Placing Organisations in Context

An organisation's context involves its “operating environment.” The context must be 
determined both within the organisation and external to the organisation. It is important to 
understand the unique context of an organisation before starting the strategic planning. 

To establish the context means to define the external and internal factors that the organizations 

must consider when they manage risks. An organization’s external context includes its outside 

stakeholders, its local operating environment, as well as any external factors that influence the 

selection of its objectives (goals and targets) or its ability to meet its goals. An organization’s 

internal context includes its internal stakeholders, its approach to governance, its contractual 

relationships with its customers, and its capabilities and culture (Pojasek, 2013). 

Context matters because it determines the influence and priority of stakeholder roles. It also 

helps determine how readily sustainability programs can be adopted and even whether they can 

help get the organisation to where it needs to be to address its social license to operate. If 

customers or principal stakeholders come from different contexts, this may systematically 

influence the statement of the goals and other operating requirements no matter what kind of 

organisation is involved.

Three valuable tools to establish context for an organisation are : 

1. SWOT Analysis

SWOT Analysis is a useful technique for understanding your Strengths and Weaknesses, and for identifying both the Opportunities open to you and the Threats you face.

When using SWOT analysis, be realistic about the strengths and weaknesses of your organisation. Distinguish between where your organisation is today, and where it could be in the future. Also remember to be specific by avoiding grey areas and always analyse in relation to the competition (i.e. are you better or worse than competition?). Finally, keep your SWOT analysis short and simple, and avoid complexity and over-analysis since much of the information is subjective. Thus, use it as a guide and not a prescription.

2. Porter's Five Forces

The Porter's Five Forces tool is a simple but powerful tool for understanding where power lies in a business situation. This is useful, because it helps you understand both the strength of your current competitive position, and the strength of a position you're considering moving into.

Conventionally, the tool is used to identify whether new products, services or businesses have the potential to be profitable. However it can be very illuminating when used to understand the balance of power in other situations.

3. PESTLE Analysis

PESTLE analysis is in effect an audit of an organisation's environmental influences with the purpose of using this information to guide strategic decision-making. The assumption is that if the organisation is able to audit its current environment and assess potential changes, it will be better placed than its competitors to respond to changes.

A PESTLE analysis is a useful tool for understanding the ‘big picture’ of the environment in which an organisation is operating. Specifically a PESTLE analysis is a useful tool for understanding risks associated with market (the need for a product or service) growth or decline, and as such the position, potential and direction for an individual business or organisation.

Management Theory

     This week we looked at management theories as a useful tool briefly. Management theory can be defined as a collection of ideas which set forth general rules on how to manage a business or organisation. A theory addresses how managers and supervisors relate to their organisations in the knowledge of its goals, the implementation of effective means to get the goals accomplished and how to motivate employees to perform at the highest standard.

Classical School

The two theories that we focused on were :

Scientific management theory which is considered by most to be the brainchild of Frederick Winslow Taylor - embracing careful specification and measurement of all organisational tasks. Tasks were standardised as much as possible. Workers were rewarded and punished. This approach appeared to work well for organisations with assembly lines and other mechanistic, routinised activities.

Max Weber  embellished the scientific management theory with his bureaucratic theory. Weber focused on dividing organisations into hierarchies, establishing strong lines of authority and control. He suggested organisations develop comprehensive and detailed standard operating procedures for all routinised tasks.

    

                      

Human Relations School

Elton Mayo has been considered as the father of the human relations movement, which later became organisational behaviour. The other two important co-researchers are F.J. Roethlisberger and William J Dickinson. They believed that organisations always involve interrelationships among members and that it is the managers’ role to see that relationships are as conflict-free as possible, in order to accomplish the organisation’s objectives. They believed that the human aspects of business organisations had been largely ignored and felt that satisfaction of psychological needs should be the primary concern of the management.

Systems Approach

Systems theory has come up via media with an integrated and holistic approach to management problems. This has emerged as a way of looking at the organisation as a whole. Chester Barnard, George Homans, Philip Selznick and Herbert Simon are some of the advocates of the systems theory.

Contingency Theory

Basically, contingency theory asserts that when managers make a decision, they must take into account all aspects of the current situation and act on those aspects that are key to the situation at hand. Basically, it’s the approach that “it depends.” For example, the continuing effort to identify the best leadership or management style might now conclude that the best style depends on the situation.

     Though practice of management existed thousands if years ago, most of them needed to be refined and synthesised to call them management principles. The early 'autocratic period' of management is characterised by the use of absolute authority, coercion and force. Development of a unified and integrated management theory out of 'the management theory jungle' has some difficulties like applied science nature of the subject, lack of coherent theoretical concepts of its own and heavy reliance on concepts borrowed from other disciplines.

Organisational Design & Structure

Carrying over the momentum from the previous week, the aim for the week commencing the 20th of January was the introduction to related ideas of organisational design and structure. This entails considering the purpose it serves, the possible connection between structure and strategy and the principles as well as objectives of organisational structure.

Organisational structure is the skeleton of an organisation. It is an expression of who is performing the various functions and tasks of a company and how these people relate to one another. Organisational structure encompasses a list of the various job positions, titles and duties of a business, and the reporting structure or chain of command among them. Structure is a statement of the current state of affairs, not the ideals, intentions or betterment of an organisations.

Design in an organisation is much the same as for buildings, clothing and vehicles -- it's a plan. When a company's leaders develop plans for how their company should function or would perform better, they undertake the business of organisational design. Good design takes inventory of all the tasks, functions and goals of a business, and then develops groupings and orderings of job positions, departments and individuals to best and most efficiently achieve those ends. Usually, designs are expressed through an organisational chart, which helps players throughout an organisation understand functions and power relationships.

Centralised organisational structures rely on one individual to make decisions and provide direction for the company. Small businesses often use this structure since the owner is responsible for the company’s business operations. Decentralised organisational structures often have several individuals responsible for making business decisions and running the business. Decentralised organisations rely on a team environment at different levels in the business. Individuals at each level in the business may have some autonomy to make business decisions.



The organisational culture of a business reflects the mentality, work ethic and values of the company's owners and employees. Some firms are regarded as having a cut-throat culture in which employees aggressively compete for promotions and bonuses without regard to one another's feelings. Other firms have a family-friendly culture or a culture that encourages creativity. 


Organisational structures do not always require significant amounts of planning time. Many businesses have organisational structures that simply evolve during the business’s lifetime. Business owners often set the tone based on how they manage employees. Employees will perceive how the owner handles different business situations and simply adjust their work style accordingly. This will create an organisational structure by default, with no serious planning involved.