simplest form of organizational environment in which resources, goals, and values are distributed randomly and remain unchanging. Inputs, such as resources, goals, and values, are distributed at a constant pace or frequency. The organizational environment survives without much knowledge or direction on the part of its members. Adaptability and copiability are low in the placid, randomized environment.
  • The placid, clustered environment refers to the semi-complex form of organizational environment in which resources, goals, and values are unchanging and located in clusters. Examples of clusters include segmented markets, vendors, and products. In a placid, clustered environment, the organization's survival is linked to its ability to connect the right specialized knowledge, processes, and technologies with their corresponding cluster. Placid, clustered environments need to develop multiple specialized competencies for each cluster.
  • The disturbed, reactive environment refers to scenarios in which multiple social systems dominate the same environments. In disturbed, reactive environments, the social systems are dependent on one another. The survival of systems in disturbed, reactive environments depends on the system's knowledge of other system's reactive behavior as well as their resources, values, and goals.
  • The turbulent field environment refers to chaotic scenarios in which there are no clear cause and effect relationships between the organizational system and its environment. There are constant external fluctuations and uncertainties. An organization's survival in a turbulent field environment is dependent upon the organization's knowledge of the changing environment and its ability to endure sustained emotional stress. Surviving turbulent field environments requires high amounts of adaptability and copability.

The Emery-Trist levels of organizational environments, described above, have different levels of adaptability and copability. Organizational environments vary in their decision-making, information processing, tolerance for frustration, competence, and needs. Ultimately, organizational managers and leaders need to have extensive knowledge of the internal characteristics of the system and the external environment (Motamedi, 1977).

Simple-Complex & Static Dynamic Models

In 1972, Robert Duncan developed the simple-complex and static-dynamic models of organizational environment. Duncan's model is used by organizations to understand how best to respond to and cope with uncertainty. Duncan argues that different types of environments produce different types of uncertainty. He studied twenty-two decision-making groups in three manufacturing and three research and development organizations to identify the characteristics of the environment that contribute to uncertainty in the decision-making process. To do so, Duncan recognized and defined an organization's decision-making unit as a formal work group within an organization with responsibilities that further organizational goals. These decision units are characterized and classified as simple, complex, static, or dynamic. The simple-complex organizational environment refers to the number of factors that affect the decision-making process. The static-dynamic organizational environment refers to the degree to which the decision-making factors or variables remain constant or in a state of change. Individuals in dynamic-complex environments experience the greatest degree of uncertainty and change.

In addition to the decision-making characteristics of organizational environments, Duncan distinguishes between the characteristics of external and internal organizational environments. Internal organizational environments include organizational personnel, organizational functional and staff units, and organizational level. The organizational personnel component includes educational background and skills, technical and managerial skills, interpersonal styles, and availability of workers within the system. The organizational functional and staff component includes technical abilities of units, interdependence of organizational units, and intra-unit and inter-unit organizational conflict. The organizational level component includes organizational goals and organization's product or service. External organizational environments include customers, suppliers, competitors, socio-political variables, and technology. The customer component includes distributors and users of products and services. The supplier component includes those who supply equipment, materials, product parts, and labor. The competitor component includes those in competition for suppliers and customers. The socio-political component includes government regulation, public attitude and perceptions about the industry and organization, and relationship with trade and labor unions. The technological component includes new technological requirements or innovations and new products and services (Duncan,1972).

In 1986, George Huber and Reuben McDaniel suggested that all organizational environments can be divided into one of three categories including hostile, turbulent, or complex. They advanced the idea that organizations must be designed with their environmental type in mind. Ultimately, there is no consensus regarding the make-up, scope, and parameters of organizational environments and social scientists continue to debate the meaning and parameters of the organizational environment. The organizational environment may be defined as a subjective experience of belief and information flow. In contrast, the organizational environment may be considered to include concrete elements of physical setting, organizational strategy, authority structures, formal regulations, organizational resources, human resource choices, organizational culture, and organizational processes.

