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Organization Structure
Author(s): Rosalie L. Tung
Source: The Academy of Management Journal, Vol. 22, No. 4 (Dec., 1979), pp. 672-693
Published by: Academy of Management
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Dimensions of Organizational
Environments: An Exploratory
Study of Their Impact on
Organization Structure
ROSALIEL. TUNG
Universityof Oregon
FIGURE 1
A Typology of Organizational Environmentsa
5 6 7 8
n = 12 n = 3 n = 10 n = 5
High U = 3.36 U = 3.41 U = 2.35 U = 1.85
Change Rate S = 3.80 S = 3.33 S = 2.64 S = 2.30
T = 2.41 T = 3.66 T = 3.25 T = 3.00
C = 2.94 C = 2.93 C = 3.86 C = 4.20
an = number of cases in the cell; U = Uncertainty. A low score indicates high uncertainty. A high
score indicates high certainty; S = Structure. A high score indicates mechanistic structure. A low
score indicates organic structure; T =Time perspective taken in planning. A high score indicates
long range planning perspectives; C = Frequency of changes to plans. A high score indicates fre-
quent changes.
Unit of Analysis
Data on environmentalcharacteristics,perceivedenvironmentaluncer-
tainty, and organizationalvariableswerecollectedfrom 64 organizational
units of 21 different companies located in Vancouver, Canada. These
companieswereengagedin sevendifferenttypes of business/industrialac-
tivities.
All the organizationsselectedfor studywerelargesizedcompanies.Size
was defined in terms of (a) number of employees-a minimumof 500
Operationalizationof EnvironmentalDimensions
Re -
Change Rate Frequency of Magnitude Weighting assigned to
Cangex qe x oMange x change depending
upon its location
Thus, a respondent who indicated that the frequency with which his
departmental unit had to contend with changes in each of the relevant fac-
tors (assuming the first two are located in the external environment and
the remaining in the internal environment) is 2, 4, and 5, respectively, and
who estimated the magnitude of such changes to be 5, 4, and 3, respective-
ly, would receive a change rate index score of ((2 x 5)(2) + (4 x 4)(2) +
(5 x 3)(1)] = 67.
The stability of change subdimension focused on the stability and
predictability of contingencies confronting the focal unit. An investigation
of this subdimension took the following into consideration: (1) The extent
to which the focal unit has to contend with the same factors/components
in the environment over time. Duncan's (1972) operationalization of this
variable was used in this study. (2) Duncan's operationalization of the
static/dynamic dimension merely revolved around the stability of the fac-
tors dealt with by the focal unit and the frequency with which new factors
are taken into consideration in the decision making process. It is argued
that such assessment is not sufficient. Any operationalization of the
stability of change rate dimension must incorporate some measure of the
predictability of the change rate, i.e., did the change follow a trend, or
was the change more or less random? If the latter, the change would be so
sudden and completely unpredictable that the focal unit probably would
be far less likely to possess the capabilities to cope with the change. It was
hypothesized that changes of the latter sort would greatly increase the
degree of environment uncertainty perceived by the CEO.
The predictability of change rate or trend was assessed from reported in-
formation. (1) The CEO was asked to indicate on a 5-point scale the ade-
quacy or inadequacy of the warning period preceding the onset of the
change. All organizations face changing environments to a certain extent.
Whether an organization can respond successfully and adapt to such
changes depends to a large extent on whether there is considerable lead
time so that the organizational unit can gather "reasonably adequate in-
formation as to what might be expected to plan the adaptation" (Haas &
Drabek, 1973, p. 267). Each unit's score on this variable was obtained by
summing and then averaging the subject's response to each of the relevant
factors/components in the internal and external environments. Thus, a
respondent who had to take 'three factors into consideration in decision
making and who indicated the "adequacy of warning period" associated
with each of these factors as 3, 2, and 4 would receive an overall score of
(3 + 2+4) ?3] = 3. (2) The CEO was asked to indicate on a 5-point scale
the extent to which his department knows what to expect after the change
takes place. The unit's score on this variable was calculated in a manner
similar to that for the adequacy of warning period.
Each departmental unit's score on the stability of change dimension was
calculated by adding and then averaging the respondent's subscores
(following interitem analysis) on the three items above, namely: (a) fre-
quency with which new and different elements have to be taken into con-
sideration, (b) adequacy of warning period, and (c) knowledge of what to
expect.
In subsequent correlation and factor analyses it was found that the
change rate index did not correlate with nor did it load on the stability of
change index. Rather the items comprising the latter index loaded highly
with the items comprising the routineness of problem/opportunity states
dimension. Consequently, change rate and stability of change were not
combined to form a measure of movement.
