Organizational culture is an idea in the field of organizational studies and management which describes the psychology, attitudes, experiences,

beliefs and values (personal and cultural values) of an organization. It has been defined as "the specific collection of values and norms that are shared by people and groups in an organization and that control the way they interact with each other and with stakeholders outside the organization. Ravasi and Schultz (2006) state that organizational culture is a set of shared mental assumptions that guide interpretation and action in organizations by defining appropriate behavior for various situations. Although its difficult to get consensus about the definition of organizational culture, several constructs are commonly agreed upon that organizational culture is holistic, historically determined, related to anthropological concepts, socially constructed, soft, and difficult to change. This definition continues to explain organizational values, described as "beliefs and ideas about what kinds of goals members of an organization should pursue and ideas about the appropriate kinds or standards of behavior organizational members should use to achieve these goals. From organizational values develop organizational norms, guidelines, or expectations that prescribe appropriate kinds of behavior by employees in particular situations and control the behavior of organizational members towards one another. Types of Organizational cultures:Collaborate (Clan) Culture: An open and friendly place to work where people share a lot of themselves. It is like an extended family. Leaders are considered to be mentors or even parental figures. Group loyalty and sense of tradition are strong. There is an emphasis on the longterm benefits of human resources development and great importance is given to group cohesion.There is a strong concern for people. The organization places a premium on teamwork, participation, and consensus. Create (Adhocracy) Culture:A dynamic, entrepreneurial, and creative place to work. Innovation and risk-taking are embraced by employees and leaders. A commitment to experimentation and thinking differently are what unify the organization. They strive to be on the leading edge. The long-term emphasis is on growth and acquiring new resources. Success

means gaining unique and new products or services. Being an industry leader is important. Individual initiative and freedom are encouraged. Control (Hierarchy) Culture:A highly structured and formal place to work. Rules and procedures govern behavior. Leaders strive to be good coordinators and organizers who are efficiency-minded. Maintaining a smooth-running organization is most critical. Formal policies are what hold the group together. Stability, performance, and efficient operations are the longterm goals. Success means dependable delivery, smooth scheduling, and low cost. Management wants security and predictability. Compete (Market) Culture:A results-driven organization focused on job completion. People are competitive and goal-oriented. Leaders are demanding, hard-driving, and productive.The emphasis on winning unifies the organization. Reputation and success are common concerns. Long-term focus is on competitive action and achievement of measurable goals and targets. Sucess means market share and penetration. Competitive pricing and market leadership are important.

WHAT GOOD ARE THESE CATEGORIES? These organizational categories are helpful in that they provide a foundation upon which space planners can begin to structure their solutions and thus account for the important role that culture plays. Each of the different organization types has different cultural attributes and preferred methods and concerns for work. The means of assessing an organizations (company, group, or both) culture type using the OCAI is relatively simple given the potential complexity of a comprehensive investigation. How employees learn culture:Culture is transmitted to employees in a number of forms, the most potent being stories, rituals, material symbols and language. Some cases:

During the days when Henry Ford II was chairman of the Ford Motor Co., one would have been hard pressed to find a manager who hadnt heard the story about Mr. Ford reminding his executives, when they got too arrogant, that its my name thats on the building. The message was clear: Henry Ford II ran the company. Nike has a number of senior executives who spend much of their time serving as corporate story tellers. And the stories they tell are meant to convey what Nike is about. When they tell the story of how cofounder (and Oregon track coach) Bill Bower man went to his workshop and poured rubber into his wifes waffle iron to create a better running shoe, theyre talking about Nikes spirit of innovation. When new hires heard tales of Oregon running star Steve Prefontaines battles to make running a professional sport and to attain better performance equipment they learn of Nikes commitment in helping athletes. Stories such as these circulate through many organizations. They typically contain a narrative of events about the organizations founders, rule breaking, rags-to-riches successes, reduction in the workforce, relocation of employees, reactions to past mistakes, and organizational coping. These stories anchor the present in the past and provide explanations and legitimacy for current practices. Rituals: Rituals are repetitive sequences of activities that express and reinforce the key values of the organization what goals are most important which people are important, and which people are expendable. One of the better Known corporate rituals is Wal-Marts company chant. Begun by the companys founder, Sam Walton as a way to motivate and unite his workforce, Gimme a W, gimme and A gimme and L , gimme a squiggle, give me an M, A, R ,T ! has become a company ritual that bonds Wal-Mart workers and reinforces Sam Waltons belief in the importance of his employees to the companys success. Similar corporate chants are used by IBM, Ericsson, Novell, Deutsche Bank, and Pricewaterhouse coopers. Materials Symbols: The headquarters of Alcoa doesnt look like your typical head office operation. There are few individual offices even for senior executives. It is essentially made up of cubicles, common areas, and meeting rooms. This informal corporate headquarters conveys to employees that Alcoa values openness, equality, creativity and flexibility.

