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Month: November 2011

  • Organization Theory – 36 (Relation between theories)

    Over the last few blogs ending with this one, we have discussed the various organization theories. In today’s blog, we look at the inter-relation between the 3 theories we studied:

    The Resource Dependency Theory is formulated at the organizational level of analysis and provides a top-management perspective looking outwards from the organization to its surrounding environment.

    The later 2 theories are formulated at the level of environment. The Population ecology model attempts to explain why there are so many different kinds of organizations. institutional theory tries to explain why many organizations look alike in essence, both these theories answer their fundamental questions with the reference to the influence to the environment no the organizations.

    When environment has many rules and expectations to which organizations must confirm to derive necessary social legitimacy – institutional theory best explains organization’s structure and outcome.
    When the environment is not highly institutionalize and is influenced more by economic and technical competitions – population ecology perspective explains better to begin with.

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  • Journey So Far

    Over the last nearly 35 blogs, we have looked at organization from a theoretical context.


    The study of organization theory summarizes the patter of growth of organizations through their lifespan. We have covered initially the phase of looking at organization processes like – centralization etc and its implication on the organization. We then moved on to discuss about the relation between environment and organization.


    Before we proceed, we would love to inform our future plans. Our steady success over the last 9 months of operations have given us the confidence to move to the next leap – A newsletter.


    We would love to listen to our readers what they would love to see in the newsletter. This is the starting point for us to enhancing our ambit of offerings and making it more relevant to the readers of this blog.


    Expecting your response.


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  • Organization Theory – 35 (Institutional Theory)

    In the last blog, we looked at the population ecology model partially. In today’s blog we look at another theory – Institutional Theory.

    Environment puts demands on organization in 2 ways
    1. They make a technical and economic demands that require organizations to produce and exchange their goods and services in a market or a quasi-market.
    2. They may make social and cultural demands that requirer organizations to play particular roles in society and to establish and maintain certain outward appearances.

    Institutions generally have a repeated actions and shared concept of reality. Sometimes actions are repeated because explicitly rules or laws exist to ensure their repetition (legal and political influences). Sometimes activity patterns are supported by norms, values, and expectations (cultural influences); sometimes by a desire to be or look like another institution (social influences).

    In the institutional perspective, the environment is session as providing a more or less shared view of what organizations should look like and how they should behave.

    In this approach the manager would need to analyze the particular organization you should consider how the organization is adapting to its institutional context.

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  • Organization Theory – 34 (Population Ecology theory)

    In the last blog, we looked at the Resource Dependency Theory of relation between organization and environment. In today’s blog we will into another theory – Population Ecology theory.

    Similar to the Resource dependency theory, the Population Ecology theory too starts with assumption that organizations depend on their environment for the resources they need to operate.

    The population ecology assumes that the environment of an organization is assumed to have the power to select from a group of competitors those organizations which best serve the needs. Organizations which share a resource pool are competitively interdependent and the patters of interdependence that they adopt within the group affect the survival and prosperity of individual members.

    The main interest of the theory to explain the evolutionary process of the organization. There are 3 evolutionary processes – variation, selection and retention – which explain the dynamics of a population.

    Variation occurs in a population through entrepreneurial innovation and through the adaptation of established organizations.

    The new organizations that are formed through birth or adaptation provide the range of choice the environment has during the selection process.
    Environment sélects on the basis of fitness – the survival. Retention equals survival.

    This model provides a more detached view of the organizations than they are normally used to taking.

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  • Organization Theory – 33 (Resource Dependency Theory)

    In the last blog, we began our discussion about the relation between organization and environment with the contingency theory. In today’s blog we look at another theory – the Resource Dependency Theory.

    The Resource Dependency Theory suggests that “an analysis of inter-organizational relations within the network of the organization can help managers to understand the power/dependence relationships that exist between their organization and other network actors.

    Every organization depends on its environment for almost all the tangible requirements – raw materials, labor, capital, equipments, and outlets for its produce.  This dependency of the organization on its environment gives the environment a power over the organization. 

    Managers would need to perform this resource dependency analysis by identifying the source of organization’s resources. The next point of focus has to be on environmental actors which can affect these organization-environment relationships and there by the organization. These are generally competitors and regulatory agencies. This is to be followed by sorting these by criticality and scarcity. 

    With this analysis done, an apt strategy would have to be developed by the manager towards addressing these challenges from the resource front. There are numerous ways that have been traditionally followed, we would look at them in different cases at a later date.

