Main Contribution of Environmental Determinist Theories - Coursework Example

Introduction Early management theories show that the outcomes of an organization are as a result of the rational decisions made by the managers. There are different organizational theories that have been developed which argue that organizational performance is mainly determined by the environment (Child 1972). The purpose of this paper is to illustrate how the environmental factors influence organizational action that lead to its performance. It focuses on different theories, some of which emphasize on the organizational actions aimed at adapting to the environmental factors while some that emphasize on the influence of the environment on the organizational decision (Bourgeois 1984). The theories that have the adaptive component include contingency theory and resource dependency theory. Examples of theories with unintended environmental enactment component include population ecology theory and institutional theory. This paper identifies and discusses the major contributions of these environmental determinist theories and the way they are applied by managers to determine strategic actions. Contingency theory of management focuses on different organizational contingencies and various organizational characteristics (Donaldson 1987). These contingencies (both internal factors such as organization size, strategy and technology, and external factors i.e. the environment) influence the organizational structure. The size of the organization determines if the organization performs better with a bureaucratic or a non- bureaucratic structure i.e. small organizations works better with a simple structure while large organizations works better with a greater degree of bureaucratization. The predictability and certainty of the environment determines the structure of the organization. For instance, stable organizational environments enhance a mechanistic structure which lays emphasis on centralization, specialization, formalization and standardization in order to achieve consistency and efficiency. While, unstable environments suggest an organic structure that emphasizes on decentralization in order to achieve adaptability and flexibility. This structure is better suited in uncertain and volatile environments. It has been noted that those organizations that have high performance in uncertain environments have high levels of both differentiation and integration (Michael and Linda 1989); unlike those that perform well in less uncertain environments which have lower levels of both differentiation and integration. Contingency theory illustrates that there is no best structure which can fit an organization at under any circumstances but rather proposes the most appropriate structure under which the set of conditions lies (Pennings 1987). Thus, effective planning control and organization should focus to particular circumstances whish an organization takes. Another organization theory that espouses an adaptationist view of organization is resource dependency theory (RDT). RDT holds that organizations have varied dependence on the external environment, especially in the resources they require in their operations. According to Bernard (2005), the external control of the resources interferes with the achievement of organizational goals and reduces the managerial discretion. This raises issues in the organizational dependency and acquisition of resources. Thus, the management should direct its decisions in managing the external dependency for it to stay advantaged. This perspective illustrates the management of the increasing dependency through the adaptation to the external demands or even avoiding them. The organization should therefore: “alter its organizational interdependence” though the creation of merger, integration and diversification; establish collaborative selective structures to form a “negotiated environment”; and use legal, political and social action by forming a “created environment” (Elaine and Michael 1986). A firm should control its resources in order to achieve effectiveness through the creation of acceptable outcomes and actions. This competitive environment should be effectively managed to achieve a superior financial performance. This organizational perspective is concerned with withholding or contribution of the important resources in managing the dependencies and uncertainties in the competitive environment. In acquiring and maintaining external resources, an organization is viewed as being dependent on others. RDT also suggests that organizations alter the interdependence relationship by reducing their dependency and increasing the number of organizations that depend on them. In contingency theory, the contingencies determine the structure of an organization. An organization tends to adopt new structures which fit the new level of contingency factors in order to achieve high performance. However, this determination has been criticized by authors who assert that organizational change is due to the free choice of the managers (Whittington 1969) cited in (Donaldson1996). Child (1972) has a moderate position that there is a substantial degree of choice in what he terms as “strategic choice”. He argues that the choice by the managers vary depending on how they respond to the contingencies according to their implicit theories and perceptions. Again, if an organization becomes misfit, then there is need for restoring its fit by altering the contingencies and retaining the structure. Thus, the managers should exercise some degree of choice for the management and adaptation to the new environment. Critics of the contingency theory argue that for an organization to be profitable, it should alter its environment rather than making structural alterations. The contingency theory is said to be static in providing a framework for organizational design. However, there are structural changes to the contingencies such as diversification and the size of the organization and to the environment that shapes them. Neither the ‘strategic choice’ nor the ‘contingency determinism’ theories of structural change is completely adequate. A more fruitful model that focuses on both strategy and structure (structural adoption to regain fit, SARFIT,) is proposed. According to Donaldson (1987), SARFIT is a model that provides a theory of organizational change through the formulation of structural adaptation. This cycle of adaptation holds that organizations are capable of changing their structures, practices and procedures so as to adapt to the pressures and requirements of their environment and improve their performance. The SARFIT model illustrates that organizations that are initially fit change their contingencies hence moving to a misfit situation that result into a decline in their performance. This calls for an adaptive change whereby the organization adopts new structure