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Framework for Organizational Responses to Uncertainty

• Simple/Complex

• Stable/Unstable framework

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Organizational Responses to Uncertainty

1. Low uncertainty environment: • Stable/Simple• Examples:

– soft drink bottlers, container manufacturers, food processors – mechanistic design, few departments, current operations

orientation, centralized decision making

2. Low moderate uncertainty environment: • Stable/Complex• Examples:

– universities, chemical companies, insurance companies – mechanistic design, centralized, many departments (some

boundary spanning), few integrating roles, some planning

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Organizational Responses to Uncertainty

3. High moderate uncertainty environment: • Unstable/Simple• Examples:

– e-commerce companies, fashion clothing, music industry, toy manufacturers

– organic design, teamwork, decentralized, few departments (much boundary spanning), few integrator roles, planning orientation

4. High uncertainty: • Unstable/Complex• Examples:

– IT companies, aerospace firms, telecommunications, airlines – organic design, teamwork, decentralized, many departments

(differentiated, extensive boundary spanning), many integrating roles, extensive planning, forecasting

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Controlling Environmental Resources

• Two strategies can be used manage resources in external environment:

1. Establish favorable linkages with key elements in the environment and

2. Shape the environmental domain

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Establishing Interorganizational Linkages

1. Ownership (acquisition, merger)2. Formal strategic alliances (contracts and joint

ventures)3. Cooptation, interlocking directorates

– Cooptation, influential customers or suppliers are appointed to the BOD (e.g. a banker sitting in the BOD of a chemical plant)

– Interlocking directorate, when member of BOD of one company sits on the BOD of another company (director of company A and of company B both are directors of company C)

4. Executive recruitment5. Advertising & Public Relations

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Controlling the Environmental Domain

1. Change of domain: – through acquisition and divestment

2. Political activity, regulation: – to influence government, legislation and

regulations

3. Trade associations:

4. Illegitimate activities – kickbacks, bribes, gifts etc.