Organizational Studies & Theories of Organizational Environments

Organizational studies is a multidisciplinary field attracting scholars in management, business and sociology and has evolved over two distinct periods including pre and post-World War II years. The fifty-year period before World War II was characterized by an interest in industrial efficiency with active study of worker management as part of the larger effort to increase industrial output and efficiency. The fifty-year period after World War II was characterized by an interest in the social and psychological issues at play in organizations. Key scholars who represent the foundations of modern organizational studies include Frederick Taylor, Max Weber, Douglas McGregor, and Abraham Maslow. The sociological study of organizations is called organizational sociology (Scott, 2004).

Systems Theory

In the twentieth century, social scientists began using systems theory to understand, characterize, and classify organizations. Systems theory developed first in the biological sciences to explain how organisms relate to one another in an ecosystem. There are two main principles of systems theory; namely, systems can be classified as closed systems or open systems. Closed systems refer to systems that exist in isolation from their external environment. In contrast, open systems refer to systems that are in a constant state of interaction and exchange with their external environment. Open systems exchange energy, information, capital, and material resources with their environment.

During the mid-twentieth century, systems theory grew very popular in management and organizational studies. Systems theory was seen to address the limitations of classical management theory which considered all organizations to be closed systems. Classical management theory, as explained in Frederick Taylor's "Principles of Scientific Management" (1911), did not recognize the importance of an organizational environment. Organizational management during the nineteenth and early-twentieth centuries focused almost exclusively on increasing the efficiency of work-flow processes and the production system (Huber & McDaniel, 1986).

During the 1960s, social scientists began to study organizational environments as a means of understanding how and why organizations function. Social scientists embraced the notion that organizations, now understood to be open systems, exist within particular environments. An organizational environment refers to a system's economic, technological, social, cultural, political, and legal operations. The interaction between the organization and these economic, technological, social, cultural, political, and legal inputs affect the strength and success of the organization. Domains of the environment include industry, structure, technology, government relations, and culture (Daft, 2021).

Organizational Environment Theories

The concept of the organizational environment is the basis for numerous theories such as ecological theory, resource dependence theory, and institutionalization theory.

Ecological models of organizational environments prioritize environmental selection in organizational founding, change, and mortality.

Resource dependence theory asserts that organizations are in active exchange with their environment as a means of ensuring survival and increasing performance. According to resource dependence theory, organizations can alter their environments (Pfeffer & Salancik, 2009).

Institutionalization theory suggests that the legal and cultural forces faced by an organization are responsible for shaping the organizational environment. Institutional environments reflect the legal and cultural norms of the organization. Organizations with highly articulated and fixed institutional environments tend to operate in one nation or culture rather than across nations and cultures (Rosenzweig & Singh, 1991).

Applications

Factors that Determine the Effectiveness of Organizational Environments

Sociologists study organizational environments to learn how social systems interact with different environmental forms. Theories of organizational environment are applied to diverse forms and types of organizations to gain information and understanding about their functions and processes. Sociologists are particularly interested in learning more about the factors that affect organizational environments. Researchers have found that adaptability and copability are two of the main factors that determine the effectiveness and survival of organizational environments. Adaptability and copability are distinct but related states of being for organizations.

Adaptability

Adaptability refers to a social system's ability to address its internal environment and remain relevant to its chosen audience. Adaptability is a social system's means of interacting with its environment to ensure survival. Social systems, such as organizations, use four main adaptation techniques: Conforming, opposing, resisting, and controlling.

  • Conforming refers to the process of accepting and implementing any required changes.
  • Opposing refers to a social system's rejection of any form of change request.
  • Resisting refers to a social system's hesitance or reluctance to respond to necessary changes. Common forms of organizational resistance include delays and procrastination.
  • Controlling refers to a social system's active and intentional effort to influence the source of proposed change, the pace of change, and the direction of change.

Two common forms of organizational adaptability include long-term planning and dynamic homeostasis. Long-term planning allows an organization to forecast and control future internal and external variables. Dynamic homeostasis is a process of maintaining stability through constant interaction between the internal and external environment.

Copability

Copability refers to a social system's ability to create and sustain a viable internal environment. A social system's coping strategies allow the system to maintain its internal identity, characteristics, and integrity. Copability is a strategy for reducing internal dissonance, stress, strain, and strife and returning the system to its whole state. Social systems employ four main coping mechanisms or tactics: Resolution, stalling, arresting, repressing.