Some corporations provide their top executives with chauffeur-driven limousines and, when they travel by air, unlimited use of the corporate jet. Others may not get to ride in limousines to private jets but they might still get a car and air transportation paid for by the company. Only the car is a Chevrolet (with no driver) and the jet seat is in the economy section of a commercial airliner. The layout of corporate headquarters, the types of automobiles top executives are given, and the presence or absence of corporate aircraft are a few examples of materials symbols. Others included the size of offices, the elegance of furnishings executive perks, and attire. These materials symbols convey to employees who is important, the degree of egalitarianism desired by top management and the kinds of behavior (for example, risk taking, conservative, authoritarian, participative, individualistic, social) that are appropriate. Language: Many organizations and units within organizations use language as a way to identify members of culture or subculture. By learning this language, members attest their acceptance of the culture and, in so doing help to preserve it. The following are examples of terminology used by employees a Knight Ridder Information, a California based data redistributor: accession number (a number assigned to each individual record in a database); KWIC (a set of key words-in-context); and rational operator (searching a database for names or key terms in some order). If youre a new employee at Boeing you will find yourself learning a whole unique vocabulary of acronyms including: BOLD (Boeing online data). CATIA (computer graphics aided three dimensional interactive application), MAIDS (manufacturing assembly and installation data system). POP (purchased outside production) and SLO (service level objectives. An ethical culture should be a top priority of every business, large or small. The challenge for many organizations is trying to understand what it takes to build one. From an enforceable code of conduct, to ongoing training and communications, to an anonymous reporting hotline, companies can quickly implement ethics and compliance programs and solutions that foster an ethical culture across the enterprise. This page will outline how to build an ethical culture and identify the tools and best practices of companies that are doing it right. Building an ethical culture takes time, and while it is not as easy as flipping a switch, it is not as difficult as many companies may think. The benefits pay you back in the form of less fraud, less risk, less litigation and safer, happier employees. And happy employees make happy

customers, which will have an obvious impact on the bottom line. In many companies today, management is dealing with a hodge-podge of different personalities, belief systems, backgrounds, ethnicities and politic affiliations. These are just a few things that may impede creating a single unified system of ethics. While many may say that right and wrong is what should ultimately determine the culture, others will argue that what is right for the majority may not be right for the minority. Having an ethical culture is an important component to running an effective business today. In fact, with the current state of legal and industry regulations, from SarbanesOxley to HIPAA, not only is having an ethical culture a good idea, it is now practically a requirement. Developing an ethical culture will take more than creating a list of company dos and donts; although that list will help. It will take more than issuing a code of conduct via email to a new hire; although that too will help. What it will take is a combination of things. On this page, we focus on the top six steps that have the most effective and direct impact on establishing an ethical culture. The six steps are as follows:

1. 2. 3. 4. 5. 6.

Establish an enforceable code of conduct Initial and ongoing training Regular communications Anonymous reporting hotline Enforcement/Action Rewarding employees that live the culture Having an ethical culture is an important component to running an effective business today. In fact, with the current state of legal and industry regulations, from SarbanesOxley to HIPAA, not only is having an ethical culture a good idea, it is now practically a requirement. Of course to be able to get management, let alone employees, to support an ethical culture, there has to be benefits. Again, while there are a number of benefits of an ethical culture, we will focus on the following four because they are the most impactful:

1. 2. 3. 4.

