Business External Environment and Internal Structure - Essay Example

 Business External Environment and Internal Structure With reference to research findings, consider whether an organisation's external environment has a direct causal influence on its internal structure or whether senior managers can have a significant mediating influence. Introduction Business today comes with many implications and various models of analysing the position of a business come with several factors which are directly concerned with the external environment a business is placed in. For instance, political, economic, sociological and even legal factors can influence how the internal structure of a company is created. At the same time, the management of the organisation can fight against the pressures coming from the external forces and this process acts as a mediating influence. This can be shown to be true with practical examples of various companies as well as the research done by business analysts. The simplest example of the external forces which can influence the internal structure is the culture of the country where the business operates. For instance, a multi-national company can have a very different structure amongst its various branch offices depending on the cultural requirements of various locations where it operates. As discussed by Bartlett & Ghoshal (1998), the differences between national and corporate cultures can even lead to conflicts between the way things are structured at a local office and the management directives coming from the home office. The home office often wishes to recreate the corporate structure followed at their location in a country where the national culture can be significantly at odds with the way the corporation is structured. Cultural Factors One such example is the case of GE’s position in Hungary where the local culture had structured the company based on the amount of time a person had served with the company. Since seniority became the basic premise of promotions, the Hungarian operation soon became bloated and could not match the expectations of GE’s head office in America (Welch, 2005). The external environment had affected the internal structure to the extent that operations managers from the home office had to step in and make changes to the present system in order to save the company’s base in Western Europe. GE’s culture is reportedly based on individuals and intrinsic motivation which helps its employees seek benefits for the company while they seek benefits for themselves. As outlined by Jack Welch in Winning (2005), GE rewards those employees who are instrumental in helping GE grow and achieve the corporate vision and punishes those who are not performing to the highest level. In fact, layoffs and quarterly removal of lowest performing employees is an essential part of the management style employed at GE. The influence of Senior Management The method used by GE to control the culture of their operations in Hungary was dependent upon the Hungarian acceptance of their corporate culture manual titled Integrity: The Sprit and Letter of Our Commitment. The initial results were disastrous to say the least since bad press, negative sentiments and resentment amongst the employees was created once GE’s creed was being established in the company. However, GE persisted and the senior management worked towards making sure that the internal structure of the firm could be changed with several tools. The first was to change the Hungarian operations from the domestic to regional and global levels which significantly changed the culture when the employees realized they were competing in a world market. The location and availability of labour can also be expected to have played a role here since the Hungarian labour market is closer to the western countries it is supposed to cater for rather than the Russian bloc or the Asian markets where GE’s products might be seen as too expensive. The second method used by the senior management was to simply get rid of all employees who were forcing the previous structure and could not handle the new situation that GE wanted to create. GE had a mission to change the internal structure of the company and get ride of the external influences and was willing to whatever it took to get there. Welch (2005) reports that, “We publicly rewarded those who drove the mission and let go of people who couldn’t deal with it for whatever reason (Welch, 2005, Pg. 16)”. It seems that in spite of what the cultural influences or environmental factors may demand of the internal structure of the company, the final word does rest with people who are responsible for hiring and firing the employees. Legal Factors However, there are some cases in which the company’s senior management may be legally required to follow the external requirements for its internal structure. Diversity requirements and equal opportunity laws around the world can certainly have an influence on how a company is structured internally and instead of being an external hindrance; the requirements for diversity can actually be an advantage to a company. Given the times that we live in, diversity can no longer be considered only a part of the legal requirements for running a business (Daniels & Macdonald, 2005). Anti-discrimination compliance laws might have been important at a time when civil rights and racial equality were being demanded but today diversity is a business practice which has a direct effect on the bottom line of a company. Lockwood (2005) considers diversity as an evolutionary process that comes with time. As evolution takes its own path with various organisms, companies also have to take their own steps in getting to a higher state of diversity. It is difficult to give any specific pointers that fit all companies since different companies can be in different stages of development regarding workplace diversity. Lockwood cites the landmark study, Workforce 2020, and mentions several factors in the study which have influenced the workforce and internal structures of many different companies in present times. These factors include the process of globalisation, technological developments, a need for specialists in a given system, individuals staying on to work beyond their retirement age and the process of immigration as well as outsourcing which create changes in the internal