Adapting to Complexity and Dynamism

Once you see how environments differ with respect to dynamism and complexity, the next question is, “How do organizations adapt to each level of environment uncertainty?”

Environmental uncertaintyOpens in new window represents an important contingency for organization structure and internal behaviors. Recall from earlier postOpens in new window that organizations facing uncertainty often use structural mechanisms that encourage horizontal communication and collaborationOpens in new window to help the company adapt to changes in the environment.

In this post we discuss in more detail how the environment affects organizations. An organization in a certain environment will be managed and controlled differently from an organization in an uncertain environment with respect to positions and departments, organizational differentiation and integrationOpens in new window, control processesOpens in new window, and future planning and forecastingOpens in new window. Organizations need to have the right fit between internal structure and the external environment.

Adding Positions and Departments

As complexity and uncertainty in the external environment increase, so does the number of positions and departments within the organization, leading to increased internal complexity. This relationship is part of being an open system. Each sector in the external environment requires an employee or department to deal with it.

  • The human resource department deals with unemployed people who want to work for the company.
  • The marketing department finds customers.
  • Procurement employees obtain raw materials from hundreds of suppliers.
  • The finance group deals with bankers.
  • The legal department works with the courts and government agencies.

E-business departments handled electronic commerce, and information technology departments deal with the increasing complexity of digital information and knowledge management systems.

Adding new positions and departments is a common way for organizations to adapt to growing environmental uncertaintyOpens in new window. Companies such as Johnson & JohnsonOpens in new window, Philips ElectronicsOpens in new window, and PepsiCoOpens in new window have added chief design officer positions to their senior ranks to beef up the development and marketing of products in an environment where consumers are paying more attention to appealing design. Many companies have added diversity officer positions in recent years.

WarnerMediaOpens in new window created a new position of Chief Diversity and Inclusion Officer after employees questioned the lack of female and minority leaders during question-and-answer sessions following AT&T’sOpens in new window acquisition of Time Warner.

Building Relationships

The traditional approach to coping with environmental uncertaintyOpens in new window was to establish buffer departments.

  1. Buffering Roles

The purpose of buffering roles is to absorb uncertainty from the environment.

Whereas the technical core performs the primary production activity of an organization; buffer departments surround the technical core and exchange materials, resources, and money between the environment and the organization.

Buffering departments help the technical core function efficiently.

  • The purchasing department buffers the technical core by stockpiling supplies and raw materials.
  • The human resource department buffers the technical core by handling the uncertainty associated with finding, hiring, and training production employees.

A more recent approach many organizations use is to drop the buffers and expose the technical core to the uncertain environment. These organizations no longer create buffers because they believe being well connected to customers and suppliers is more important than internal efficiency.

Highly uncertain environments require rapid transfer of information and knowledge so the organization can adapt quickly. Teams often work directly with customers and other parties outside the organization. At Total AttorneysOpens in new window, a Chicago-based company that provides software and services to small law firms, cross-functional teams work with customers who test and provide feedback on products as they are developed.

Opening up the organization to the environment by building closer relationships with external parties makes it more fluid and adaptable.

  1. Boundary-Spanning Roles

Boundary-spanning roles link and coordinate an organization with key elements in the external environment.

Boundary spanning is primarily concerned with the exchange of information to detect and bring into the organization information about changes in the environment and to send information into the environment that presents the organization in a favorable light.

Organizations have to keep in touch with what is going on in the environment so that managers can respond to market changes and other developments. A study of high-tech firms found that 97 percent of competitive failures resulted from lack of attention to market changes or the failure to act on vital information.

To detect and bring important information into the organization, boundary personnel scan the environment. For example:

  • A market research department scans and monitors trends in consumer tastes.
  • Boundary spanners in engineering and research and development departments scan new technological developments, innovations, and raw materials.

Boundary spanners prevent the organization from stagnating by keeping top managers informed about environmental changes. The greater the uncertainty in the environment, the greater the importance of boundary spanners.

Recall that toy companies operate in uncertain environments. The toy and game maker Hasbro effectively used boundary spanners to discern in the mid-1990s that technology would likely change competition in the industry, so managers stayed abreast of technical changes.

In addition, detecting other patterns such as falling birth rate, greater ethnic diversity in the U.S. population, and more households with two incomes helped managers position Hasbro to remain competitive and successful as changes occurred.

  1.    Business Intelligence

One approach to boundary spanning is business intelligence, which refers to the high-tech analysis of large amounts of internal and external data to spot patterns and relationships that might be significant.

VerizonOpens in new window uses business intelligenceOpens in new window to actively monitor customer interactions so that it can catch problems and fix them almost immediately.

Tools to automate the process are a hot area of software, with companies spending billions on business intelligence software in recent years.

Another interesting example is how colleges and universities are using software to track data on prospective students.

IN PRACTICE | Seton Hall University and Dickinson College
If you’ve submitted an application to attend Seton Hall University, Dickinson College, or any of another number of schools, enrollment officers know right down to the second when you opened the e-mails the school has sent you, how long you spent reading them, and whether you clicked through to any links. Schools uses that and other information to help them determine your “demonstrated interest.”

Software from companies such as Technolutions Inc. helps track which applicants are truly interested in the school versus those who have simply applied to a large number of schools. Technolutions generates a dashboard summarizing thousands of data points on each applicant. The company’s CEO says its product is now used by more than 800 schools.

Demonstrated interest is of growing importance to colleges and universities because many are getting an increasing number of applicants and the schools want to make good decisions about which ones to accept. At Seton Hall, students get a score based on 80 variables that help determine whether they are likely to enroll if accepted.

Colleges, as well as business organizations, are also using social media analytics to help make decisions about specific issues. Marriott InternationalOpens in new window operates a social media center where employees analyze Twitter feeds, Instagram photos, Facebook posts, and other social media to keep up with the latest trends.

Business intelligenceOpens in new window is related to another important area of boundary spanning, known as competitive intelligence (CI). CI gives top executives a systematic way to collect and analyze public information about rivals and use it to make better decisions.

Using techniques that range from Internet surfing to digging through trash cans, intelligence professionals dig up information on competitors’ new products, manufacturing costs, or training methods and share it with top leaders.

  1.    Intelligence team

Intelligence teams are the newest wave of CI activities.

An intelligence team is a cross-functional group of managers and employees, usually led by a CI professional, who work together to gain a deep understanding of a specific business issue, with the aim of presenting insights, possibilities, and recommendations to top leaders.

Intelligence teams can provide insights that enable managers to make more informed decisions about goals, as well as devise contingency plans and scenarios related to major competitive issues.

The boundary task of sending information into the environment to represent the organization is used to influence other people’s perception of the organization.

In the marketing department, advertising and salespeople represent the organization to customers. Purchasers may call on suppliers and describe purchasing needs.

The legal department informs lobbyists and elected officials about the organization’s needs or views on political matters. Many companies set up special web pages and blogs to present the organization in a favorable light.

Remember This!
  • Organizations may adapt to complexity and dynamism by adding specific departments and functions to deal with uncertainties and by establishing buffering and boundary-spanning roles.
  • As external environmental uncertainty increases, internal complexity increases as well. Under great uncertainty, managers allocate more resources to departments that will plan, deal with specific environmental elements, and integrate diverse internal activities.
  • The organization can be conceptualized as a technical core, and buffering departments absorb uncertainty from the environment.
  • Boundary-spanning roles bring information about the environment into the organization and send information about the organization to the external environment.
  • Business intelligence, including social media analytics, is one approach to boundary spanning.
    Research data for this work have been adapted from the manual:
  1. Organization Theory & Design By Richard L. Daft