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  • Organization Theory – 32 (Contingency Theory Environmental – Organization Relation)

    In the earlier blog,
    we looked at the larger context of International environment and the relevance
    to the managers. Beginning today over the next few blogs we would look at some
    of the theories that highlight the organization-environment relations. Today we
    discuss the first of these theories – Contingency Theory.
    The Contingency
    Theory talks about the relation between the environmental condition and the
    nature of organization that would develop in such an organization. A careful
    observation of the business environment around us and we begin to realize that
    this theory is really true.
    Simply put, this
    theory finds that a stable environment would have the organization with strict
    line of authority, distinct areas of assigned responsibilities etc. Since, this
    resembles a machine with strict rules and predictability – this is called
    mechanistic organization. On the other hand if the environment is very dynamic,
    the organization operating within it would have to be very flexible and
    employees would have the freedom to respond with a fitting reply relevant to
    the context. Given this lively nature, this is called an organic organization.
    Of these 2 types –
    mechanical and organic, none could be said as superior to the other. Each is
    appropriate to different environmental conditions. In stable environment, the
    mechanistic form is advantageous through the standard procedures to perform
    routine activities. Under rapidly changing environment, the organic model
    scores over the mechanistic model or organizations. Flexibility of organic
    organizations, support the need for innovations and adaption.
    To summarize – the most
    effective way to organize is “contingent” upon the conditions of
    complexity and change in the environment – Thus the name “Contingency
    Theory”.
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  • Organization Theory – 31 (International Environment in Business)

    In the last blog, we looked at the general environment view of the organization, in today’s blog we look at a larger view – the international environment and the elements that would be part of it.
    We could visualize the international organization in the following manner:
    In the fast paced global world of today, managers cannot afford to just be limited to the general environment of an organization which generally operates within a national boundary. Today’s businesses are always getting global. We have numerous companies opening up their manufacturing set up in China, and the software giant’s their offices in India. These trends come in with their own complexity. Such international context of the organization also get along with it the numerous treaties, etc that generally rule the international business environment. Let’s understand with an example:
    Consider the Earth Summit held in Rio de Janeiro in 1992, (). Managers would need to be aware of the specific ways in which these changes might affect and are already affecting their inter-organizational network and their organization. 
    As soon as an organization decides to expand its activities beyond the boundaries of its home nation, it will interact with representatives of organizations from other nations – joint venture partners, consumer groups, tariff collecting agencies, tax authorities all these will be part of the organization’s network. Even before the organization enters international market or exchanges, it would have to face competition not just with in the international market but by firms that entre the organization’s domestic markets from abroad!
    Managers would have to broaden themselves in a way that more local aspects of the inter-organizational network are taken care of. This is pretty important and we have multiple cases where organizations ignoring such local flavors have had to pay a heavy price. In essence, organizations dealing in the international environment have to – “Think global, act local”
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  • Organization Theory – 30 (General Organizational Environment and Sectors involved)

    In the last blog, we looked at the most significant factors that affect the organizational environment in the inter-organizational network view of the environment. In today’s blog let’s look at the general environment view and the factors involved in it. 
    The general environment could be looked at as – social, cultural, legal, political, economic, technological and physical. These could be depicted in the following diagram:
    Sectors in General Organizational Environment
    • Social Sector– This involve the class structure, demographics, mobility patterns life styles, and traditional social institutions like educational system, religious practices etc.
    • Cultural Sector– This includes the issues of history, traditions, expectations for behavior, and the values of the society or the society in which the organization operates.
    • Legal Sector– This include the constitution and laws of the nations in which the organization conducts his business, as well as legal practices in each of these domains.
    • Political Sector– This describes the distribution and concentration of power and the nature of the political systems in those areas of the world in which the organization operates.
    • Economic Sector – This includes numerous markets like the labor, financial, market for goods and services. This tends to have a very powerful influence on conditions in the other sectors that we discuss here
    • Technology Sector – This provides the knowledge and information in the form of scientific developments that the organization can acquire and use to produce output (goods and services).
    • Physical Sector – This covers the nature and natural resources of a nation.
    Though for the case of understanding the environment we have divided the various sectors, in reality these are interrelated. This classification assist us reduce the complexity into a manageable unit of analysis. A manager would have to take calls on which of these sectors would be the most significant and which of these would be better classified differently. It is again a call that the manager trying to analyze the industry has to take.

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