  • Resolution refers to the process in which a social system identifies, confronts, and alleviates a problem.
  • Stalling refers to the process in which a social system procrastinates or delays in an effort to address an internal problem.
  • Arresting refers to the process in which a social system makes some but not total effort to identify a problem, locate the source of the problem, and implement measures to stop the growth of the problem.
  • Repressing refers to a process in which a social system refuses to acknowledge the existence or magnitude of a problem. Repression may be used without later repercussions for temporary problems but will not work for lasting internal problems.

Other Factors Affecting Organizations

Other factors that significantly affect the organizational environment include physical setting, organizational strategy, authority structures, formal regulations, organizational resources, human resource choices, and organizational culture.

  • Physical setting refers to the size and physical arrangement of space available to the organization.
  • Organizational strategy refers to an organization's overall approach to operations.
  • Authority structures refer to the procedures and paths for supervision, accountability, and reporting within an organization.
  • Formal regulations refer to an organization's standardized rules, procedures, and policies.
  • Organizational resources refer to an organization's money, time, equipment, knowledge, and labor.
  • Human resource choices refer to the employee selection process.
  • Organizational culture refers to the values, norms, and beliefs that inform an organization.

General discussion of systems and their environment tends to assume that all systems, as a means of survival, will have the ability to adapt and cope with changes in the environment. Research demonstrates that social systems, such as organizations, have different levels of environmental adapting and coping abilities. The fields of organizational design, development, and planning focus on analysis of organizational adaptability and copability (Motamedi 1977). Social scientists and business consultants agree that organizations should be designed with their environmental characteristics and needs in mind. In particular, organizations with hostile, turbulent, or complex environments require careful planning and design to ensure compatibility between environmental demands and system decision-making, information processing, adaptability, and copability (Huber & McDaniel, 1986).

Issues

Transnational Organizational Environments

Critics argue that most research on organizational environments does not account for the particular pressures and influences that nations exert on their organizations. While a single national or cultural focus is sufficient for domestic organizations or national agencies, the growth of transnational organizations should be reflected in research and theory. Transnational organizations refer to organizations with holdings or operations in more than one country. Further research is needed to explore whether characteristics of organizational environments vary across nations. For instance, research could explore how an organization's country of origin influences its ability to secure and distribute resources such as capital, skilled labor, technological innovations, and management expertise. This research question is particularly important for transnational organizations that span multiple nations (Rosenzweig & Singh, 1991).

Defining Transnational Environments

Social scientists are exploring which, if any, theories of organizational environments apply to international and transnational organizational environments. What are the characteristics of a transnational organizational environment? There are three main perspectives on how to define a transnational organizational environment.

  • First, a transnational organizational environment may be seen as a single, united global environment. The singular global environment would include global industry, global structure, global laws, global politics, and global society and culture.
  • Second, a transnational organizational environment may be seen as a cluster of multiple national environments. The national environmental clusters or subunits would affect the organizational system but not affect one another. This second perspective views transnational organizations as groups of independent domestic operations.
  • A third viewpoint on transnational organizational environments recognizes that transnational organizational environments may consist of differentiated, nation-based structures that are simultaneously influenced by national and global forces. This third perspective, which acknowledges global integration and national influence, is embraced by international business consultants and scholars.

Consulting on Organizational Environments

Sociological research on transnational groups and organizations is often based on applied research and consulting opportunities. Individual group members, managers, leaders, and consultants incorporate theories of organizational improvement and leadership into their own behaviors, performance, and choices. International businesses or organizational consultants use sociological principles of organizational environments to fix organizational problems across transnational businesses and industries. For example, transnational organizational consultants worked with a fast-growing transnational company which was experiencing organizational problems. The company was doing well externally in customer sales and vendor relations but was experiencing internal upset, stresses, clashes, and strains. The company had created a turbulent organizational environment by growing quickly without addressing the need for internal changes and support. The organizational environment had become characterized by exhaustive overtime work, untrained managers, and an influx of foreign technical workers from the United States, Japan, and Europe. The organizational environment was full of cultural and communication problems and blocks. In this case, consultants worked with the company to assess and fix the damage that had been done to the organizational environment by the company's fast growth (Motamedi, 1977).

