Understanding the Organisational Environment and Culture

Most managers are faced by an overload of information, so a key skill they need is the ability to filter information to identify what is relevant to the organisation. They also need to analyse information to understand its significance and to communicate it to those who need to act on it. Effective knowledge management can give the organisation a competitive advantage. A major aspect of the organisation's external and internal environment is culture. Managers have to be sensitive to the culture around them.

Every day managers are required to make decisions. Unless they have relevant and accurate information about the environment in which they are operating, these decisions are probably based on guesswork and intuition. There is a place for intuition in management, but it does not replace adequate and timely information. In the past, managers were able to assess their information needs based on their previous
experience, but with the rapid changes in business in recent times, this is no longer the case. There are limits on the types of information that can be collected and there are ways of collecting information which are illegal or unethical. There are basically two kinds of information a manager needs; information for the short-term (operational information) and information which relates to longer-term plan (strategic information). We can classify these kinds of information further; critical data which is directly related to the organisation's immediate operations and general background information which helps managers understand and interpret external events and situations.

There are various information-gathering frameworks which help organisations identify the key issues and compile and analyse the critical data that they need.

SWOT stands for Strengths Weaknesses Opportunities and Threats. An organisation which conducts a SWOT analysis gathers and analyses a variety of information from a range sources and tries to identify:

  • the strengths which the organisation has compared to its competitors
  • the weaknesses relative to competitors
  • the opportunities which might be available for growth and profit
  • the threats to its current business.

The Balanced Scorecard is a system developed by Kaplan and Norton (1992). This evaluation system uses four sets of measures:

  • financial perspective, including future predictions of growth and profit
  • internal business perspective, such as value add per employee and time for new product introduction
  • customer perspective, including satisfaction measures
  • innovation and learning perspective, covering areas such as technology leadership and staff attitudes.

Probably the most general framework used to guide the collection and analysis of information, however, is the stakeholder model of organisations which we examined in Topic 1. This model identifies the various groups of people who influence, and are influenced by, the organisation—including customers, employees, suppliers, regulators, society and owners/shareholders. The purpose of the organisation is to provide value to each of these stakeholders, so it must understand the situation, needs and preferences of each group.

Many organisations have people who can be termed 'boundary scanners'—people who interact with the external environment, such as salespeople, purchasing staff and market researchers. Part of their job has to be the search for relevant information for the organisation—not just information for their own needs, but for others in the organisation who do not have the same access to the outside world. The general external environment includes Technology, Economc and Social Trends, Political and Legal Developments, and Globalisation. The task environment consists of Customers, Competitor's Products, Competitors and Labour.

Knowing what is going on in the external environment is only part of the picture. Managers need to also have a deep knowledge of what is occurring in their own organisations. The first requirement is to understand the people who work in the organisation—what their skills are, what motivates them, what their attitudes to work and the organisation are, what their values are and what cultural norms they observe. It is difficult to manage staff without knowing them. It is also a key management objective to retain the workforce, its special knowledge and experience.

Every organisation has processes. These are the formalised task sequences used to carry out routine functions. Without processes, you do not have an organisation, but a collection of individuals. The efficiency and effectiveness of any organisation is largely determined by the way their processes operate. Virtually any process can be improved and programs such as total quality management and benchmarking are aimed at process improvement. Unless you know what these processes are, you will have no idea how to implement the required changes. A great advantage of the quality standard ISO-9000 is that it requires organisations to document and measure their processes.

The capabilities of an organisation result from the performance of various organisational processes, the knowledge, skills and experience of staff and associated groups (e.g. suppliers and consultants), combined with the resources which it has available—including equipment, finance, linkages to other organisations. In recent years many organisations have focused their efforts on what are termed their 'core competencies' (Hamel & Prahalad 1990) - things a company does especially well in comparison to its competitors. It is these areas which give the organisation its competitive advantage. The idea is that other activities - those not critical and where the organisation does not have special expertise - can be outsourced to specialist contractors.

There are four stages in converting information into knowledge which can guide actions.

1. Assess the information and decide if it is useful or not
2. Combine information with other related information
3. Analyse the combined information to see what it implies for the organisation
4. Pass the analysis to someone who is in a position to act upon it.

The first stage—deciding if information is useful—is a critical one. This should encompass all parts of the organisation, so marketing managers should be aware of what might be useful to the research and development (R&D) department. The next step is filtering, to discard as much information as possible so that a manageable portion remains. Finally, as a part of the assessment stage, evaluate the reliability and accuracy of the information. Combining information depends on having access to a range of information across the organisation. Many organisations have knowledge-based software systems which help the sharing and integration of information. The right skills and experience are required to analyse what they mean, such as a cross-functional team. Finally, when the significance of the information has been assessed, it must be handed to the appropriate people to action.

Knowledge assets are the accumulated organisational information, learning, and experience that resides in employees' heads, databases, policies, procedures and filing cabinets regarding markets, products, technology and competitors. An organisation's knowledge assets contribute to its competitive advantage so they have to be managed. Organisations need to know; what their knowledge assets are, where there are gaps in their knowledge, and how to manage and make use of these assets to get maximum return. A number of corporations have appointed Chief Information Officers, who facilitate the collection and analysis of information.

When we discuss cultural issues we are referring to the issues that emanate from both the external cultural environment and the internal organisational culture. The external cultural environment includes the local culture. By this we mean not only the national culture, but the truly local culture—as within a national culture there can be differences. The internal culture of an organisation is greatly influenced by the external cultural environment—after all, the employees are mainly from the local area. However, organisations develop their own cultures. Often these cultures develop when the organisation is being set up and they reflect the ideas of the founders.

A new manager who sets out to change the culture does so at his/her peril. There is usually a long entrenched tradition behind the culture and the organisation has attracted people who fit that culture. There needs to be a very good reason to change the culture and it has to be done with great care and sensitivity.

The controls, systems and procedures that can be effectively used to manage the operations of an organisation are influenced by the culture of the organisation. The following points illustrate the impact of culture on management practice; the effects of culture on strategy, intergroup conflicts within the organisation, ineffective communication.