Chapter 2

The Changing Environment of Organizations

The changing environment of business presents both opportunities and

challenges for managers today.
Five important environmental forces:
1. Globalization
2. Diversity
3. Technology
4. Ethics and corporate governance
5. Employment relationships.

Diversity, equity, and inclusion are a major part of the changing environment of
business
Diversity
The variety of observable and unobservable similarities and differences among people
Equity
Is about creating fair access, opportunity, and advancement for all those different
people.
Inclusion
Is the extent to which all team members, employees, and other people feel valued and
a sense of belonging within a given organizational setting.

Types of Diversity
1.Surface-level diversity
Observable differences in people, including race, age, ethnicity, physical abilities,
physical characteristics, and gender
2. Deep-level diversity
Individual differences that cannot be seen directly, including goals, values,
personalities, decision-making styles, knowledge, skills, abilities, and attitudes
3. Intersectionality
Refers to the fact that all of us simultaneously belong to more than one demographic
category
Two prominent diversity researchers, David Harrison and Katherine Klein, have
identified three other types of within-group diversity that reflect different types of
deep-level diversity:
4. Separation diversity
Differences in position or opinion among group members reflecting disagreement or
opposition—dissimilarity in an attitude or value, for example, especially with regard to
group goals or processes ( a type of deep-level diversity)
5. Variety diversity
Differences in a certain type or category, including group members’ expertise,
knowledge, or functional background ( a type of deep-level diversity)
6. Disparity diversity
Differences in the concentration of valuable social assets or resources—including
dissimilarity in rank, pay, decision-making authority, or status (a type of deep-level
diversity)
Effective diversity management plays a key role in attracting and retaining
talent. By being as inclusive as possible organizations can attract, retain, and
capitalize on the abilities of high-talent people, regardless of their age, gender,
ethnicity, or religion.

Barriers to Inclusion:
The “like me” bias
People prefer to associate with others they perceive to be like themselves.
Stereotypes
A belief about an individual or a group based on the idea that everyone in a particular
group will behave the same way or have the same characteristics.
Prejudice
Outright bigotry or intolerance for other groups.
Perceived threat of loss
If some employees perceive a direct threat to their own career opportunities, they may
feel that they need to protect their own prospects by impeding diversity efforts.
Ethnocentrism
The belief that one’s own language, native country, and cultural rules and norms are
superior to all others.
Unequal access to organizational networks
Women and minorities are often excluded from organizational networks, which can be
important to job performance, mentoring opportunities, and being seen as a candidate
for promotion.

Globalization
The internationalization of business activities and the shift toward an integrated global
economy
Globalization is a major part of the changing environment of business. Fast
food businesses like KFC and McDonald’s, for example, have set up shop around
the world. Their challenge is to maintain the identity and appeal that led them to
become so recognizable while also adapting to customer tastes and workplace
practices in different countries.
Four major factors account for much of the growth in international trade:
1. Communication and transportation have improved dramatically over the past
several decades.
2. Businesses have expanded internationally to increase their markets.
3. More and more firms are moving into international markets to control cost,
especially to reduce labor cost.
4. Many organizational have become international in response to competition.

Cultural competence
The ability to interact effectively with people of different cultures
Four components of cultural competence:
1. Awareness of our own cultural worldview, and of our reactions to people who are
different
2. Our attitude toward cultural differences
3. Knowledge of different worldviews and cultural practices
4. Cross-cultural skills

Culture
The set of shared values, often taken for granted, that help people in a group,
organization, or society understand which actions are considered acceptable and which
are deemed unacceptable.
Geert Hofstede, a Dutch researcher, studied workers and managers in sixty
coun- tries and found that specific attitudes and behaviors differed significantly
because of the values and beliefs that characterized those countries

The two primary dimensions that Hofstede found are the individualism/
collectivism continuum and power distance:
Individualism
Exists to the extent that people in a culture define themselves primarily as individuals
rather than as part of one or more groups or organizations
Collectivism
Characterized by tight social frameworks in which people tend to base their identities
on the group or organization to which they belong
Collectivism tends to be a dominant cultural value in many Asian countries. As
a result, workers such as these have a tight social framework and closely identify
with their co-workers.
Power distance (also orientation to authority)
The extent to which people accept as normal an unequal distribution of power
Uncertainty avoidance (also preference for stability)
 The extent to which people feel threatened by unknown situations and prefer to be in
clear and unambiguous situations
Masculinity (also assertiveness or materialism)
The extent to which the dominant values in a society emphasize aggressiveness and
the acquisition of money and other possessions as opposed to concern for people,
relationships among people, and overall quality of life
Long-term values
Include focusing on the future, working on projects that have a distant payoff,
persistence, and thrift
Short-term values
More oriented toward the past and the present and include respect for traditions and
social obligations

Global perspective
A willingness to be open to and learn from the alternative systems and meanings of
other people and cultures, and a capacity to avoid assuming that people from
everywhere are the same

Technology
Refers to the methods used to create products, including both physical goods and
intangible services
Three specific areas of technology worth noting here are:
(1) the shift toward a service-based economy
(2) the growing use of technology for competitive advantage
(3) mushrooming change in information technology.

Manufacturing
A form of business that combines and transforms resources into tangible outcomes
that are then sold to others
Service organization
One that transforms resources into an intangible output and creates time or place
utility for its customers

Ethics
A person’s beliefs regarding what is right or wrong in a given situation

Specifically, most ethical dilemmas faced by managers relate to how the

organization treats its employees, how employees treat the organization, and how
employees and organizations treat other economic agents.
Corporate governance
Refers to the oversight of a public corporation by its board of directors
Corporate social responsibility
Businesses living and working together for the common good and valuing human
dignity
Corporate sustainability
When the social responsibility issues involve the creation of a “green” strategy intended
to protect the natural environment
Knowledge workers
Those employees who add value in an organization simply because of what they
know
Outsourcing
The practice of hiring other firms to do work previously performed by the organization
itself; when this work is moved overseas, it is often called offshoring
Offshoring
Outsourcing to workers in another country
Contingent worker
A person who works for an organization on something other than a permanent or
full-time basis ( example: independent contractors and permanent employees)
Psychological contract
A person’s set of expectations regarding what he or she will contribute to an
organization and what the organization, in return, will provide to the individual
A psychological contract is an unwritten agreement about expectations
between an organization and its employees.

The Psychological Contract

Contributions from the Individual Inducements from the Organization
Effort Pay
Ability → Job Security
Loyalty Benefits
Skills ← Career Opportunities
Time Status
Competencies Promotion Opportunities