Management Concepts Chapter 04 – Managerial Environment

Managerial Environment

04.01. Introduction to Managerial Environment:

A manager’s environment is made up of constantly changing factors - both external
and internal - that affect the operations of the organization. Although managers
can’t always control their environments, they need to be aware of any changes that
occur, because changes ultimately affect their daily decisions and actions.
For example, in the airline industry, deregulation opened up the market to new
airlines, forcing existing airlines to be more competitive. Managers in existing airlines
couldn’t afford to ignore the cheaper airfares and increased service that resulted.
Not only did managers have to identify the new challenge, but they also had to act
quickly and efficiently to remain competitive.
Any change in environment affects the entire organisation and require an
organisation to change. Now-a -days it's slogan 'change or perish' and the same is the
warning to the today's managers.

04.02. The Internal Environment

Forces or conditions or surroundings within the boundary of the organization are the
elements of internal environment of organization. The internal environment consists
mainly of the organization’s owners, board of directors, employees and culture.

1. Owners: Owners are people who invested in company and have property
rights and claims on the organization. Owners can be an individual or group of
person who started the company; or who bought a share of the company in
the share market. They have the right to change the company’s policy at any
time.

2. Board of Directors: The board of directors is the governing body of the

company who are elected by stockholders, and they are given the
responsibility of overseeing a firm's top managers such as general manager.

3. Employees: Employees or the workforce, the most important element of

organizations internal environment, who performs the tasks of the
administration. Individual employees and also the labor unions they join are
important parts of the internal environment. If managed properly they can
positively change the organizations policy. But ill-management of the
workforce could lead to a catastrophic situation for the company.

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Management Concepts Chapter 04 – Managerial Environment

4. Organizational Culture: Organizational culture is the collective behavior of

members of an organization and the values, visions, beliefs, habits that they
attach to their actions. An organization’s culture plays a major role in shaping
its success, because culture is an important determinant of how well their
organization will perform. As the foundation of the organization's internal
environment, it plays a major role in shaping managerial behavior.

04.03. The External Environment

All outside factors that may affect an organization make up the external
environment. The external environment is divided into two parts:
(1) Directly interactive
(2) Indirectly Interactive

04.03.01. Directly interactive forces

Directly interactive forces include owners, customers, suppliers, competitors,

employees, and employee unions. Management has a responsibility to each of these
groups.

(a) Customers: demand satisfaction with the products and services they purchase
and use.

(b) Suppliers: require attentive communication, payment, and a strong working

relationship to provide needed resources.

(c) Competitors: present challenges as they vie for customers in a marketplace

with similar products or services.

(d) Strategic Partners: they are the organization and individuals with whom the
organization is in an agreement or understanding for the benefit of the
organization. These strategic partners in some way influence the organizations
activities of in various ways.

(e) Regulators: regulators are units in the task environment that have the
authority to control, regulate or influence an organization's policies and
practices.

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04.03.02. Indirectly interactive forces

The second type of external environment is the indirectly interactive forces. These forces
include socio-cultural, political and legal, technological, economic, and global influences.
Indirectly interactive forces may impact one organization more than another simply
because of the nature of a particular business. For example, a company that relies
heavily on technology will be more affected by software updates than a company that
uses just one computer.

(a) Socio-cultural dimension: customs, mores, values, and demographic characteristics

of the society in which the organization operates are what made up the socio-
cultural dimension of the general environment. Socio-cultural dimension must be
well studied by a manager. It indicates the product, services, and standards of
conduct that the society is likely to value and appreciate. Standard
of business conduct vary from culture to culture and so does the taste and necessity
of products and services.

(b) Political-Legal Dimension: the politico-legal dimension refers to the government law
of business, business-government relationship and the overall political and legal
situation of a country. Business laws of a country set the do’s and don’ts of an
organization. A good business-government relationship is essential of the economy
and most importantly for the business. And overall situation of law implementation
and justices in a country indicates that there is a favorable situation in of business in
a country.

(c) Technological Dimension: it denotes to the methods available for converting

resources into products or services. Managers must be careful about the
technological dimension. Investment decision must be accurate in new technologies
and they must be adaptable with them.

(d) Economic Dimension: the economic dimension of an organization is the overall

status if the economic system in which the organization operates. The
important economic factors for business are inflation, interest rates and
unemployment. These factors of economy always affect the demand for products.
During inflation, company pays more for its resources and to cover the higher costs
for it, they raise commodity prices. When interest rates are high, customers are less
willing to borrow money and the company itself must pay more when it borrows.
When unemployment is high, the company is able to be very selective about whom
it hires, but customers' buying power is low as fewer people are working.

