Organizations are OPEN SYSTEMS — meaning they are composed of complex sub-systems (inter-related parts) which are acted upon by both internal and external forces. Ultimately these forces are interactive in their affect.

A company’s “core competency” — the thing it knows and does best —  is usually the key to its success. Many companies get into trouble trying to diversify into fields they are unfamiliar with, in other words, fields outside their core competencies. The core competency is usually a function of “intellectual capital”. The intellectual capital is a collection of the knowledge, experience, wisdom and expertise of the company’s employees. Along with tangible assets, this represents the potential and the value of the company.

“Organizational culture–The dynamic system of shared values, beliefs, philosophies, experiences, customs, and norms of behavior that give an organization its distinctive character.”

“Organizational climate–how employees feel about working for the company” . Most companies that are successful have employees that feel valued, and who are able to contribute ideas and suggestions in a safe environment without undo fear of failure.

The trend today is toward flatter organizational structures, rather than the pyramidal structure of most companies in the past. These flatter structures represent middle managers and others who are able to gather information and make decisions at lower levels in the organization, rather than waiting for orders “from the top”. Much of the flattening can be attributed to better information resources in more hands, and the need to move faster to remain competitive. 

There is a movement toward boundary-less organizations, with less specific definition, able to adjust and react to changes, particularly through a continued process of learning and modifying of organizational behavior. Peter Senge has called this the “learning organization”. 

Companies need resources to operate. The primary resource is people, but information, facilities and infrastructure, machinery and equipment, materials and supplies, and finances are also needed to operate. Changes in these may be referred to as internal forces of the internal environment.

External scanning helps identify the outside environment and trends. The external environment affecting a company is not just outside competition; it is also comprised of those factors over which the company has little or no direct control such as outside owners, customers, suppliers and partners, and the labor force. The external environment may also include economic forces, legal and political forces, and socio-cultural forces, technological forces, and natural forces.

A manager must stay constantly alert to needed changes in the internal environment, and must stay abreast of possible factors coming from the external environment that will affect the company. In many cases these external factors force internal changes that the company might not otherwise make. Leadership is the ablity to help people understand and react to needed changes by setting and achieving goals.

Stakeholders in are those persons who are directly or indirectly affected by a company’s decisions and actions. The definition of stakeholders may be narrow or broad, direct or indirect. The list could include owners, employees, vendors/suppliers, customers, the local community, and society in general.