Reduced risk Reduced fraud Reduced litigation Happier Employees = Improved bottom line Today, customers, partners and investors expect integrity, and making integrity the centerpiece of a business is always a good business decision. Fortunately, the investment in an ethical culture does pay dividends in a currency that all businesses can understand.

1. Establish an Enforceable Code of Conduct A code of conduct, often referred to as a code of ethics, is the foundation of any ethics program. The code of conduct should not be designed as a reaction to past missteps. An ethical culture is built upon the proactive efforts of the organization. The development of the code of conduct should be led by those at the top of the company, and should also include employees in the process. While ultimately, the tone of the program and the ability to enforce it will be determined by the actions and examples of the executives, when employees have a hand in the codes development, they become owners as well. Ethics code of conduct experts Lisa Stewart and Edwin Freeman said: Leaders see their constituents as not just followers, but rather as stakeholders striving to achieve that same common purpose, vision, and values. These follower and stakeholder constituents have their own individuality and autonomy, which must be respected to maintain a moral community. Ethical leaders embody the purpose, vision, and values of the organization and of the constituents, within an understanding of ethical ideals. They connect the goals of the organization with that of the internal employees and external stakeholders. The code must include guidelines for appropriate behavior in everything from marketing practices and finance policies, to the treatment of co-workers. Equally important are enforceable and clear consequences for inappropriate behavior. The code should also extend beyond internal behavior to external relationships with partners, customers and contractors. An ethical culture does not end at the entrance of the company, and all employees must buy into the program in order to build a successful culture. 2. Initial and Ongoing Training There is a phrase that has been used many times when it comes to training: The day we stop learning is the day we die. One of the most important aspects of developing an ethical culture is the ongoing training that companies can provide to executives and employees. The purpose of training is to help employees know what is expected of them and to help them understand that a strong ethical culture can protect the companys reputation and actually enhance profits. Employees need to know that their ethical or unethical choices will have a direct impact on the success or failure of the company. Ethical leaders embody the purpose, vision, and values of the organization and of the constituents, within an understanding of ethical ideals. They connect the goals of the organization with that of the internal employees and external stakeholders.

 Lisa Stewart and Edwin Freeman Ethics Code of Conduct Experts Berkshire would be more valuable to me today if I had put in a whistleblower line decades ago. Warren Buffett And because they were involved in the development of the code of ethics, they have skin in the game. Training begins once a person is hired and should continue throughout the life of the employee. Each training session should focus on a single concept to ensure that the message is understood. Examples of training may include confidentiality, protection and proper use of company assets, discrimination and harassment, use of email and Internet, and gifting policies. Training should be ongoing. The concept of tell them, tell them again, and then tell them what you told them, is extremely relevant when it comes to building a culture and will help to continually remind employees of important principles. In addition, training should also be tailored to specific positions in the company and employees roles. Management may need additional training to help deal with employee issues, while someone in purchasing may need more training on gifting policies and someone in finance needs to understand the companys position on fraud. Training should be available in multiple formats to ensure that it is available to everyone. Live workshops, on-line resources, or printed materials should be available to train all of those responsible for the success of the organization. 3. Regular Communications The Ethics Resource Centers (ERC) 2007 National Business Ethics Survey found that less than 40 percent of employees are aware of comprehensive ethics and compliance programs at their companies. Once the policy has been executed and training has started, communicating aspects about the code of conduct can have a significant impact on the ethical culture. Many of these communications come through the human resources department, but the voice of the executive management team is critical in these communications. While a corporate-wide newsletter can communicate ethics issues with a broad stroke, often communicating with employees on a more personal level may be more effective; whether directly to a specific department, to a project team or to an individual person that may have seen or experienced questionable behavior. The goal of communications is to make ethics a live, ongoing conversation. If ethics is something that is constantly addressed, referenced frequently in company meetings, and in personal conversations among managers and employees, then people are more aware and more willing to defend the companys policies when they see or hear of problems. Employees will hold other employees responsible and

