Influence of Non-economic Environments on Management Effectiveness - Essay Example

Non-economic environments on Management Introduction One of the most important issues when designing a business strategy is the location and the evaluation of the factors that could influence the operation and the performance of the business. The level of this interaction is higher in accordance with the importance and the general role of these factors in business daily activities. The most usual result of such an influence is the alteration of the organization’s management in order to eliminate possible negative results, which are more likely to follow an unexpected turbulence in the area of these factors, and is less possible to take place in organizations the strategy of which is flexible and includes specific provisions for such situations. We should notice here that the nature of the factors that can ‘interact’ with a firm’s management can vary in accordance with the following variables: the type of business activities, the country where the firm operates, the political and natural environment and the culture/ knowledge/ ethnicity of the employees but also of the employer. Moreover, these factors can be related to financial data or to other elements of non-economic character, like the physical environment, the human resources and the market (referring to the people and not to financial activities). Analysis of the non-economic factors of business environment and their impact on its management In order to achieve an integrated presentation of the non-economic business environment that has an influence to the structure, the decisions and the performance of its management, we should refer to its separate elements (in both the external and the internal area) as they can be observed from their interaction to the firm’s activities. As an indicative effort towards that direction we could mention the work of Davidson, Per, Kirchoff, Bruce, Hatemi-J. Abdulnasser and Gustavson, Helena (2002, 343) who made a research regarding the business growth factors as they could located and evaluated using Swedish data (referring specifically to the business size, age and industrial sector). Their research showed that ‘small, owner-managed firms in their early years have better-than average growth opportunities’. This result evolved the examination of the age, size and independence factors and was explained by the authors as favorable for the owners of small firms because of the flexibility that usually follows companies of this size regarding the choice of their legal form. To a next level the element of geographic area is seemed to be without an important influence to the operation of the business. Under these terms the creation of a successful business can be feasible in every area and – according to the above researchers - the ‘entrepreneur should be free to locate wherever he/she lives’. The above mentioned research showed a very important result regarding the possible differences between the private and the public sector as of the business performance and the related structure of the management decisions. More specifically according to the results of the research ‘there are few effective public policies for promoting growth of new, independently-owned small businesses’. I. External factors Political Conditions The role of the general political environment can be very important to the business operation and the structure and the performance of its management. When referring to the political situation we do not mean exclusively the decisions that are taken to a governmental level, but all the actions of a particular state that deal with the individuals that live in it and also with the businesses that operate in its ‘land’. In this context, the term ‘environment’ includes both the legal rules and the other decisions that are taken by the state’s representatives and the actions of the state’s authorities towards the ‘subjects of the law provisions’ i.e. the corporations and the individuals. When the above rules or the actions are characterized by lack of flexibility and understanding, the exertion of the power of the state can be really oppressive and create a negative environment of financial activities both for the individuals and for the companies. In order to avoid such situations, each state should examine its behavior and its decisions in order to allow an effective and flexible practice of civil and commercial activities for the people that constitute the nation. The role of the management in the confrontation of the problems related with non-effective governmental activity is really crucial. At a first level the management of a business should be aware of the laws and the other governmental rules regarding the business specific activity. Moreover, the design of the business strategy should contain a provision for possible or unexpected changes to the current legislation in order to secure the business positive performance both for a short-term and for a long-term period. Environmental factors A factor that has developed to a very important one regarding the business activities is the environmental one. The changes in the climate as a global phenomenon have being one of the most severe problems for the last decades. During the last years, the problem seems to be out of control both for the developed countries and for those who are under development. The absence of a specific and effective strategy as well as the lack of cooperation between the members of the global community can be characterized as the main reasons for the constant increase of the natural disasters that can be observed around the planet on a daily basis. The consequences of this situation