The Macro environment–Process Relationship

The macro environment factors reflect major trends and conditions outside the organisation and tend to be beyond a single organisation’s ability to affect or alter directly, at least in the short term (Bartol et al. 2001:65). However, such trends affect the functioning of organisations and therefore need to be considered, although their impact may not necessarily be very clear (Robbins & Barnwell 1998:190).

The political-legal climate refers to legal and governmental systems within which an organisation functions. Trends in legislation, court decisions, politics and government regulation are important political-legal environment aspects. Political processes also influence the legal system. Political issues may result in government regulation on various areas (Bartol et al. 2001:67).

The economic climate involves systems of wealth production, distribution and consumption – these could be capitalist or socialist economic systems. Countries generally have hybrid economies with an emphasis on either one. Thus, for organisations operating in a variety of countries, they face a range of economic ground rules. Within any economic system however, organisations are influenced by economic factors over which they have little control, such as inflation and recessions (Bartol et al. 2001:66). Not-for-profit organisations for example, find a greater demand for their services during economic decline but receive fewer contributions. They must adapt to these changes in economic conditions (Daft 1997:78).

The sociocultural climate represents the attitudes, values, norms, beliefs, behaviours and associated demographic characteristics of the population within which the organisation operates (Bartol et al. 2001:68; Daft 1997:78). Multinational organisations are particularly faced with the problem of sociocultural differences between countries. They need to be aware of these differences as well as changing trends in order to remain effective in delivering their services and products (Bartol et al. 2001:68).

At another level Bedeian (1993:73) views the social environment of an organisation as the societal views regarding an organisation’s behaviour – that is, whether the organisation is pursuing socially acceptable goals in a socially acceptable manner. In order for an organisation to survive, the society has to perceive it as legitimate and worthy of support. This facilitates the organisation’s ability to acquire resources and deflects questions about its right to provide, competency in providing, and effects of its goods and services on the social structure of the community.

The technological climate includes scientific and technological advancements in the production of goods and services (Daft 1997:77). Technology is of particular importance because it has been and continues to be the main source of increases in productivity, which means it can either provide a competitive advantage to organisations that can use it effectively, or pose a threat to those that lack it (Bedeian 1993:74). To remain competitive therefore, organisations need to understand current technology developments affecting their ability to offer desirable products and services (Bartol et al. 2001:65).

The international element includes changes in countries other than the organisation’s home country with potential to influence the organisation, as well as the opportunities presented by these foreign countries (Bartol et al. 2001:68; Daft 1997:76). The international environment provides new competitors, customers and suppliers, as well as shapes social, technological and economic trends. It also represents an ever-changing and uneven playing field compared to the domestic environment, pushing organisational managers to learn new rules to cope with goods, services and ideas circulating around the globe (Daft 1997:77).

The difficulty in interpreting and responding to the macro environment is that first, organisations are influenced by multiple ideologies represented by the different environmental factors (McKenna 1999:98). Non-governmental organisations while having altruistic (social) values, for example, may find that other ideologies, especially the economic and political inevitably influence their behaviour, because of their interactions (and interdependence) with these

ideologies. Managing an organisation therefore requires not just an understanding of the dominant ideology relating to that organisation, but of others as well (McKenna 1999).

Second, the effect of the macro environment on the organisation is considered remote and sometimes not clearly understood. However, it is a very real one. Organisations that have traditionally focused on the domestic environment need to develop a broader view, if not in their production and delivery of goods and services, at least in their thinking and planning (Turner & Hulme 1997).

2.3.1.2 The Task environment-Process Relationship

As described earlier, the task environment includes those sectors that have a direct working relationship with an organisation. As shown in Figure 2.1, the task environment is important to any organisation for two reasons:

• The results of an organisation are always to the task environment – the end- users of a product or service are ‘out there’. For an organisation to survive, it must meet the needs and expectations of these groups, and do so competitively (Hammer & Champy 2001:21; Nickols 1998:18).

• The resource base for the organisation is also ‘out there’ in this environment. Resources are gathered from the environment, and results are sent back to the environment. Nickols (1998:15) refers to this environment-organisation interdependence as a transactional relationship.

Such a view of the task environment as a component of organisation processes is of great strategic importance as it helps organisations to position themselves well to respond to changing contexts, through identification of drivers for change. In other words, it is important to articulate the wider organisational contexts of which critical processes are a part, and then adopt a holistic approach to process design (Edwards, C. et al. 2000:30; Short & Venkatraman 1992:19).