which restores the performance of the organization hence regaining fit. The structural changes due to changes in contingencies are triggered by the effect of feedback from the low performance that is caused by misfit (Donaldson 1996). This is a deterministic model whereby the structure of the organization is determined by the changes in contingencies. The contemporary organization theories hold that organizational performance is determined by the environment. They view the environment as the one responsible for the determination of growth of new organizations and development of organizational change (Hannan & Freeman 1989). Population ecology perspective draws a Darwinist view: “survival of the fittest”. Organizational survival is equated to the competition for the essential resources. The organizations that are fit gain control over resources allowing them to grow and flourish while those that are unfit are “selected out” by the environment. In population ecology, those constraints that maintain the survival of an organization form its central concept and are very crucial. According to McKinley (1991), the environments “select” the organizations that survive and those that are eliminated based on certain set of organizational attributes which characterizes organization at their birth and determines whether they are fit under the environmental conditions. In population ecology, the organizational change is not illustrated through adaptation process but rather through a selection process. The general conclusion drawn from this perspective is that managers do not play a role in shaping the organizational strategy. According to Hannan and Freeman (1984), the population ecology involves the study of dynamic changes in a particular set of organizations. The population ecologists use population as their level of analysis by statistically examining the birth of organizations as well as the mortalities over a period of time. Hannan and Freeman believe that the organizational change within the population is due to selection process. They say that most organizations have structural inertia which deters adaptation when an environmental change occurs. The firms that are incompatible to the new environment get replaced through competition from new firms that meets their external demands. The population ecology analysis ascribes to an evolutionary outlook of an organizational change. The three levels of population ecology show that new organizations arise from existing or previous organizations and this change is a slow but a continual process. The population ecology draws the expectation of relating between the density and mortality rates of organizations and that between density and founding rates of the organizations. These expectations have been derived from the following building blocks, or assumptions (Elaine and Michael 1986). Firstly, it assumes that organizations build up routines that ensure accountability and reliability. The second assumption is that, the accountability and reliability of the organization require structures that are highly reproducible. Thirdly, organizational inertia, a consequence of selection, is caused by the reproduction of almost similar routines. The final assumption is that the organizational environment selects those organizations with a high inertia. Considering the first expectation, mortality rate reduces with an increase in legitimacy. In the second expectation, the founding rate is determined by the legitimacy. If the legitimacy is low, then the founding rate is also low meaning that, when competition if fierce due to increase in the organizational density, the niche becomes less attractive for the development of new organizations. According to Zucker (19870, institutional theories provide a view that normative pressure, which sometimes arise from external sources, influence organizations management. The institutional theory has a view that an organization’s environment is a location with institutional rules that determines and defines good management. These rules have an environmental deterministic influence on the structure of the organization. Thus, organizations design their structures in order to follow the set of rules which are embedded in the organizational environment. The conformity to the rules results into the production of legitimacy and the enhancement of survival chances for the organization. Institutional theory focuses on moving towards an isomorphic institutional environment. DiMaggio and Powell (1991) have discussed the assumption of institutional theory that organizations, through institutional forces, become increasingly similar. They also focus on maintaining institutional norms through mimetic, coercive, and normative processes. They ignore how organizations change as well as the organizational diversity. Indeed, this theoretical perspective has little to say about why and how the institutional norms change (Powell 1991). Clearly, institutional norms and organization change over time but it fails to answer the questions as to where the impetus for change come from and in what ways the organizations respond to these pressures of change. The theory discusses on the effect of isomorphism that is demonstrated in organizational performance. Diversification is crucial in changing of institutional norms. Thus, an organization that deviates from such norms is not constrained to the institutional results. It posits that elaboration of the rules to which the individual organization conform characterizes the organizations environment. The organizational processes and structures are institutionally derived: that even in competitive environment, the driving force cannot be efficiency. In the understanding of the organizational action we learn that both the strategic choice and environmental determinism exist independently and develop an organizational adaptation (Hrebiniak and Joyce 1985). The interaction between the variables results into the following types of organizational actions. First, it leads to selection where there is minimum adaption and choice. Secondly, there is differentiation with high environmental determinism and high choices made leading to the adaptation to the constraints. Thirdly, it leads to strategic choice, with adaptation by design and maximum choice. Finally, it leads to undifferentiated choice with adaptation by chance and incremental choice. In conclusion, strategic choice highlights that the effectiveness of the adaptation depends on the perceptions of its decisions and environmental conditions. Later developments in organization theories show that the organizational theories depend mainly on the environmental factors rather than the rational decisions made by the management. These environmental deterministic theories explain how organizational performance arises due to the influence of the environment. 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