Thursday, August 8, 2013

Management - Internal and External Environments

I owned a business for over 10 years and with owning the business I noticed that I could create (or better yet, control) the internal environment but also that the external environment influenced my company greatly – much more so than I could control.  Everything I controlled within my business was a response in one way or another to the dynamic external environment.  As an example, I could choose to carry specific product lines, where to ship, what relationship to create, build, or discard, and whether or not I wanted to be more customer-centric.  There were many variables that I could experiment with to create more profits; however, I could not control many things.  Consumer demand, new government policies or recalls on baby items, government fees, prices offered by my competitors, new entrants into the industry, and customer issues with product shortages (supply) were all uncontrollable aspects of the external environment and all of these aspects affected the way I did business, internally.

Expanding on the issue of an organization creating its environment is relatively complex because it largely depends on the type of organization.  For instance, Weick mentioned in his article that Polaroid was able to create a situation where the stock was “less attractive to hold” and ultimately satisfied a “self-fulfilling prophecy” (Weick, 2001).   Weick stated through examples that banks, actors, and physicians can also create their environments through investor size and contribution, improvisation in theater, and type 2 errors when diagnosing patients.  Essentially when a company is creating its environment, it is creating a situation where the environment is conducive to growth and their structure is not necessarily attached to the demands of the external environment.  My argument is this:  How can a company truly believe they are creating their own environment when they are creating/controlling the environment in response to ultimate consumer or other demand?  I mean, the entire existence of the organization is for the purpose of helping others, creating profit, other otherwise dealing with other people in general.  I can understand how creation of the environment can be seen in the examples that Weick provided, but people bailing out on stock? Doctors diagnosing patients incorrectly get more business; and improvisational actors having fun?  I agree that these organizations are being more proactive than reactive to their specific environments; however the situations in these examples are not necessarily contributing to the growth of business (monetarily or otherwise).  My main concern here is do companies create the environment because they want to or because they need to (response mechanism to externalities)?  I feel that Weick’s article is very interesting and is a good read; however I feel that the examples have narrow scope and are not exactly indicative of the majority of organizations.  That is to say for instance that I hope doctors are not creating type 2 errors with the majority of their patients.  I feel that organizations evolve and adapt to changes in the external environment, but also try to control as much as possible, even if most of that creation or control is sometimes impossible and/or solely internal.  As stated in the text on page 274, “It is important to realize that while organizations can learn and adapt to their environment, they also, to varying degrees, attempt to change and control their environment” (Bowditch, Buono, & Stewart, 2007).     

Expanding on the issue of external environments influencing organizations is also complex, because, again, it largely depends on the type of organization to what degree the external environment has on the organization.  All organizations are affected by the general external environment which is discussed by Dr. Olga Chapa from the University of Houston-Victoria as “the economic, technological, sociocultural, and political trends that affect all organizations” (Uhv.edu, 2010).  In my company, I constantly had to change, or evolve, to the ever pressing demands from consumers.  I had to pay very close attention to recalls from the government, watch for new entrants into the industry, and constantly benchmarked competitor’s pricing and programs.  I could control the environment of the organization when it came to internal policies, which products to carry, and overall organizational climate. However, I could not control the external environment; instead I had to respond to it in order to survive in the industry.  For instance when customers were complaining about certain aspects of customer service, I had to change some of the corporate culture to respond to the demands.  As stated in the text, “organizations are open systems that are influenced by a multitude of environmental forces” (Bowditch, Buono, & Stewart, 2007).   I completely agree with this statement, furthermore I believe that even though organizations try to create or control their environment they also are influenced by the environment and that an open system is a better choice for most organizations today due to the dynamic nature of the environment itself.   I feel this way because of consumer demands, economic issues, political conditions, rapid change in technology, and various other dynamic external conditions need to be responded to by an organization. It is this response that ultimately shapes the strategy the business uses.   The organization needs to be sensitive to the changes and respond appropriately and quickly to those external changes in order to succeed.  According to the Encyclopedia of Business Reference for Business online, “research during the 1960s showed that traditional bureaucratic organizations generally failed to succeed in environments where technologies or markets were rapidly changing. They also failed to realize the importance of regional cultural influences in motivating workers” (Referenceforbusiness.com, 2011).  I feel that organizations simply cannot afford not to be open systems due to the current market and consumer interests / demands.  But organizations still need to implement control of their organizational environment in response to the needs and pressures of the external environment. 


