In the 1970s the world reeled from the shock of quadrupled process for petroleum, and organizations from General Motors to the Post Office had to decide how to reconfigure themselves to take this eternal event into account. The 1980s saw a dramatic shift from a local to a global playing field as strong organizations from Japan, Korea, Europe, and other areas intensified competition for markets across the world. In the 1990s new technologies for communications and information processing (ranging from in expensive fax machines and notebook computers to super powerful new computers) and geopolitical upheavals have revolutionized the way we think about organizations. Indeed, all of these factors and many others are part of the organizational environment that managers must take into account.
At the same time worldwide concern about the natural environment has emerged, spurred by environmental disasters, the discovery of a hole in the ozone layer that covers the earth, and an increase in pollution and other forms of environmental degradation. A new environmentalism has swept the globe – symbolized by the 1992 Earth Summit in Rio de Janeiro which drew unprecedented attention to the environmental problems that we all share.
Traditional ways of thinking about management pay little detailed attention to ether organizational or natural environments for good reasons. And there was little concern about the natural environmental; citizens of the world simply assumed that the earth’s resources were inexhaustible. Today, the world is very different. External groups with particular agendas are often organized and powerful and many organizations depend on them for support Technological, political economic and social trends can have major effects on whether or not organizations are successful. And finally, today’s managers must pay attention to the natural environment if we are to preserve the world for future generations. It is difficult to separate ‘organizational’ and natural environments because they are ultimately connected. In this article we will present some ways to understand analyze and manage the changes that organizations face in today’s topsy-turvy world.
To understand organizational environments we must borrow some concepts from systems theory. One of the basic assumptions of systems theory is that organizations are either self sufficient or self contained, Rather they exchange resources with and are dependent upon the external environment, defined as all elements outside an organization that are relevant to its operations. Some of these elements connect the organizations to the physical world. Because of its current importance, we will treat this topic separately in a section on natural environments. Organizations take inputs (raw materials, money, labor and energy) from the external environment, transform them into products or services and then send them back as outputs of the external environment.
The external environments have both direct action and indirect action elements. Direct action elements also called stakeholders include shareholders, unions, suppliers and many others who directly influence an organization. Indirect action elements such as the technology, economy, and politics of a society affect the climate in which an organization operates and have the potential to become direct action elements.
Elements of the Direct-Action Environment:
The direct action environment is made up of stakeholders – individuals or groups that are directly or indirectly affected by an organization’s pursuit of its goals. Stakeholders fall into two categories. External stakeholders include such groups as unions, suppliers, competitors, customer special interest groups and government agencies. Internal stakeholders include employees, shareholders, and the board of directors. The roles stakeholders play may change as organizational environments evolve and develop. Managers must be sensitive to this fact when they are tracing the various influences on an organization’s behavior and recommending responses to environmental change.
Both the internal and the external stakeholders groups of most organizations have changed substantially over the past few years.