accountable for living the companys values. 4. Anonymous Reporting Hotline The fact that an ethics hotline exists within many companies may be a surprise to their employees. The hotline number or Web site URL is often hidden in the back of an employee handbook or within the dusty binder labeled Corporate Governance. An anonymous hotline provides employees with a confidential way of reporting unethical or inappropriate behavior. Many people are not comfortable with reporting bad behavior for fear of being considered a snitch, possible repercussions if the guilty party learned of who reported him or her, or perhaps impacts on their job. While a corporate-wide newsletter can communicate ethics issues with a broad stroke, often communicating with employees on a more personal level may be more effective; whether directly to a specific department, to a project team or to an individual person that may have seen or experienced questionable behavior. Based on the most recent Association of Certified Fraud Examiners (ACFE) report to the nation, U.S. organizations lose an estimated 5 percent of annual revenues to fraud. Occupational fraud schemes can be very difficult to detect. The median length of the schemes in our study was 18 months from the time the fraud began until the time it was detected. Occupational frauds are more likely to be detected by a tip than by other means such as internal audits, external audits or internal controls. The importance of encouraging tips is evident in cases involving losses of $1 million or more. Forty-four percent of the million-dollar frauds in this study were detected by tips. This is more than twice the rate of detection by internal audits and three times the rate of detection by external audits. The ERCs 2007 National Business Ethics Survey found that over the past year, more than half (56 percent) of employees surveyed had personally observed violations of company ethics standards, policy or the law. Many saw multiple violations. Unfortunately, more than two of five employees (42 percent) who witnessed misconduct did not report it through any company channels. Others may want to report their concerns, but are not comfortable going directly to a manager or fellow employee. This is why the anonymous reporting hotline is so important. In its 2006 Report to the Nation on Fraud and Abuse, the Association of Certified Fraud Examiners concluded that Occupational frauds are more likely to be detected by a tip (34%) than by other means such as internal audits, external audits or internal controls. The importance of encouraging tips is evident in cases involving losses of $1 million or more. Forty-four percent of the million-dollar frauds in this study were detected by tips.

Because of new laws and industry regulations, and as ethics has become more and more important to businesses, the anonymous hotline or ethics hotline is finding its way out of obscurity. The hotline has become a valuable tool in helping to enforce codes of conduct and establish an ethical culture. 5. Enforcement/Action A code of conduct has to be enforceable, and a company needs to take action when problems arise. Employees should be part of the enforcement and know if and when it has been violated. While 42 percent of employees are reluctant to report unethical behavior, the good news is that the ERC study also found that the rate of misconduct is cut by three-fourths at companies with strong ethical cultures, and reporting is doubled at companies with comprehensive ethics programs. Unethical behavior can have a damaging effect on a variety of aspects of a business, from brand reputation to bottom-line revenues. WorldComs and Enrons names will forever be connected to accounting scandals that led to the Sarbanes-Oxley Act of 2002. Lockheed Martin was forced to pay $2.5 million for knowingly looking the other way on alleged racial discrimination. Arthur Anderson could never recover from its shredding scandal, while Madison Square Garden and the New York Knicks lost an $11.6 million lawsuit after a jury found that an employee had been frequently harassed in the workplace by Isiah Thomas. In addition, a recent scandal involving what the French Bank, Socit Gnrale, called a rogue trader, cost the bank more than $4.8 billion in unauthorized trades. The trader claimed the bank knew that large unauthorized trades were being made. The above examples are not uncommon. Violations of ethics policies can be expensive in more ways than one. Enforcing policies and taking action to protect the organization will help set a standard that will contribute to developing an ethical culture. Without enforcement, ethical guidelines listed in a corporate code of conduct are simply nice suggestions. A recent scandal involving what the Frank Bank, Socit Gnrale, called a rogue trader, cost the bank more than $4.8 billion in unauthorized trades. The trader claimed the bank knew that large unauthorized trades were being made. Violations of ethics policies can be expensive in more ways than one. 6. Rewarding Employees That Live the Culture The final step in developing an ethical culture is rewarding employees that behave ethically and live the culture that the organization is trying to instill companywide. With an ethics policy in place, ongoing training and communications, the ability to report unethical behavior and strict enforcement, an organization will have the structure in place that will leave little doubt the importance of ethical behavior.