Weick takes the position that organizations mainly create their environments.  “Organizations are more active in constructing the environments that impinge on them than is commonly recognized” (Weick, 2001).  Weick believes that organizations create their environments and also have varying degrees of control over these environments once they are built.  Weick also states that “as an organization increases in size it becomes more and more its own selection system and finally quite literally does impose the environment that imposes on it”.   So, essentially Weick is stating that organizations build their own environments, and then eventually have to control the other aspects of environment once it is imposed onto the organization.  “Organizations have to build their environment before they can even have the luxury of controlling them” (Weick, 2001).  This statement says it all – Weick’s view is that an organization does not automatically know the environment because it has yet to be built and once it is built then the organization can worry about controlling it.  And that the only thing that is truly known is what a person has already done or what they are thinking.  Weick is concerned with the definitions of boundaries that are defined by other people.  He sees the definitions of these boundaries as non-existent and problematic.   Weick stated that “an organization can never know what it thinks or wants until it sees what it does” (Weick, 2001).   I understood this as an organization can offer a good or service to consumers and based on the consumers, then the organization can see what it wants and what it thinks about a situation.  Organizations will have to respond, evolve, and/or adapt to the external environment, especially in the case of a bad product or service being offered.  I wonder how Weick would reconcile advocacy groups, economic recessions, and new laws that are passed which affect business as usual.  Would Weick state that these were all conditions because the organizations made them so?   I can see Weick’s point, but I do not agree with it.  For instance, if I started a company again selling any type of product retail, I would have to exam the external environment first.  The external environment has a huge impact on what I can sell in this economy.  Then as new laws are passed, I would have to adhere to those laws; I would have to constantly adjust business due to the changing external environment.  I mean, bell-bottom pants and polyester white leisure suits were cool back in the day, but would they sell now?  Making adjustments due to the external environment is the evolution of an organization.

Personal thoughts:

Weick used three examples, which were described above in answer number 1, and states that the banks, physicians, and actors influence their environment instead of the environment influencing them.  At what point does an organization cross ethical lines when attempting to influence their environment?   Also, Weick dives deep into his article discussing environments as a psychological thing (he does have a Ph.D. in organizational psychology after all).  So, I have another question:  Are many organizations really solipsistic in nature?

Cognition & Sensemaking

Karl Weick’s article provided a link between cognition and the environment.  I took away a lot from this because I absolutely adore psychology and enjoy reading theories and various articles on the subject, especially regarding cognition and reality.  I felt that the entire take away from this article was to understand how a person (or organization) can justify their thoughts, rationalize their ideas and enact these emotions through sensemaking thus creating their environment.  According to Dr. Weick, “sensemaking fills important gaps in organizational theory.” And “The seemingly transient nature of sensemaking belies its central role in the determination of human behavior, whether people are acting in formal organizations or elsewhere” (Weick, Sutcliffe, & Obstfeld, 2005).  Even though I have an opposing view on the some of Weick’s views (but I plan to read a lot more of his articles), I can understand what Dr. Weick and his colleagues were conveying –that people or organizations gather thoughts and ideas, put them in order (organize them) and enact these thoughts back to the environment in order to make their environments more logical overall.  And this is why I took this part out of the reading and enjoyed it the most – order out of chaos.  It seems it is a human need to create, control, project their feelings, and try to make sense of their environment, always, even if there really is no connection. When people are faced with ambiguity and uncertainty “people search for meaning” and “settle for plausibility then move on” (Weick, Sutcliffe, & Obstfeld, 2005). Connecting abstract thoughts to concrete actions, creating an environment, and looking back in retrospect is the cornerstone of sensemaking.  For instance, when I ran my business I would often think, plan, do, and look back at the decisions I made and altered what I needed to in order to control my environment.  However, I learned very fast that in my industry if my decisions did not work out as planned that it was mainly due to outside influences such as demand and supply; conversely, if my internal plans did work, it was because they were in harmony with the external environment.  If the demand did not run high or low and remained stable, then my actions would have been to do nothing; it was because of the flux in demand and supply that started a reaction in my business to alter prices and to order more or less goods in a period.  The decisions I did make created the environment that produced more profit. So perhaps Weick is correct, perhaps I made the decisions, thereby creating the environment and found myself inside my own creation.



References:
Bowditch, J. L., Buono, A. F., & Stewart, M. M. (2008). Organization-Environment Relations.A primer on organizational behavior (7th ed., pp. 252, 274). Hoboken, NJ: Wiley.

Weick, K.E. (2001). In Weick, K.E. (ed.), Making Sense of the Organization:179-206, Malden, MA: Blackwell Publishers.

Referenceforbusiness.com. (2012). Organization Theory - Open-systems theory, Basic organizational characteristics, Organizational theory in the 1980s and 1990s. Reference For Business - Encyclopedia of Small Business, Business Biographies, Business Plans, and Encyclopedia of American Industries. Retrieved August 28, 2012, from http://www.referenceforbusiness.com/small/Op-Qu/Organization-Theory.html.


Uhv.com. (2010). Chapter 3 Summary. University of Houston - Victoria: Academic Web. Retrieved August 29, 2012, from http://www2.uhv.edu/chapao/MGT3311/outlines/chp3.htm 

Weick, K., Sutcliffe, K., & Obstfeld, D. (2005). Organizing and the process of sensemaking. (4 ed., Vol. 16, pp. 409-421). Organization Science

No comments:

Post a Comment