Characterizing the
environment is useful for
managers when trying to
understand how the environment influences their
organization. However,
some
environmental conditions are easier to understand and predict than
others. Any manager examining the same environment should arrive at the
same conclusion on what domains the factors are located in and where
the organization resides within the environmental dimensions. This will
occur if all managers have full information about the environment.
However, managers rarely have the opportunity to make judgments based
on total information. Indeed, much information about the environment
may be absent or erroneous. Hence, many environmental evaluations are
subjective and lead to disagreements among managers about the true
condition of the environment.
When managers do not have information or have incorrect information
about environmental factors, they have a difficult time predicting
external changes. When this occurs, managers must decide under
conditions of
uncertainty. As uncertainty increases, so also does the
risk that managers will make decisions that harm rather than help the
organization. Five types of
managerial uncertainty can lead to poor
decisions:
•Uncertainty about information availability, accuracy, and clarity
•Uncertainty about cause-effect relationships
•Uncertainty about outcome preferences
•Uncertainty arising from the time span needed for definitive feedback
•Uncertainty arising from the inability to assign the probability of an outcome
Research suggests that uncertainty will increase for organizational
managers when the environment becomes lean, heterogeneous, unstable,
dispersed, turbulent, and is in a state of dissensus. Each of these
environmental conditions requires the gathering of more information. If
the information is difficult to get or unobtainable, managerial
uncertainty will increase even more.
Environmental dynamism and complexity can both create managerial
uncertainty in different degrees. A manager in an organization such as
a manufacturer of cardboard containers, should experience low
uncertainty because the environmental factors are basically similar and
stable over time. Managers of organizations in stable environments like
in
companies producing canned foods serve different types of customers,
but the demands and needs for such products change little over time.
Companies that produce country music albums are facing more instable
environments. The artists are similar, as is the method of producing
the albums, but the demand for the music varies as does the popularity
of the performing artists. Managers in many airline and oil companies
face the greatest amount of uncertainty because the factors in the
environment are both unstable and complex.
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