According to Bedeian and Zammuto (1991), Daft (1995) and McKenna (1999), the environment influences an organisation’s survival by the degree to which the organisation is successfully able to:

• Acquire scarce and valuable resources from its environment, transform them and discharge outputs to the environment;

• Perceive and correctly interpret the properties of the environment;

• Respond to changes in the environment either by adjusting the

organisation’s capacities to suit those changes or manipulating the environment to meet organisational objectives. To these two responses McKenna (1999:95-96) adds a third response – shifting the domain away from threatening elements and towards a more favourable location.

Starbuck (1976, cited in Weick 1995:163) also observes that organisations play an active role in manipulating and shaping their environments by (1) seeking environments that are sparsely inhabited by competitors; (2) defining their products and outputs in ways that emphasise distinctions between themselves and their competitors; and (3) relying on their own experience to infer environmental possibilities.

However, as noted by Braganza and Lambert (2000:177), the fact that managers need to create organisations that can react quickly to environment changes or even manipulate their environment is not a new challenge. However, what is new is that changes in the future may be in directions that are hardly conceivable today. Changes brought about by globalisation strategies, knowledge management and information and communications technology, have created a situation in which traditional governance mechanisms that are intended to integrate the variety and range of organisational activities are insufficient (Prahalad & Oosterveld 1999:32).

Managers therefore have the task of creating a new framework for adapting to external pressures while, at the same time ensuring the organisation retains a sense of integrity at strategic and operational levels. This new framework involves governance at the level of business processes as this enables

organisations to be managed in ways that enable changes, identified either for strategic purposes or in response to an environmental shift, to be effected quickly and appropriately (Braganza & Lambert 2000:177-178).

Hammer and Champy (2001:20) in their analysis of the environmental factors affecting organisations note that in today’s environment, nothing is constant or predictable—not market growth, end-user demand, product life cycles, the rate of technological change or the nature of competition. Three forces, separately and in combination, are driving today’s organisations deeper and deeper into a territory that most of their executives and managers find frighteningly unfamiliar—Customers, Competition and Change. They assert that a task- oriented organisation of jobs in this new environment is obsolete. Task- orientation produces organisations that are unresponsive to the current large changes in the external environment. Organisations must organise work around process.

Dunham and Pierce (1989) in their studies on management systems of organisations concluded that to be successful, an organisation must obtain the best possible fit between the environment and its management system—its strategy, structure and processes.

The main challenge presented by the environment-process link, however, is the interpretation and operationalisation of environmental changes into viable responses. Different organisations will be affected differently by the same environment, and thereby respond differently (Daft 1995; McKenna 1999; Noda & Bower 1996). They will also have different levels of resources that they can adequately channel towards redesigning their processes. Questions of feasibility and impact of redesigning process, on both the organisation and its environment will ultimately determine an organisation’s response (Davenport 1993:31).

In spite of the challenges, an appropriate response to the environment represents a significant part of an organisation’s survival and success. Organisations need to increase their attention to developing viable processes

that can improve their chances of adapting to changing situations (Brinckerhoff 1998; Fernsler 1999; Villacorta 1997).

With reference to nonprofits, Venden-Berk (1999:38) urges them to be opportunist organisations, that is, organisations that have the fundamentals so solidly in place that they can respond almost instantly and effectively to challenges and opportunities in their environment. Turner and Hulme (1997:24) suggest that, managers at all levels of nonprofit organisations, who have a good appreciation of the environment and express that in their decisions and actions, have a far greater chance of success than those who choose to underestimate or ignore the significance of the environment.

2.3.1.3 The Stakeholder-Process Relationship

Another way to view the task environment is to view it as the group of external stakeholders important for an organisation. As shown in Figure 2.1, the task environment for NGDOs consists of these stakeholders (donors, target beneficiaries, partner agencies, government and other NGDOs). Their significance in the process-based perspective requires that they be given special attention.

Bryson (1999:5) defines a stakeholder as ‘any person, group or organisation that can place a claim on an organisation’s attention, resources or output, or is affected by that output.’ Thus, while the task environment may be viewed as supplying resources to the organisation, the stakeholders are individuals or institutions who have an interest, and who affect and/or are affected by the outputs of that organisation.

Processes aim at adding value to stakeholders of an organisation. Processes represent the linking and coordination of those activities that organisations should undertake to address stakeholder expectations. In other words, activities constitute a process when linked explicitly to stakeholder expectations (Braganza & Lambert 2000:179; Cook 1996:2; Nickols 1998:16).

Processes are thus derived from stakeholder expectations. This means that when an expectation of a stakeholder changes, the process that meets that expectation needs to adapt accordingly (Braganza & Lambert 2000:182). A key function of stakeholders is therefore to provide information for the organisation’s processes. Information should be gathered from the most important stakeholder—the existing and potential end-users of an organisation’s outputs. In fact taking a process approach implies adopting an end-user’s point of view (Davenport 1993; Hammer & Champy 2001).

