Managers must recognize and respond to all the factors that can influence their organizations.
Navigating through the modern chaotic work environments is like trying to drive a small boat to shore during a hurricane.
Just like this small boat, the modern organizations and their managers are faced with a significant amount of factors that require immediate response.
The forces that drive this change in the business are known as internal and external environmental factors.
The internal environment
The internal environment of an organization refers to events, factors, people, systems, structures and conditions inside an organization that are generally under the direct control of the company.
Corporate mission, corporate culture, and leadership style are factors that are typically associated with an organization’s internal environment.
As such, it is the internal environment that will influence the organizational activities, decisions, behaviors and attitudes of employees.
Changes in leadership style, in the corporate mission or in culture can have an important impact on the organization.
Let’s see in detail what are the internal corporate environmental factors.
Internal environmental factors: the staff
Employees are an important part of the internal environment of an organization.
Managers must be able to manage lower-level employees and, at the same time, supervise the other factors of the internal environment.
Indeed, even when everyone is capable and talented, politics and internal conflicts can destroy a good organization from within.
Internal environmental factors: the budget
In business, even the lack of money can determine the survival – or not – of a company.
When cash resources are too limited, that can affect the number of people you can hire, the quality of equipment and the type and amount of advertising you can buy.
Internal environmental factors: Corporate culture
The internal corporate culture consists of the values, attitudes and priorities that employees live every day.
The external environment
The external environment is composed by factors that occur outside the organization but which can cause internal changes and are, for the most part, beyond the company’s control.
Customers, competition, economy, technology, political and social conditions, and resources are common external factors that influence the organization.
Even if the external environment occurs outside an organization, it can have a significant influence on its current operations, growth and long-term sustainability.
Ignoring external forces can be a damaging mistake for managers. As such, it is necessary that managers continue to monitor and adapt to the external environment.
The key is to work in order to make proactive changes rather than having to take a reactive approach and solve problems rather than preventing them.
External corporate environmental factors: The economy
In a bad economy, even a well managed organization may not be able to survive.
If customers lose their jobs or take jobs that can barely support them, they will spend less on sport activities, recreation, gifts, luxury goods, and new cars.
External corporate environmental factors: The competition
Unless the organization is a monopoly, you will always have to deal with the competition.
When you open a company, you normally find yourself fighting against established and more experienced organizations in the same sector.
On the other hand, when a company has established itself, it will find itself fighting against new organizations trying to steal a slice of the market.
External corporate environmental factors: Politics
Changes in government policy can have a huge impact on an activity.
A classic example is the tobacco industry.
Since the 1950s, cigarette manufacturers have been asked to put warning labels on their products and have lost the right to advertise on television. Smokers have less and less places where they are allowed to smoke. Therefore, the percentage of people who smoke is diminished, with a corresponding effect on the sector’s revenues.
External corporate environmental factors: Customers and suppliers
Next to employees, customers and suppliers are, in most cases, the most important people with which an organization has to deal.
Suppliers have a huge impact on costs. The weight of a given supplier depends on the scarcity of his service or product and, consequently, on the possibility of negotiation with him.
In project management, you can influence those factors that are closer and more directly related to management, such as resources or project management systems.
It will be more difficult to influence the more general factors external to the organization.
In every situations, the project manager must be aware of these factors. This will also apply to the risks of the project related to harmful environmental factors on which the project manager can not exercise any control. In any case, the project manager has to be ready to act accordingly.
Moreover, the project manager is also responsible for communicating and informing the team of factors influencing a project, both internal as well as external.
It is therefore essential that every organization knows which of the internal factors represent limiting conditions and which are the drivers of the projects for their correct management.
If you have any questions on the subject, please leave a comment.