Like a manufacturing company that brags about its safety record with signs indicating how many days without an accident, companies should publicly congratulate their employees for adhering to the code of conduct. That performance could be rewarded in terms of a bonus based on how much money the company saved by not having internal issues or having to fight legal battles over unethical business or accounting practices. If an employee completes ethics training, is responsible for blowing the whistle on questionable activities, or provides unique ways for protecting the companys confidential information, he or she should be recognized publicly by management. Employees need to know that creating an ethical culture is important to everyone from their direct managers to c-level executives. A 2007 study by the ERC asked employees of publicly traded companies to grade their companies using a scale of A through F on how well they do to encourage ethical conduct in the workplace. Only 35 percent of employees gave their companies an A while 32 percent ranked their employers a C, D or F. By recognizing and rewarding ethical behavior, companies can provide a tremendous incentive for employees to be an integral part of helping to enforce a code of conduct and establish an ethical culture. Benefits of an Ethical Culture The benefits of an ethical culture are real. Companies that emphasize the importance of an ethical culture are helping to protect the company and its employees from a number of challenges. Scandals can rip through a corporation, sending employee morale downward and once loyal employees to look for new jobs. Recent studies show that an overwhelming majority of people want to work for an ethical company, going as far as suggesting they would be willing to accept lower salaries as long as the company is ethical. Organizations today are under a lot more scrutiny from both industry and government regulations. A corporations culture can help to contribute to compliance and can also place the company in jeopardy of significant fines. Non-compliance with Sarbanes-Oxley for example, can result in a punishment of millions of dollars in fines and up to 10 years in prison for executives. Penalties could also include permanent delisting from stock exchanges and c-level executives being banned from being able to serve in similar offices elsewhere. According to a DePaul University study, Companies explicitly committed to an ethics code return shareholder value at twice the rate of other companies. A 2002 International Survey Research whitepaper titled Ethics and organizational culture: How corporate culture impacts stakeholder security reported that according to investment reports, 17 organizations known to be facing ethics crises had lost share price at four times the rate of the Dow Jones Industrial Average.

Companies explicitly committed to an ethics code return shareholder value at twice the rate of other companies. DePaul University Investment reports show that 17 organizations known to be facing ethics crises have lost share price at four times the rate of the Dow Jones Industrial Average. International Survey Research Companies that are committed to a code of ethics will enjoy the following four key benefits:

1. 1. Less Risk - With more focus on ethical behavior (i.e. following the six steps outline above), companies will not have to worry about falling out of compliance with Sarbanes-Oxley or violating HIPAA. Their culture will ensure that violations of the code of ethics are reported, and issues are identified and managed before they turn into major problems. 2. 2. Less Fraud - The United States is just emerging from the shadows of a tremendous season of highly publicized corporate fraud cases, yet as the most recent ACFE Report to the Nation reported, the loss due to fraud in the country is still $6 billion per year. With the appropriate code, enforcement and training in place, companies can help to deter fraud and stop it before it turns into major scandals. 3. 3. Less Litigation - We are in the most litigious era ever in the history of this country, and litigation is expensive. According to a survey by law firm Fulbright Jaworski, LLP, Companies worldwide spend an average of $15.8 million annually on all their legal work. More than two-thirds goes to litigation. Forty percent of those surveyed by Fulbright Jaworksi had one or more lawsuits filed against them in which $20 million or more was at stake. By creating an ethical culture, there will be fewer situations where issues or problems will lead to litigation. 4. 4. Happier Employees = Improved Bottom Line- Finally, research tells us that happier employees add to the bottom line. Happy employees are more productive, more loyal to the organization and are more invested personally in helping the company be successful. In fact, companies listed on Fortune magazines annual list of the 100 Best Companies to Work for in America between 1998 and 2005 showed an annual return of 14% per year, while the overall market showed a return of only 6% per year. Employees feelings toward the organization are reflected in how they treat customers. And if customers are happy, they will continue to do business with the company. In addition, loyal employees are more likely to stay longer and will also settle internal problems peacefully. The majority of employees want to work for an organization they know is ethical. Failing to create an ethical environment is likely to impact how employees feel about the organization. Their disappointment, frustration or angst toward the company will come across in their productivity and service to customers. And unhappy customers are not likely to continue to do business with a company that has unhappy employees. Conclusion An ethical culture should be a top priority of every business, large or small. Companies that follow the six steps outlined above, from establishing enforceable