In the illustration below, Fowler (1997) suggests that in order for organisations to get their processes right, they need to focus on the impact they want to make on the end-users.

Box 2.1

NGDOs – What do we need to be doing to get to where we want to be? A training non-governmental development organisation (NGDO) was established to improve the efficiency of other organisations through knowledge and skill-based training courses. In a short time, it established a reputation for bringing substantial improvements, and took pride in the fact that it always completed its yearly plan of activities. In addition, more and more costs were being covered through the fees charged. Boards, clients and donors were all positive about its work and viewed it as an example of an efficient, productive organisation.

It was therefore very surprising to hear the head of training ask, “Why do we train organisations to be more efficient? What difference do we want to make? What are we trying to achieve?” It was evident that it was not enough that the organisation was meeting its strategic goals and yearly plans, but rather that it made a difference in the community being served. This was because training was only a single and a short-term means of achieving a greater goal. Ultimately, the aim was to improve the management and service delivery functions of their trainees, so that they in turn could

effectively make a difference in the lives of the communities that they were serving. If the training NGDO was not conscious of this ultimate goal, its training activities would either become obsolete, or simply inadequate to address the needs to their trainees, making the success of the NGDO very short-lived indeed.

In other words, the training NGDO could only adequately assess its effectiveness by assessing the value of its training on a broader political, economic and social position of the local communities. This implies that organisations should not be assessing their performance on how well they function within their strategic plans, but on their ability to satisfy end-user needs and expectations, both in the short and long term. Instead of setting targets for the number of training courses to be run, for example, there is need for deeper interaction with different categories of target groups to determine the long-term effects of an organisation’s work.

The issues they need to be addressing are:

• What ultimate difference they want to make;

• What activities will contribute to making that difference; and most

importantly,

• How they need to carry out the activities so as to contribute to making that difference.

(Source: Adapted from Fowler 1997:178-179)

The stakeholder-process link presents obvious problems for process definition and design. Any and all aspects of processes would be viewed in terms of self- interest by each of the stakeholders. They have different expectations and views on priorities, which suggests there would probably be a conflict in demands as to how processes ought to be defined and designed (Hudson 1999:49). And as process boundaries can be set anywhere the organisation chooses (Nickols 1998:18), the result might be that the organisation has to prioritise and choose processes that benefit the most influential stakeholder(s).

Inevitably, the organisation is likely to benefit some stakeholders more than others, giving rise to the satisfaction of some and the dissatisfaction of others (Bedeian & Zammuto 1991:69; Fowler 1997:174). Decisions over prioritising of stakeholders, or which processes to give most emphasis to, often manifest themselves in unhealthy internal organisational conflicts over allocation of resources (Braganza & Lambert 2000:181).

Prioritisation of stakeholder expectations is therefore a challenging task because it results in the dissatisfaction of some stakeholders, and also internal organisational conflicts. The alternative is to attempt to satisfy the expectations of all stakeholders. The likely outcome of such an approach would be that scarce resources would be over-stretched, resulting in all stakeholders being poorly satisfied (Braganza & Lambert 2000).

In spite of the complexity in stakeholder satisfaction, Daft (1995) argues that the management and survival of an organisation is a complex, multi-dimensional concept. Research studies have shown that an assessment of the satisfaction of multiple stakeholders groups is an accurate reflection that the organisation is engaging in effective processes (Tsui 1990).

Organisations do care about their reputation, and do attempt to share in stakeholders’ view of what the organisation should be doing and how. If an organisation is not meeting the expectations of several interest groups, it probably should not exist at all (Fombrun & Shanley 1990).

Hudson (1999:171-172) and Fowler (1997:172-174) note that for nonprofit organisations, stakeholder satisfaction is at the top of their list of priorities because they determine the organisation’s financial bottom-line. For various stakeholders to continue supporting an organisation, they need to have sufficient reason to do so. In an environment of a set of complex political, economic and legal considerations, an organisation hoping to survive must take into account all stakeholders who either affect, or are affected by the organisation’s strategies (Perrott 1999:225). Perrott (1999:225-228) and Hudson (1999:49), however, appreciate the fact that similar issues affect

stakeholders differently. As such, managers need to constantly assess stakeholder significance in the light of each issue, in order to guide the amount of time and resources allocated to them. Assessing stakeholder significance using some meaningful criteria also assists in better management of their needs and expectations.

The next section discusses the internal environment of the organisation and examines two components that are significant to the process perspective – organisational strategy and structure.