(e) International Dimension: virtually every organization is affected by the international

dimension. It refers to the degree to which an organization is involved in
or affected by businesses in other countries. Global society concept has brought all
the nation together and modern network of communication and transportation
technology, almost every part of the world is connected.

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Management Concepts Chapter 04 – Managerial Environment

Conclusion:

The environment irrespective of its external or internal nature, a manager must have
a clear understanding about them. Normally, you would not go for a walk in the rain
without an umbrella, because you understand the environment and you know when
it rains you can get wet.
Similarly if a manager does not know and understand the environment of
organization, he or she will definitively get wet or dry and the organization also in
today’s fast and hyper moving organizational environment.

04.04. Resistance to change :

The attitude of employees and organisation (i.e. - Personnel’s at top level) plays an
important role in deciding response to change. This response (support or oppose) to
change depend on the outcome of the change. However, resistance to change is
natural; the following are the factors responsible for resistance to change. Which are
classified in two major factors (viz. – Individual factors and organisational factor’s.)

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(A) Individual Factors of resistance :

1. Economic factors: Employees resist change when they feel that change causes
their economic loss. The major losses are unemployment, reduction in present
pay, reduction in monetary benefits, demotion etc. (Example - Fear of
automation and computerisation might create the above situation).

2. Obsolescence of Skills: Change may cause some discomforts in job. New job
requires learning new procedures and forgetting old ones which is a most
dislike activity with employees. (Example - Introduction of computerised
accounting will automatically reduce manual accounting.)

3. Problem of Adjustment: When new change is introduced employees have to

face new situation and the old techniques are no longer required and the
security of the familiar activity is lost. Change may create feeling of non-
possibility of adjustment with new work and leads to increase stress. Hence,
change is generally resisted.

4. Change in position: Generally employees do not want to change their present

position in job. Of course new change requires re-defining of job, change in
responsibility etc. which is inconvenient and uncomfortable to employees. The
same feeling may cause of resistance.

5. Lack of trust: If the past experience of change is unfavourable to employees

and had bad experience, employees lack trust in change and they may resist
to change.

6. Psychological factors :
a. Fear of uncertainty - The fear of unknown ways of doing job creates threatening
and uncertainties in mind many employees feel extremely insecure.
b. Group Pressure - Every employee belongs to a specific formal group. Sometimes
employee may be unable the pressure of the group. As the employee is a member of
the group he also resists the change.
c. Disturbance in social relationship - Man is a social animal. He may feel that change
is likely to disturb the social relationship of people. It may affect their daily customs,
norms etc. (Example - transfer of employee may disturb his social relationship and
friendship at that place.) Hence, employees resist to change.
d. Problem of ego - Everyone has some ego which one tries to maintain. Ego means
state of thinking, behaving and feeling. Any adverse affect/change on these, will be
resisted by employee.

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B) Organisational Factors :
Like individuals, some organisations may resist the change. Particularly when
organisation's function is based on traditional lines they always resist to innovation
and change. Some important reasons of organisational resistance are as follows :

1. Form of organisation: Some forms of organisation are more resistant to

change. Particularly bureaucratic form of organisation does not favour to any
change. Change does not suit to the present organisation structure.

2. Threat to established resources allocation: The departments, which are

getting more benefit from current resource allocation, resist change. As they
feel that after change they may not get proper share of resources.

3. Threat of position: Sometimes, the top level personnel’s consider change as a

threat to their position. Because, they feel change may reduce the power and
influence on employees. Hence, they always resist the change.

4. Wastage and obsolescence: Sometimes, when the change is introduced many

of fixed assets become obsolete and useless. So the organisations resist to
change and continue with old system.

5. Other conditions: Mr. Zandar has given few more conditions which are
causing resistance to change. They are as follows.
a. Nature of change is not made clear to the employees.
b. Having different meanings by different employees.
c. If the change is made for personal benefit.
d. It the change ignores customs and values in organisations.
e. Those who want change have limited authority and are not competent also.

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04.05. Remedies to overcome the resistance :

It is always better to explain employees/personnel’s why the change is to be
accepted. What are the benefits of change to the individuals and organisation,
Transparency and free flow of communication may benefit to overcome the
resistance.

(A) Efforts at Individual level :

Following ways to be applied to overcome the resistance at individual level.
i) Educate and train employees to accept the change.
ii) Make participation and involvement of employees in the process of change.
iii) Using leadership qualities pursue the employees for change.
iv) Create environment to make committed employees for change.

(B) Efforts at Organisational level :

Following efforts would be useful in overcoming resistance at organisational level.
1. Solve the problem of resistance at group level rather than at individual level.
2. Total group should be taken into confidence.
3. Arrange training programmes for the entire group.
4. Take help of professional consultants to make top officials favourable for
accepting the change.
5. Apply change gradually after careful thought.
6. Initiate change and take feedback of it.

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