Environmental Uncertainty and Organizational Structure

This Lysonski et al.’s article focuses on how an organizational structure may affect the product manager -level marketing. The article is about how a firm’s structural elements can affect the marketing effort at the product manager level. It asks if the firms take into account the uncertainty of the environment while planning their product-marketing organization structure. Nowadays organizational environment is changing rapidly, and in the future the changes will be even faster. Many marketing plans will fail because of this uncertainty.

Marketing organization structure should be flexible enough to allow product manager to react quickly to market changes. When environmental uncertainty increases, the organization’s flexibility has to grow. Traditionally organization structures have been vertical, which structure is not as well equipped to changes than organizations with lateral power-sharing. So there needs to be made some changes according to organizational models (to replace the bureaucratic hierarchical organization models). When concerning a marketing plan in firms, the key agent is usually a product manager.

He/she implements and controls a plan with a management system. But in the studies (studies from 1990s) it is noticed that only 52 % of the industrial firms were satisfied with their product management concept (72 % of consumer firms were satisfied). This much unsatisfaction may be a signal, that there has been big expectations for the product management systems (implementation, coordination, structure) that have not been reached. Also the work of product managers could have sometimes been considered as a disappointment.

Organization structure The major dimensions in organization structure can be described with these three: degree of centralization of decision making, the formulation of rules and structural differentiation. Environment should affect the firm’s organizational structure. The structure-contingency paradigm offers a theory, that when uncertainty is high, the company must have a fluid structure. And also macro-organizational behavior’s empirical research has revealed that the organization structure should be dependent on the environment surrounding the firm.

The more information the managers have of their company’s stakeholders (competitors, suppliers, government etc) and sales, the more stable the company’s environment is. Less information the managers have (the more uncertain environment), harder it is to make any decisions. Not only is the understanding of the firm’s external environment important but also the understanding of internal operating environment.

This kind of understanding supports the decision making concerning external issues. Method of this study has been qualitative research. Here is one explain of the questions to measure uncertainty: “How often are you certain that a product related decision is a correct one?” The results are based on interviews of 288 product managers who reside within USA. Response rate of the survey was 55 %

Findings Product managers seem to need more authority when the marketing environment is uncertain. Authority is needed in order to adapt to the ever changing market quickly. Product managers working under high uncertainty conditions reported they had more participation. But due to this survey, they still often feel they do not have enough decision-making power. Decisions are made at a higher level which is often too slow way. But it is also noticeable that neither the other group of managers (working in certain environment) thought they had enough authority.

Concerning formalization, it seems that when environmental uncertainty arises, there are fewer rules and procedures for managers. The authors mention that the most important finding of this study is that the dimensions of organization structure in relation to manager’s activities associate with environmental uncertainty confronting the project manager.

Critique First my opinions concerning to survey. I think it is always problematic to make this kind of questionnaire because every human has one’s subjective feeling about thing so I think for example the question “How often are you certain that a product related decision is a correct one?” is very broad. People can perceive it in many different ways. And anyhow, in decision making, some people are of course more uncertain than others. So the personality should be taken into account as well.

Results In my opinion it is very logical that when it some uncertain situation and people are not so sure about their decisions, it is easier to share the authority. It gives managers more space in the situation that everything goes wrong. This survey was only made for managers working in companies in USA. If there have been product managers also from Europe, Asia and other parts, I think the results would have been different. In my opinion in USA the marketing has often the “first” role in company, but for example in northern Europe engineering is more valued. I think this would have changed at least the result concerning product managers’ authority.

“The means for the formalization score indicate that under conditions of high environmental uncertainty there seem to be significantly fewer rules and procedures for product managers.” I think this is pointing to the fact that the uncertain times there is no choice but to change the rules in some cases. I will give a radical metaphor: a war. Then people do whatever is needed to save their lives.

For me the most important finding in this survey is that product managers do not think that they have enough authority compared to their responsibility. I think this can cause some motivation problems and as it is said by Lysonski et al. (1988):” One consequence of this lack of authority may be role conflict and ambiguity for the product manager and by Lysonski et al. (1985): “Such role conflict and ambiguity can result in lower satisfaction with the job and, most importantly, lower performance”.