The Organizational Environment

The environment defines the context in which organizations operate, which in turn shapes the strategic direction and other design decisions of the organization. Today’s environment is dynamic and finding a stable context to operate in is a luxury that few organizations can claim. Instead, organizations are faced with an environment characterized by volatility, uncertainty, complexity, and ambiguity (VUCA) (Barbara, H.F., 1992). The VUCA environment underscores the challenges associated with change efforts that must deal with the speed of change, the risks surrounding decision-making with unavailable information, the complexity of environmental factors and the organization itself, and finally, the unknown meaning of information and data available. Compounding these characteristics are a variety of factors that change practitioners must consider. 

Environmental factors that shape the context of an organization can be described using the acronym PESTEL (see Figure 1.1): Political, Economic, Social, Technological, Environmental, and Legal. Click on each of the factors to learn more.

Other Industry Factors

• Competitors
• Industry size & age
• Suppliers
• Manufacturers
• Real estate
• Customers
• Clients
• Techniques of production
• Raw materials
• Entry into overseas markets
• Foreign customs, regulations
• Green movement

These environmental factors continue to increase in complexity. Consider leadership communication in tandem with these environmental factors and how they impact changes. Do managers adequately communicate the reasons for change? The challenges of change management might be lessened if leaders communicated the logic behind a change.