Every time managers plan, they take into account the needs and desire of members of society outside the organization as well as the needs for material and human resources, technology and other requirements in the external environment. They do likewise to some degree with almost every other kind of managerial activity.
All managers, whether they operate in a business, a government agency, a church, a charitable foundation, or a university, must, in varying degrees, take into account the elements and forces of their external environment. While they may be able to do little or nothing to change these forces, they have no alternative but to respond to them. They must identify, evaluate and react to the forces outside the enterprise that may affect its operations. The impact of the external environment on the organization is illustrated. The constraining influences of external factors on the enterprise are even more crucial in international management.
Managers in the United States operate in a pluralistic society, in which many organized groups represent various interests. Each group has an impact on other groups, but no one group exerts an inordinate amount of power. Many groups exert some power over the business. There are many stake holders or claimants in the organization, and they have divergent goals. It is the task of the manager to integrate their aims.
Working within a pluralistic society has several implications for business. Various groups such as environmental groups keep business power in balance. Second, business interests can be expressed by joining such as the Chamber of Commerce. Third, business participates in projects with other responsible groups for the purpose of bettering society; an example is working towards the renewal of inner cities. Fourth, in a pluralistic society there can be conflict or agreement among groups. Finally, in such a society one group is quite aware of what groups are doing.
The technological environment:
One of the most pervasive factors in the external environment is technology. It is science that provides knowledge, and it is technology that uses it. The term technology refers to the sum total of the knowledge we have of ways to do things. It includes inventions, it includes techniques, and it includes the vast store of organized knowledge about everything from aerodynamics to zoology. But it main influence is on ways of doing things, on how we design, produce, distribute, and sell goods as well as services.
Managers must take into account the ecological factors in their decision making. By ecology I mean the relationship of people and other living things and their environment such as soil, water, and air. Land, water, and air pollution are of great concern to all people. Land may be polluted by industrial waste such as packaging. Water pollution may be caused, for example, by hazardous waste and sewer systems. Air pollution can be caused by a variety of sources such as acid rain, auto exhaust fumes, carcinogens, from manufacturing processes and other causes.
A variety of federal legislation has been passed dealing with solid waste, water, and air pollution. Managers must be keenly aware of the many laws and regulations, and must incorporate ecological concerns in their decision making.
In order to protect the environment, European countries developed the ISO 14001 registration that is to assure that company policies address a variety of public concerns including pollution prevention and compliance with relevant laws and regulations. Since the adoption of the ISO 14001 in 1996, some 10,000 companies had registered by the year 2000. Although the standard had a slow start in the United States it got a boost when Ford Motor Company certified all the facilities around the world to ISO 14001. Companies such as General Motors, IBM, Xerox, and others followed. The standard was valuable to Ford for reducing the water consumption, disposed paint sludge, and disposable packing material.
In the early 1900s, the mission of business firms was exclusively economic. Today, partly owing to the interdependencies of different groups in our society, the social involvement of business has increased. As pointed out in the systems-approach to management model, there are many stakeholders or claimants to the organization. There is indeed a question as to what the social responsibility of business really is. Moreover, the question of social responsibility, originally associated with businesses, is now being posed with increasing frequency with regard to governments, universities, non-profit foundations, charitable organizations, and even churches. Thus, we will talk about the social responsibility and social responsiveness of all organizations, although the focus of this discussion is on business. Society, awakened and vocal with respect to the urgency of social problems, is asking managers, particularly those at the top, what they are doing to discharge their social responsibilities.