The Internal Environment

The internal environment consists mainly of the organization’s owners, the board of directors, employees and culture.

1. Owners

Owners are people who invested in the company and have property rights and claims on the organization. Owners can be an individual or group of person who started the company; or who bought a share of the company in the share market.

They have the right to change the company’s policy at any time.

2. Board of Directors

The board of directors is the governing body of the company who are elected by stockholders, and they are given the responsibility for overseeing a firm’s top managers such as the general manager.

3. Employees

Employees or the workforce, the most important element of an organization’s internal environment, who performs the tasks of the administration. Individual employees and also the labor unions they join are important parts of the internal environment.

If managed properly they can positively change the organization’s policy. But ill-management of the workforce could lead to a catastrophic situation for the company.

4. Culture

Organizational culture is the collective behavior of members of an organization and the values, visions, beliefs, habits that they attach to their actions.

An organization’s culture plays a major role in shaping its success because culture is an important determinant of how well their organization will perform.

As the foundation of the organization’s internal environment, it plays a major role in shaping managerial behavior.

The environment irrespective of its external or internal nature, a manager must have a clear understanding of them. Normally, you would not go for a walk in the rain without an umbrella, because you understand the environment and you know when it rains you can get wet.

Similarly, if a manager does not know and understand the environment of the organization, he or she will definitively get wet or dry and the organization also in today’s fast and hyper-moving organizational environment.

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