Organizational Environment & LegitimacyReview Systems Theory Model

Organizational environment

Garnering legitimacy from the environment

Open System Model: ElementsInputs: Materials and resources necessary

for firm/system to remain functional.

Throughput: Transforming of inputs

Output: Finished good or service to be exchanged with the environment for new inputs

Environment/Feedback: information provided by the environment that effects the firm ability to continue operation.

Systems Theory ThemesComplexity and interdependence

No organization is an island or controls its world-IMPORTANT

Open system: organization has permeable boarders Information, resources, energy passes in and out

Energy/activity/feedback is exchanged with the environment Actions in environment effect Org. behavior and visa versa Organizations are self regulating/responds to feedback

The whole is greater than the sum of its parts-Can not understand the entire organization by studying its parts

example is engineered system functions as prototype, but not when mass produced

Inputs: Materials

Resources

Throughput/core technology

Output: Finished

Good/Svc.

Environment:Output exchanged for

InputsFeedback of info.

Healthy open systems regularly exchanges feedback with its external environment and adjust inner-systems as needed.

Inputs: Students, teachers, admin

Smart boards…..

ThroughputEducational process,

lesson plans, outdoor ed. extra curricular

Output: Educated, college prepared

Young men and women

Environment:Economic conditions, College acceptances

Community perception# of people applying

.

Forms of Feedback: RHPFeedback is

information provided by environment which causes the organization to make modification in some form.Note: not all

information is detected by the focal organization

Parents Satisfaction/

charitable giving

Colleges Acceptance Rates/Opinion of RHP quality

Future

Students

Application # changes

Economy Parents Propensity to spend/save

Competitors (Chadwick)

Reputation/

Attracting students

Examples Feedback

Genl. Enviro event Task Enviro Internal Response Changes Genl Enviro

Rainy Season Ends plentiful water which attracts potential prey

Ample food, little competition-friendly for survival

Pride reproduces Consume “low hanging fruit”-high degree of certainty

Marshes and wetlands begin to dry

Food source shrinks, but plentiful-few run ins with hyena

Sufficient food to sustain pride-no need to change behavior

Food sources getting better at recognizing threats

Heat increases with change of seasons, weather becomes harsher

Food source decreases, more competition for less

Pride must go longer without food, increase hunting but get less

Food sources migrate looking for water

Sustained, increased heat – hostile to sustaining life

Food becomes scarce and competition intensifies, must battle hyenas and crocs

Pride experiences crisis. Less able lions die or exiled

Pride leaves hunting area to find food/water

Location of food/water not known. Much uncertainty in pride’s enviro.

Environment/Organization (Pride of Lions) Interaction

Organizations and EnvironmentHealthy open systems (read: organizations) regularly exchanges feedback (info) with its

external environment and adjust inner-systems as needed.

Organizations and their operating environment are in a constant state of change.

Organization either adapt to (or are selected by) the environment or die.

Feedback: EnvironmentOutside of the “focal” organization: “field of

play”.

Environment provides raw materials, resources, constraints, and information.

Environment consists of several entities and comprise interdependent relationships with the HSO and relevant others.

Environment affects change in the organization and organizations affect the environment.

Focal Org.

Instit/Task

General

General & Institutional/Task LevelsGeneral: Context for the organization that consists of broad forces and dimensionsEconomic trends; political legal dimensions;

cultural issues….

Institutional/Task:Institutional: Rules and beliefs about

development and operation. Specific to HSO, where HSO gains LEGITIMACY in

a non-market setting.

Task: Specific actors operating in some way with the focal organization’s domain. Competitors, customers, suppliers; regulators

Environment: Dynamic RelationshipEvents occurring in different levels have a

ripple effect throughout.

Changes in task environment likely to have a more immediate effect upon focal organization.

Changes in general enviro. more difficult to detect and thus difficult to react to.

Environmental Dimensions to Evaluate HSO ContextUnderstand challenges HSO

faces/relationship with environment.

Hostile/friendly (level of competition and interdependence with other actors)

Uncertain/certain. (sophistication of knowledge to compete and availability of resources)

Hostile FriendlyUncertain

Certain

Most Manageable

Most Challenging

(level of competition, and interdependence with other actors)

(sophistication of knowledge to compete ; availability of resources)

Hostile FriendlyUncertain

Certain

Mortgage LenderStart-up

Biomedical Company

Bricks/Mortar Bookstore Subway Restaurant

(level of competition and interdependence with other actors)

(sophistication of knowledge to compete ; availability of resources)

Currency of the HSO

HSO: Exchange for Resources Not Directly Dependent on Output

Throughput: Service Delivered

Input: Clients

AcademicsExperts

$

Output:Transformed Client

Note: Beneficiary of service does Not provide Currency for new inputs

LegitimacyGovt.,Stakeholders

Legitimacy: HSOHSO needs money to operate, does not

receive $ (in many cases) from the end-user.

The currency of the HSO is “legitimacy.”