code of conductto rewarding employees for helping to implement and enforce the code will find that their efforts also will be rewarded. Research has consistently proven that developing an ethical culture; one where employees are respected, corporate values are emphasized and management guides by example, leads to growth, innovation and higher profitability. Allegiance Ethics Training and Reporting Solutions can serve as critical components to developing and maintaining an ethical culture. Based upon 25 years of experience, the Allegiance ethics program is the only end-to-end ethics training and reporting solution on the market. Allegiance provides an extensive library of online and seminar training solutions and services; customizable ethics solutions and strategies based upon client need; and a suite of ethics reporting solutions featuring SilentWhistle, an anonymous web-based reporting system. Creating Innovative culture:-

I define innovation as an organizations ability to adapt and evolve repeatedly and rapidly to stay one step ahead of the competition. A culture of innovation, when done right, gives you a competitive edge because it makes you more nimble with an increased ability to sense and respond to change. A culture of innovation has less to do specifically with new products, new processes, or new ideas. There are of course discrete innovations such as the iPhone or a battery that is powered by viruses (MIT has developed this). These are valuable and necessary in order to create a culture of innovation. But a culture of innovation is more than new ideas. It needs to be repeatable, predictable, and sustainable. This only happens when you treat innovation like you treat all other capabilities in your business. This means having, amongst other things, a defined process. An organizations innovation process must achieve three things. It must: focus on the right challenges find appropriate solutions to those challenges, and implement the best solutions. These translate into three portfolios an organization must create: A portfolio of challenges A portfolio of solutions A portfolio of projects

Diversity of culture:

Organizational diversity is defined as the differences of age, value, gender, education, ethnic groups, culture expectation and working habits in an organization. Embracing diversity in organizational culture is allowing these tangible and intangible differences to be nurtured and become a part of the culture. Organizational culture evolves as new members are added to the mix. The term is most frequently referred to as corporate culture. But it could also apply to the differences in other organizational structures such as in a community volunteering group, a homeowner association or the parent-teacher association. Diversity Advocation Cultures with organizational strategies advocate diversity. Organizational missions, goals and policy also help set the tone of organizational culture and promote team synergy. When members accept that diversity is what is required to promote innovation and progression in an organization, resistance to change is minimized. Organizations that offer diversity plans for senior members to implement and practice in their day-to-day interactions also help further the effort. Shared common goals and the willingness to learn about the differences in cultural expectations can surpass cultural and language barriers. Diversity Mindset There are deeper dimensions to diversity than external traits. One is developing a global mind set. According to Dr. Stephen Rhinesmith, Senior Partner at Mercer Delta Executive Learning Center, there are six characteristic traits: Knowledge--striving to see the overall picture of an organization. Conceptualization-the idea to accept life as an equilibrium of contradictory forces. Flexibility--instead of insisting things go a certain way, trusting that the process will work itself out at the end. Removing judgment--be willing to accept ambiguity and changes as opportunities for growth. Reflection--improve yourself by identifying what needs to be changed for the better.