for the area of the commercial activity are very severe. From one point of view, there are businesses that have a remarkable performance (to a positive direction) because of this situation (mainly companies that deal with the produce and selling of oil and its products). However, the performance of the major percentage of businesses can be characterized as very disappointed. Boons, Frank and Strannegard, Lars examine the interaction between the organizations and their natural environment (2000, 7). They came to the conclusion that up to a point the problems in the balance of the natural environment could be characterized as ‘the negative impact of industrial activities on the ecosystem’. In order to control the ‘explosions’ of the global environment and to ‘deal with this negative impact and the societal demands that are related to it’, industries around the world have begun to introduce and apply methods that can help the environmental activity to return to its ‘normal situation’. These methods include (Boons, Frank and Strannegard, Lars, 2000, 7): ‘technological alterations, such as installing water filters or energy-saving equipment, and management activities, such as the systematic collection of information and planning intended to monitor, evaluate and decrease the ecological impact of organizational activities (i.e. environmental management systems)’. The above measures could help at a first level the environmental problem, however the current situation on this area needs a permanent and global environment-friendly behavior in order to achieve the desired results. The role of the particular states is very important as only with very strict legal rules and international conventions (that will be accepted and applied from all countries-members of the international organizations) the problem related with the natural environment will be effectively handled. II. Internal factors Human Resources Inside the borders of an organization the role of human resources is very important towards the creation and the application of a successful strategic plan. We should begin with the observation that the interaction between the employees and the management team is constant during the firm’s operation. At a first level, there is no managerial plan that can be executed in a company without the participation of the employees who are the persons that are meant to apply it in real terms in order for the planning of the management team to produce its results. The problems of human resource management as well as of the work climate (as they are closely connected) were examined by Gelade and Ivery (2003, 392) who came to the conclusion that ‘favorable psychological environments in the work place, and progressive HRM practices such as management of job demand and support for professional development are associated with superior organizational performance’. They also noticed that ‘in large organizations, where decision making is partially decentralized, local HRM decisions are often strongly influenced by considerations of their associated operating costs’ (see also Solymossy Emeric, 2000). According to this assumption, there is a difference between the levels of influence of human resources to the managerial decisions in accordance with the size of the company. However, this result could be opposed by the opinion that in small firms the ‘strength’ of the employees might not be as much as desired in order to confront negative management involvements to the business activities, but on the other hand their value can be much more appreciated and therefore their opinion could be strongly influence the managerial decisions as the relationships between the employers and the employees in small businesses are by fact much more friendly and close than in large corporations. Level of customer support and satisfaction Anakwe, Uzoamaka P., Igbaria, Magid and Anandarajan, Murugan (2000) made a research on the business practices that are applied in international level and in environments of different cultures regarding the level of support provided in each particular occasion. At a first level, they examined the possibility of application of the same business strategies across all countries. The main result from their study was the most important element of the customer satisfaction seems to be the support in the technology usage. The examination was focused on particular ‘aspects of technology support such as daily use, frequency of use and total application’. Another important finding of their study (2000, 659) was that ‘similar management practices could be effective in societies that seem different and also that cultural meaning attached to different organizational phenomena could complicate the applicability of uniform or standardized management practices. In accordance with this opinion the use of similar management practices should be examined in combination with their meaning and interpretation in different countries’. The above problem was also the subject of research of Hallowell, Roger, Schlesinger, Leonard A., Zornitsky, Jeffrey (1996) who were dealing specifically with the issue of ‘internal service quality, the customer and job satisfaction and their linkages with management’. They found that (1996, 29) ‘companies seeking to differentiate themselves on the basis of customer satisfaction may benefit by delivering what front-line employees and managers need to serve their customers’. They also came to the conclusion that there are six factors that are indicative of internal service quality: ‘tools (specifically information and information delivery systems for certain types of companies), appropriate policies and procedures, teamwork, management support, goal