The Routineness of Problem/Opportunity States-Simon's (1960) no-
tion of the programmability of decisions and Perrow's (1970) concept of
the analyzability and variability of the stimuli were expanded upon in the
operationalization of this dimension. Perrow distinguished between the
analyzability and variability of the stimuli or problem/opportunity states
because the two elements need not go hand in hand: "Because no two
stimuli ever present themselves in exactly the same manner, a stimulus is
said to be analyzable when incremental adaptations from existing pro-
grams or portions of existing programs can easily be made to standardize
the new situation" (1970, p. 75ff.). Where the stimulus is unfamiliar or
unanalyzable, "considerable search behavior must be instituted." The
variability of the stimuli, on the other hand, takes into consideration the
number of stimuli. "Sometimes the variety is great and every task seems to
be a new one demanding the institution of search behavior of some
magnitude (whether analyzable or unanalyzable)." A problem/opportuni-
ty state may be fairly analyzable even though a variety of stimuli must be
taken into consideration (i.e., high variability) and vice versa. In the pres-
ent research, the routineness of problem/opportunity states dimension
was analyzed in terms of the variability of the stimuli (item 1 below),
analyzability of the stimuli (item 2 below), and the amount of discrepancy
between environmental demands and the organizational unit's capacity
(item 3). The latter notion is akin to Duncan's (1970) concept of degree of
perceived influence over the environment. The lesser the discrepancy be-
tween environmental demands and the organizational unit's capacity, the
greater the perceived influence over the environment and the greater the
ability to resort to routine procedures in handling the problems/oppor-
tunities that arise in the focal unit.
The routineness of problem/opportunity states dimension thus was
measured by collecting information as follows. (1) The CEO was asked to
enumerate the frequence with which the focal unit is able to resort to each
RESULTS
Initial Considerations
TABLE 1
Correlation Matrices and Coefficient Alphas for Environmental Dimensions,
Perceived Environmental Uncertainty, and Departmental Structure
Departmental Structure
Specialization Standardization Formalization Participation
Specialization 1.0000
Standardization 0.8167* 1.0000
Formalization 0.7572* 0.9192* 1.0000
Participation 0.8145* 0.9060* 0.8781* 1.0000
ij(est)== .82
Coefficient alpha = .95; rF 8
*=p<.001
TABLE 3
Multivariate Regression Analysis: Environmental Characteristics
Against Organizational-Variablesa
The first and principal finding of the study is that it is possible both to
conceptualizeand to operationalizeorganizationalenvironmentsin terms
of more than two dimensions.It has been shown that it is indeedpossible
to define and analyze the environment in terms of three dimensions. These
threeenvironmentalcharacteristicswereshownto be significantpredictors
of variationsin perceivedenvironmentaluncertainty,departmentalstruc-
ture, time perspectivetaken in planning, and frequency of changes to
plans.
It is believedthat the resultsof this researchprovide a significantim-
provement over the 4-cell typologies heretofore available. A more
elaborate typology of organizationalenvironmentscan assist organiza-
tional theorists, researchers,and practitionersto distinguishmore clearly
and to identifythe problemsconfrontingorganizationalunits operatingin
different environments.A more refined and expanded typology could
assistin the generationof more specificand sophisticatedhypothesescon-
cerning the relationships between environmental and organizational
variables,which subsequentlycould be tested in the field. The research
reportedhereis just a step towardsa seriesof more detailedinvestigations
and analyses of styles and patternsof people interaction, organization-
people interaction,and organization-organization interaction.Resultsof
such analyseshave widespreadimplicationsfor organizationaltheoryand
behavioralresearch.
Second, the findingsof this study about the relationshipsbetween en-
vironmentaland organizationalcharacteristicsare in line with those ob-
tained by other researchers of organization-environmentinteraction
(Lawrence& Lorsch, 1967; Duncan, 1972). This study has shown that
changerate has the singlegreatesteffect on the variationin perceiveden-
vironmentaluncertaintyand that departmentalstructure,time perspective
taken in planning, and frequency of changes to plans do vary among
departmentslocated in different environments.Although this study did
not explicitly examine what impact the "fit" between organizationen-
vironmentalcharacteristicsand organizationstructuralvariables would
have upon the effectiveness of the organization, the notion of effec-
tivenesswas implicitin the selectionof the sample. All the organizations
selectedfor study were high performersin termsof returnon investment.
Thus, this studypoints to the importanceof achieving"fits" betweenen-
vironmentaland organizationalvariablesto ensurethe long run survival
of the organizationalunit understudy. It points to the need for organiza-
tions-or, more specifically, organizationalunits-to identify correctly
the environmentin whichthey are operating.It signifiesthe importanceof
gatheringintelligenceon any changesthat may take place in the environ-
ment so that strategiesand techniquesmay be developedfor coping and
dealingeffectivelywith such environmentaldemandsand constraints.
The findings of this study have widespreadimplications for future
researchon organizationsand organizationaltheory. A morerefinedbasis
for differentiatingbetween organizationalenvironmentscan lead to the
developmentof a bettercore typologyof organizations.Basedon a critical
reviewof existingtypologiesand the resultsof his own empiricalresearch,
Hall (1972) concluded that because organizationsdo not operate in a
vacuum,any comprehensiveframeworkfor classifyingorganizationsmust
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