Cultural Expectations

Managing cultural expectations does not require that we change each other. It also does not judge whether one set of expectations and standards is more valid than another. Managing cultural expectation ask that one recognizes and respects the fact that there are differences among groups of different age, gender and culture. The goal is to achieve a mutually accepted method of communicating and collaborating within the same organization. Benefits

Obvious benefits are increased competitiveness, openness to new reactions and innovations through diverse viewpoints. The less subtle benefits can be found in organizational members' attitude. Members will become more flexible to different cultural perspectives. As organizations become more global, companies with a diverse group of members are naturally better equipped at addressing client needs of different cultural backgrounds. Organizational Environment:An organizations environment is composed of institutions or forces outside the organization that potentially affect the organizations performance. These typically include suppliers, customers, competitors, government regulatory agencies, public pressure and the like.

Types of environment: External environment Specific environment General environment

Organizations External Environment The external organization comprises of all the entities that exist outside its boundary, but have significant influence on its growth and survival. An organization has little or no control over its environment but needs to constantly monitor and adapt to these external changes, a proactive or reactive response leads to significantly different outcome. The Environmental Domain The domain consists of all the entities of the environment that interacts with the organization. Although the domain can be large, it is important to focus on the ones that have the highest significance. The common external factors that influence the organization are discussed below.

Competition: It comprises of the related industries with similar products or services, their geographic locations and markets. o Related Industries: It is important to know all the competitors, their organizational size and skills pool, their competitive advantages, their marketing strategies, offshore development etc. o Global context: Due to increasingly broad world economy, it is important to watch the competition across the oceans, competitive products launched from abroad, changing socio-political situations, and home grown entrepreneurs. Customers: They are the end-users of the product and services, the most critical aspect of the environment. o Preference changes: Customers likes and dislikes changes rapidly, people live in a tight social system that create and encourage trends. It is important to anticipate changes in users product requirements, emerging technologies that can change how the products are used etc. o Demographical changes: These include the social, economical and cultural changes like population age, ethnicity, education level and economic class. Such changes affect the customer preference and the mass market trends. Resources: An organization depends upon availability of certain external resources for its operations and productivity. o Skilled Workers: These include undergraduate students, related university courses, training schools and labor market. The availability of adequately skilled employees at various levels in the organization can change dramatically over the period of time. Once the demand for certain skill drops, so does the supply, in a long run it adversely affect the organization since it becomes hard to obtain highly skilled new workers. Similarly, as the competition grows, they compete for the same skill set in the market creating a high temporary demand. o Raw Materials: Every organization uses certain raw materials to manufacture its product or service, any disruption in its supply, changes in cost of materials etc can have an adverse effect. The raw material definition includes sub parts that are contracted to be manufactured by others, projects that are send overseas for production, the leased space the organization uses or the transportation of its goods.

Finance: It provides operational support; it includes savings or available cash, credit lines to fund new ventures, venture capitals, the stock markets and investors. It is particularly noteworthy in the organizations that operate on thin margins or new startups since they have little support to raise capitals. Technology: It includes the science and technology required for the production, the technical tools that are used in the manufacturing or the technology of the product itself in case of high-tech industry. Internet, social network, advances in semiconductors and communication technologies have revolutionized how organizations operate in current era. Laws and Regulations: All organizations have to abide by the legal system, new laws and regulations are constantly added due to the political or social changes. Compliance can result in additional cost, developing new technology, additional taxes or legal fees; one such example is lowered carbon emission requirements.
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Environmental Uncertainty The rate at which the external domain can possibly change defines the environmental uncertainty; put differently, its a measure of how many factors change during a single planning period. Not all factors impact the day to day operations and thus needs to be weighed differently. Higher level of uncertainty entails that organizational leaders have a complex environment to deal with, it test their visionary and decision making capability in absence of clear data. A framework of environmental uncertainty can be formulated by determining the complexity and stability of the environment.

Complexity of Environment: Its a measure of number of domain elements that influence the organizations operation. Not all domain factors might have considerable impact, one company might have very few competitors with little market share while another might be threatened by new players. Stability of Environment: It is the frequency at which the domain elements change and how predictable are the changes. Domain is considered to be stable if only few elements change in a predicable fashion. It is considered unstable if the domain elements are dynamic and shift abruptly, and it is hard to anticipate the changes. Competitors marketing strategies or alliances, price wars, sudden change in political climate are some unpredictable factors that add to the domains instability.