Conclusion

In the final analysis, social scientists debate the meaning and parameters of the organizational environment. The organizational environment, a concept developed in the 1960s, may be defined as a subjective experience of belief and information flow. In contrast, the organizational environment may be considered to include concrete elements such as physical setting, organizational strategy, authority structures, formal regulations, organizational resources, human resource choices, organizational culture, and organizational processes. Despite debate about the parameters of organizational environments, social scientists agree that organizations are affected by the environment. The success and effectiveness of an organization is dependent upon the interaction of the system with its environment.

Understanding the ways in which organizations and their environments affect one another is vital for all those interested in the sociology of social interaction in groups and organizations. This article explores the sociology of organizational environments in four parts: An overview of different types of organizational environments; a description of the field of organizational studies and theories of organizational environments; an exploration of the factors that determine the effectiveness of organizational environments; and a discussion of issues associated with studying the organizational environments of transnational organizations.

Terms & Concepts

Adaptability: A social system's ability to address its internal environment and remain relevant to its chosen audience.

Closed Systems: Systems that exist in isolation from their external environment.

Copability: A social system's ability to create and sustain a viable internal environment.

Open Systems: Systems that are in a constant state of interaction and exchange with their external environment.

Organizations: Goal-oriented social groupings.

Organizational Environment: The physical, legal, political, social, and cultural elements that influence an organizational system.

Organizational Sociology: A field of sociology that applies sociological theories and methods to the study of organizational processes and structures.

Organizational Studies: The study of social interactions and structures in organizations.

Social Systems: The social organization of groups of people.

Society: A group of individuals united by values, norms, culture, or organizational affiliation.

Sociology: The scientific study of human social behavior, human association, and the results of social activities.

Transnational Organizations: Organizations with holdings or operations in more than one country.

Bibliography

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Suggested Reading

Burt, R., Gabbay, S., Holt, G., & Moran, P. (1994). Contingent organization as a network theory: The culture-performance contingency function. Acta Sociologica, 37, 345-370. Retrieved September 22, 2008, from EBSCO Online Database Academic Search Premier. http://search.ebscohost.com/login.aspx?direct=true&db=aph&AN=9503280393&site=ehost-live

Chau, P., & Tam, K. (1997). Factors affecting the adoption of open systems: An exploratory study. MIS Quarterly, 21, 1-24. Retrieved September 22, 2008, from EBSCO Online Database Academic Search Premier. http://search.ebscohost.com/login.aspx?direct=true&db=aph&AN=9707270121&site=ehost-live

Howard, J., & Wech, B. (2012). A model of organizational and job environment influences on workplace violence. Employee Responsibilities & Rights Journal, 24, 111–127. Retrieved October 30, 2013, from EBSCO Online Database SocINDEX with Full Text. http://search.ebscohost.com/login.aspx?direct=true&db=sih&AN=75163826

Mitrea, I. (2013). Characteristics of a professional community in a closed organizational environment - the army. Comparative analysis. Scientific Annals Of The 'Al. I. Cuza' University, Iasi. Sociology & Social Work / Analele Stiintifice Ale Universitatii 'Al. I. Cuza' Iasi Sociologie Si Asistenta Sociala, 6, 160–172. Retrieved October 30, 2013, from EBSCO Online Database SocINDEX with Full Text. http://search.ebscohost.com/login.aspx?direct=true&db=sih&AN=89710873

Young, O. (1995). System and society in world affairs: Implications for international organizations. International Social Science Journal, 47, 197. Retrieved September 22, 2008, from EBSCO Online Database Academic Search Premier. http://search.ebscohost.com/login.aspx?direct=true&db=aph&AN=9507193303&site=ehost-live

Essay by Simone I. Flynn, Ph.D.

Dr. Simone I. Flynn earned her Ph.D. in cultural anthropology from Yale University, where she wrote a dissertation on Internet communities. She is a writer, researcher, and teacher.