Sources of Uncertainty in the Organizational Environment
An organization likes to have a steady and abundant supply of resources so that it can easily manage its domain and satisfy its stakeholders.
The forces discussed earlier Opens in new window create uncertainty for organizations and make it difficult for them to control the flow of resources they need. These set of forces cause uncertainty and affect organizations.
When environment becomes more complex, more unstable and poorer, the level of uncertainty increases.
The capacity of an environment refers to the degree to which it can support growth. Rich and growing environments generate excess resources, which can be used by organization in times of difficult and relative scarcity.
When the environment is volatile, there is a high degree of unpredictable change, the environment is dynamic. In a dynamic environment, the management finds it difficult to predict accurately the environment. The factors that cause uncertainty are discussed below.
Complexity can increase greatly when specific and general forces in the environment become interconnected. The more interconnected the forces in an organization’s specific and general environments are, the more uncertainty the organization faces.
The more complex an organization’s environment, the greater the uncertainty about that environment. When an organization is complex, it becomes difficult to predict and control the flow of resources.
Environmental complexity thus is a function of the strength, number and interconnectedness of the specific and general forces that an organization has to manage. It is therefore important for organizations to reduce the number of dealings and thus reduce the complexity of its environment.
An environment is said to be stable if forces affecting the supply of resources can be predictable while the environment is said to be dynamic (unstable) if the organization cannot predict the way the forces will change over time.
In today’s world, with the existence of global markets, the environment is becoming more complex and hence more dynamic. An organization in a dynamic, unstable environment will seek ways to make the environment more predictable.
Environmental richness is a function of the amount of resources available to support an organization’s domain. In rich environments, resources are available in large quantities and therefore organizations need not compete for resources.
Therefore, the uncertainty is low. The poorer the environment, the more difficult the problems organizations face in managing resources. Environments are poor for two reasons:
- The organization may be located in a poor country or region.
- There is a high level of competition and organizations may not be able to get the resources desired.