The organisation and the external environment

Organisations do not exist in isolation. They exist within a wider environment that includes a network of customers, suppliers, competitors, and regulators. Organisations are also subject to changes in the social, technological, economic, environmental, and political settings they operate in.

There are essentially three environments:

  • The internal environment – the organisation itself, including staff, resources, and facilities.
  • The near external environment – or the customers, clients, suppliers, competitors, etc.
  • The far external environment – the social, technological, economic, environmental, and political (STEEP) factors.

Organisational boundaries are not clearly defined or fixed, but adjust in response to changes in the far external environment (STEEP factors).

How to improve psychological climate

Improving the psychological climate can have a beneficial effect on job satisfaction, work outcomes, stress, absenteeism, commitment, participation, sick leave, and creativity.

So what can a manager do?

  • Trust people to make and take work-related decisions.
  • Do not micro-manage.
  • Allow people to plan and prioritise their own work.
  • Let people decide how best to do their job.
  • Develop a willingness to work together.
  • Foster loyalty between team members.
  • Create a sense of unity.
  • Encourage commitment to goals and achieving them.
  • Build trust.
  • Offer support through meetings and non-work-focused discussion.
  • Give specific, consistent, and fair recognition where deserved.
  • Be fair and sensitive to others.
  • Support innovation and creativity.
  • Support new ideas.
  • Encourage debate and discussion of ideas.
  • Build cross-functional cooperation and support.

Psychological climate

The psychological climate of an organisation is based around individual perceptions of an organisation and its people. Individual perceptions differ according to their status and which part of an organisation they work in, but they are always their own perceptions based on their experience of working in an organisation.

The B628 course book suggests there are a number of factors that make the most important contributions to psychological climate:

  • Leadership
  • Facilitation and support
  • Professional and organisational esprit
  • Conflict and ambiguity
  • Regulations
  • Organisation and pressure
  • Job variety
  • Challenge
  • Autonomy
  • Work-group cooperation
  • Friendliness and warmth
  • Job standards

Taxonomies of culture

Two well known classifications of organisational culture by type are those by Deal and Kennedy (1982) and Handy (1985), which build on earlier work by Harrison (1972).

Deal and Kennedy’s classifications:

  • The tough-guy macho culture – typified by fast feedback and reward, and high risk. Financial markets, venture capitalists, management consultancies are good examples.
  • The work-hard/play-hard culture – again typified by fast feedback and reward, but this time low risk. Property, car sales, and IT are good examples.
  • Process culture – typified by slow feedback and reward, and low risk. Insurance companies, banks, heavily regulated industries such as utilities, and public sector organisations such as HMRC are good examples.
  • Bet-your-company culture – typified by slow feedback and reward, but high risk. Good examples include pharmaceuticals, biotech, and other science/technology companies.

Handy/Harrison’s classifications:

  • Power culture – power is concentrated at the centre, like a spider in the centre of a web.
  • Task culture – strongly job/task-oriented.
  • Person culture – puts individuals and their interests first.
  • Role culture – systems and procedure-based; the opposite of person culture.

Organisational culture

Organisational culture is an obvious concept, but it wasn’t really something I had considered in depth until I read Chapter 12 of the B628 course book. My only knowledge of organisational culture was the observation that all organisations do things a little bit differently to each other.

It’s much more complex and far-reaching than that. Organisational culture can shape the norms and practices of the people working within an organisation almost as much as national or ethnic culture. Similarly, there is shared learning from shared history laid down by the ‘founding fathers’ of the organisation.

There are three levels of organisational culture, categorised by Schien (1992):

Behaviours and artifacts: the most visible signs of culture, such as logos, architecture, interior design, company cars, etc.

Espoused beliefs and values: the less visible signs of organisational culture, including ideas, principles, and standards.

Underlying assumptions: invisible truths that are taken for granted, such as the assumption that all employees will be motivated by money, all employees can improve their performance, etc.

Schien also goes on to argue that there are seven dimensions of organisational culture:

  1. The organisation in relation to its environment
  2. The nature of human activity
  3. The nature of reality and truth
  4. The nature of time
  5. The nature of human nature
  6. The nature of human relationships
  7. Homogeneity versus diversity

According to Schien, organisational culture can explain behaviour that is sometimes hard to understand, and can appear irrational. Furthermore, once a culture has grown, it plays a part in determining the succession of leadership, and is therefore self-perpetuating!