structure of the company. Lockwood (2005) also suggests that these are not changes which should be fought against since it does not make sense to simply fight a change because it will make us do things differently. Changes must be evaluated for their costs and their benefits before a decision is made to allow or prevent a change from coming. Perhaps the most convincing arguments towards the financial reasons for having diversity are offered by Brown (2005). His focus is on the nature of changes which bring a company closer to the ground realties of the world around them. He writes about the Mortgage Bankers Association (MBA) which decided to increase the diversity levels of the company clients with various strategies. This American company caters to new home buyers who are investing in a house through the process of getting a mortgage. The company quickly discovered out that attracting diverse clients requires diverse leadership and a diverse workforce as well. Simply targeting minorities in advertisements and billboards is no longer a guarantee for a diverse clientele. The president of MBA is reported to have said that diversity is not merely about connecting with a new customer market, it is a requirement for survival in the upcoming markets. Brown (2005) acknowledges that diversity programs and initiatives often fail because if used incorrectly, they can potentially waste time, money and other resources for the company. For diversity management, the senior members of the company must realize that merely taking a few women or a minority group member as a part of the decision makers or giving them senior positions within the company is not the ideal process for creating diversity. The successful approach for diversity management would be to hold management answerable for results connected with diversity related issues (Kirton & Greene, 2005). Additionally, senior management must set up clear execution and reporting structures to get middle managers and workers to accept the process (Schuller, 2005). In the past, big business used to be the domain of the male gender. Thankfully, it seems that the situation has certainly changed because even a quick examination for the Fortune 500 list will show that in 2003, women held 14% of board seats (while they had a scan 10% representation in 1995). Furthermore, one in ten companies had 25% or more women on the executive boards. Structural changes due to outside influences in board composition are also occurring at the international level, as global organizations expand the cultural and ethnic diversity of their boards by continually adding board members who have expertise in international businesses or are based in other localities or regions (Lockwood, 2005). Of course these internal structural changes have the blessing of senior management but it is also true that the corporate culture, as suggested by Sherman (1996), is simply a reflection of the society in which it operates and as long as we have racial or gender conflicts in society we can expect problems with diversity in the British workforce. Instead of simply ignoring the issues that a company might have with the gender, race and cultural differences between the employees, the companies must accept that there are issues which need to be resolved and the senior management has to play a role in bringing about the change it wishes to see in the company (Kirton & Greene, 2005). Additionally, a company must also acknowledge the general concept of diversity and they must create their own concept of diversity depending on the company situation and needs (Lockwood, 2005). The leaders of the company can certainly play their part by clarifying to the HR department the nature of diversity they are seeking and the nature of inclusion the company is looking for in terms of staff and their backgrounds. A company should concentrate on certain aspects of diversity at various points of growth and shift their focus once they have enlarged the workforce to a suitable size (Schuller, 2005). In this manner, the present internal structure of the company can affect the future structure of the company as it develops and grows with outside influences. Conclusion In the future it is very likely that changes in the demands made by society will cause changes to come to how a company is governed and how it is operated by individuals managing it. Already, things such as corporate social responsibility requirements and the increased focus on ethics have made various companies publish their ethics reports and even create board positions or entire departments for corporate social responsibility (Adams, 2004). Clearly, the external environment does play a significant part in the process by which the internal structure of the company is formed and as more and more requirements are placed by governments, regulatory bodies or even the customers themselves, changes to the internal structure will continue to be observed. At the same time, the changes can be mitigated, accepted and even used for the profitable operations of the company if the senior management and board members are pragmatic enough to understand how it can be done. It remains up to the managers of the future to help that cause and to understand the needs of future businesses. Word Count: 2, 031 Works Cited Adams, C. 2004, ‘The ethical, social and environmental reporting-portrayal gap’, Accounting, Auditing and Accountability Journal, 17 (5), pp.731-757. Bartlett, C. & Ghoshal, S. 1998, Managing Across Borders: The Transnational Solution to Managing Across Borders, 2nd ed. Hutchinson. Brown, R. V. (2005). The ROI of Diversity. Mortgage Banking. 65 (12), Pg. 111-113. Daniels, K. and Macdonald, L. 2005, Promoting Equality: challenging discrimination and oppression in human services, McMillan. Kirton, G and Greene, A. 2005, The Dynamics of Managing Diversity – A Critical Approach, Butterworth Heinemann. Lockwood, N. R. 2005, ‘Workplace Diversity: Leveraging the Power of Difference for Competitive Advantage’, HR Magazine, 50 (6), Pg. 1-14. Schuller, S. (2005). Develop diversity culture through a sequential process. Journal of Hotel and Motel Management. 220 (14), Pg. 13-14. Sherman, J. 1996, ‘Development and Mental Representations of Stereotypes’, Journal of Personality and Social Psychology, 70 (6), Pg. 1126-41. Welch, J. 2005, Winning. HarperCollins. Read More