alignment and training’. Furthermore, they stated that ‘by focusing on these and potentially on other components of internal service quality, managers may improve their employees’ service capability, which in turn may result in increased customer satisfaction’. According to the above view, the management team has to design the corporate strategy by taking into account that there is a strong linkage between the employees’ satisfaction and that of the customers. It seems from the above research that both of these elements can have a strong influence to the managerial decisions as they ‘control’ to an important level the strategy and the performance of the business. Regarding the issue from the aspect of relevance we could state that employees’ are the ‘instruments’ of the application of the managerial planning whereas the customers are its ‘targets’. This assumption can explain the important of both the above elements (although with having no direct connection with financial data) to the structure and the direction of the managerial decisions. Business strategy When designing a firm’s strategy, the management team should be aware for the implications that the wrong or the non-complete decisions could have to the corporate performance. When referring to the non-economic factors of business activity (as they have presented above) this task could be very difficult because of the absence of stability that usually follows them (the specific factors) as well as because the design of accurate predictions for the future cannot be guaranteed. The reason for such an assumption is that the particular elements of these factors usually they are not under the firm’s control (like the environmental conditions) or are just partially depended from the business will (like the human resources). When the business strategy does not include specific provisions for all business activities and also an adequate forecast for the future (to the highest possible level) then the possibility of business failure is very high. In this occasion the results will involve to all of the entrepreneurial participants (both the employer and the employees) and they are also likely to have a long duration. Under these terms the business recovery could only be achieved after the design and the application of a new strategic plan in which the first priority should be the measures for the successful confrontation of the failures of the past. Kimball R. (2000) examined the role of the risk management to the creation of an effective business plan towards the unexpected changes in the corporate environment and found that there is chance that risk management could be ended to failure when it is not appropriately designed. In order to achieve a successful risk management, the firm’s strategic team should try to avoid the use of ‘normality’ i.e. of the normal environmental conditions and try to allow a ‘margin of error’. Conclusion The role of the non-economic factors to the business management can be characterized as critical regarding the consequences that may have for the performance of the business but also for the individuals that participate to the firm’s operation. At a first level there are points of difference between companies of the public and those of the private sector. It seems that when referring to the decisions made by the management team in firms of the public sector, we should take into account the lack of flexibility, which is the main characteristic of the area. The stability, which is usually offered as a positive aspect of these companies, can usually be without meaning due to the severe operational and mainly financial problems that follow strategies of this type. Furthermore, the behavior of the business as a particular ‘entity’ is also very important as it can provide the measures for the limitation or even the elimination of the negative consequences that can follow the interaction of the non-economic factors with the corporate activity. On the other hand, we should take into account the fact that by nature the above factors cannot be predictable and for this reason the measures that could be taken would not have a totally positive result (or at least not at the desired level). Under these terms the survival of the company in the market could be proved a really challenging effort. However with the use of the appropriate strategy and the allowance for flexible business decisions, the above problems could be faced and the business could operate with high prospects of success for the future. Works cited Anakwe, Uzoamaka P., Igbaria, Magid, Anandarajan, Murugan, ‘Management Practices Across Cultures: Role of Support in Technology Usage’ Journal of International Business Studies 31(2000): 653-664 Boons, Frank, Strannegard, Lars ‘Organizations Coping With Their Natural Environment’ International Studies of Management and Organization 30(2000): 7-15 Davidson, Per, Kirchoff, Bruce, Hatemi-J. Abdulnasser, Gustavson, Helena ‘Empirical Analysis of Business Growth Factors Using Swedish Data’ Journal of Small Business Management 40(2002): 332-348 Gelade, Garry A., Ivery, Mark ‘The impact of human resource management and work climate on organizational performance’ Personnel Psychology 56(2003): 383-398 Hallowell, Roger, Schlesinger, Leonard A., Zornitsky, Jeffrey ‘Internal Service quality, customer and job satisfaction: linkages and implications for management’ Human Resource Planning 19(1996): 20-29 Kimball, Ralph C. ‘Failure in Risk Management’ New England Economic Review (2000): 3-14 Solymossy Emeric ‘Entrepreneurial Dimensions: The Relationship of Individual, Venture and Environmental Factors to Success’ Entrepreneurship: Theory and Practice 24(2000): 79-81 Read More