Legitimacy is a conferred status the HSO earns and or is granted by entities and forces outside of the organization.

Those capable of providing resources must view the HSO as legitimate.

Sources of Legitimacy

Market does not determine Value of the HSO

Institutional environment confers legitimacy onto the HSO

HSO ability to meet PERCEIVED expectations of Institutional environment creates legitimacy

Institutional Environment: Bosses outside of the HSOEnvironment contains actors that are like

“bosses” outside the HSO who have a say in what is done inside the HSO

Instit. Enviro. facilitates the founding of a new HSO by recognizing/prioritizing a human service need and providing resources skilled in dealing with a need.Comprised of regulatory approval agencies (FDA),

certification organizations, legal restraints, recognized experts….that give formalized approval of HSO technology/treatments

Policy changes and laws alter the operating environment of HSO

Institutional Environment:Currency of the HSO is Legitimacy

Market for services does not determine Value of the HSO. Institutional environment confers legitimacy onto the HSO.

Instit. Enviro. facilitates the founding of a new HSO by recognizing/prioritizing a human service need and providing resources skilled in dealing with a need.

Comprised of regulatory approval agencies (FDA), certification organizations, legal restraints, recognized experts….that give formalized approval of HSO technology/treatments

HSO ability to meet PERCEIVED expectations of Inst. enviro. actors creates legitimacy

Institutional Environment: HSO Legitimacy

Outputs of the HSO are not easily evaluated.Little formal empirical evaluation of treatments, treatment

effects decay, measures of success vary, Disagreement of what measures to use when evaluating a

service.

In contrast outputs (good and services) of FPO are scrutinized and evaluated-Market.Consumer reports, trade magazines, consumer satisfaction

surveys… big part of FPO world.

Meeting expectations of institutional environment is important for survival-Legitimacy Relevance.

How to Garner Legitimacy: Institutional EnvironmentEmpirical evaluation of your programs

“succeeding at what you set out to do”satisfies donors that $ are well spentbecoming a requirement for many grant sources

Nonprofit governanceHSO must show that it’s internal oversight is

transparent and effective

Monitor changes in political arena, economy and other global, macro arenasChanges here will have an effect on the task/institutional

“if we are to safeguard our credibility…we must take every step toward effective stewardship”

General EnvironmentOperate as an open system-events

occurring outside of the organization cause threats/change within the organization

Events, trends, occurrences that effect the field of play for the HSO and all other HSO operating in the same strategic space

Examples: Economic shocks, political events/changes, public opinion

Managing the Environment“The only constant is change”

Critical management function is scanning the environment, detecting/reacting change

Understand implications of legislative, judicial, and budgetary change

Changes to needs and desires of consumers

Aware of trends/changing beliefs within professional associations and academic focus of study

Example: Enviro Change Effect LegitimacyThe institutionalization of mental health patients is viewed as inhumane by some in mental healthcare community and civil libertarians

Policy makers are lobbied to change laws that allow for involuntary institutionalization

Policy changes and laws are enacted

Residential facilities lose legitimacy, cuts in funding-go out of business

Garnering LegitimacyMeet a widely recognized need

Save Reggie (alligator) not good for legitimacy

Be Big and Old: United Way.

Experts and Academics validate treatment/programs

Quality of treatment/service

Marketing and Promotion:

Promoting the HSO

Name recognition is not sufficient

People need to know what HSO does

Elevator Speech: Message starts with HSO fully understanding its missionPeople in organization are clear on what you do

Make sure stakeholders fully understand mission

Promote

Marketing ExamplesOpen Doors Ministry: Sends donors a monthly

newsletter describing how lives are being transformed.

UJA-Federation uses facebook and other social media to communicate message-30% increase in donations.

Laura Rhea, CEO Arkansas Rice Depot “it is important to tell the Rice Depot story…once people learn about (us) they are so willing to support what we do.”

Factoid: to raise $100 costs $20 for a HSO. FPO the cost is $4.

Next ClassRead 9/11 effect: Do the exercise outlined

on the next 3 slides

Read and summarize the following in a paragraph: Organizational Evaluation (keep in mind

linking quality of service with attracting $)Managing revenue: navigating a tough

economy

9/11 Effect Class Exercise: Hypothetical HSOYou are the Exec. Director of a small NYC

homeless shelter on Sep. 12, 2001.

Analyze the effects the terrorist attacks will have on your operating environment.Think like an economist: effects on demand,

supply, availability of resources.

Use systems theory model as framework for your analysis.

NYC Homeless Shelter: 9/11 effectsDemand for services: increase, decrease,

stable?

Resource availability: more, less or same?

Competition for resources: Increase keep up with demand or decrease?

Supply of available services for homeless:

Hypothetical: Systems ModelInputs: raw materials; resources/energy to do

business

Throughput: ability to provide service/care

Outputs: effect people’s lives

Feedback: How does environment effect ability to function; Increase or loss of Legitimacy?