Organizations External Environment The external organization comprises of all the entities that exist outside its boundary, but have significant influence on its growth and survival. An organization has little or no control over its environment but needs to constantly monitor and adapt to these external changes, a proactive or reactive response leads to significantly different outcome. The Environmental Domain The domain consists of all the entities of the environment that interacts with the organization. Although the domain can be large, it is important to focus on the ones that have the highest significance. The common external factors that influence the organization are discussed below.

Competition: It comprises of the related industries with similar products or services, their geographic locations and markets. o Related Industries: It is important to know all the competitors, their organizational size and skills pool, their competitive advantages, their marketing strategies, offshore development etc. o Global context: Due to increasingly broad world economy, it is important to watch the competition across the oceans, competitive products launched from abroad, changing socio-political situations, and home grown entrepreneurs. Customers: They are the end-users of the product and services, the most critical aspect of the environment. o Preference changes: Customers likes and dislikes changes rapidly, people live in a tight social system that create and encourage trends. It is important to anticipate changes in users product requirements, emerging technologies that can change how the products are used etc. o Demographical changes: These include the social, economical and cultural changes like population age, ethnicity, education level and economic class. Such changes affect the customer preference and the mass market trends. Resources: An organization depends upon availability of certain external resources for its operations and productivity. o Skilled Workers: These include undergraduate students, related university courses, training schools and labor market. The availability of adequately skilled employees at various levels in the organization can change dramatically over the period of time. Once the demand for certain skill drops, so does the supply, in a long run it adversely affect the organization since it becomes hard to obtain highly skilled new workers. Similarly, as the competition grows, they compete for the same skill set in the market creating a high temporary demand. o Raw Materials: Every organization uses certain raw materials to manufacture its product or service, any disruption in its supply, changes in cost of materials etc can have an adverse effect. The raw material definition includes sub parts that are contracted to be manufactured by others, projects that are send overseas for production, the leased space the organization uses or the transportation of its goods.

Finance: It provides operational support; it includes savings or available cash, credit lines to fund new ventures, venture capitals, the stock markets and investors. It is particularly noteworthy in the organizations that operate on thin margins or new startups since they have little support to raise capitals. Technology: It includes the science and technology required for the production, the technical tools that are used in the manufacturing or the technology of the product itself in case of high-tech industry. Internet, social network, advances in semiconductors and communication technologies have revolutionized how organizations operate in current era. Laws and Regulations: All organizations have to abide by the legal system, new laws and regulations are constantly added due to the political or social changes. Compliance can result in additional cost, developing new technology, additional taxes or legal fees; one such example is lowered carbon emission requirements.
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Environmental Uncertainty The rate at which the external domain can possibly change defines the environmental uncertainty; put differently, its a measure of how many factors change during a single planning period. Not all factors impact the day to day operations and thus needs to be weighed differently. Higher level of uncertainty entails that organizational leaders have a complex environment to deal with, it test their visionary and decision making capability in absence of clear data. A framework of environmental uncertainty can be formulated by determining the complexity and stability of the environment. Complexity of Environment: Its a measure of number of domain elements that influence the organizations operation. Not all domain factors might have considerable impact, one company might have very few competitors with little market share while another might be threatened by new players. Stability of Environment: It is the frequency at which the domain elements change and how predictable are the changes. Domain is considered to be stable if only few elements change in a predicable fashion. It is considered unstable if the domain elements are dynamic and shift abruptly, and it is hard to anticipate the changes. Competitors marketing strategies or alliances, price wars, sudden change in political climate are some unpredictable factors that add to the domains instability. The Specific Environment:

The part of the environment that is directly relevant to the achievement of an organization's goals. External forces that have a direct impact on managers decisions and actions and are directly relevant to the achievements of an organizational goals fall in the category of specific environment. General environment:The general environment includes the broad economic , political / legal social cultural, demographical , technological and global conditions that effects an organization, although these external factors do not effect organization to the extent that changes in their specific environment

do, managers must consider them as they plan, organize, lead and control.