Organization context can be thought of as "the ecology of the organization," comprising dimensions of activities and events that exist outside an organization's boundaries as well as dimensions that are unique to the organization. Contextual dimensions of an organization include the domains and dimensions of the external environment and the relationships organizations have with other organizations (i.e., the organization set) in the environment. Each of these contextual dimensions has important implications for the ways managers engage in planning, organizing and staffing, directing, and controlling the organization.
For most managers of organizations, the external context, or environment, is represented by the market for which they are trying to provide a good or service. Yet the external context can also include events and activities that do not exist in the market the organization is serving. For instance, a television station operates in a context in which viewers, advertisers, program producers, and news services all affect the broadcasting by the television station. Similarly, governmental regulations, technological changes in unrelated industries, national events, and other organizations that provide information and entertainment may also affect the operations of the television station. Contextual conditions are important because they influence the methods by which managers can effectively use resources to plan, organize and staff, direct, and control organization activities.
We can think of an organization's context as an array of interrelated conditions, perceived or not perceived' by organization managers, that influence activities and organization performance. By interrelated, we mean that the contextual conditions of an organization affect one another and, at times, managers must account for this interrelationship in their decision making. Contextual conditions that influence an organization or a manager may be fairly constant over time or they may change every hour. A change in a contextual conditionâ€”for example, entering a new marketâ€”requires an understanding of how the new environment will affect the organization and its activities. It also requires an understanding of how the environmental change will affect the role of other contextual conditions of the organization as well.
The task of the manager would be considerably less complicated if contextual conditions of the organization remained constant. Managers could then reduce the number of unique situations faced over the course of time and become quite skilled at handling recurring problems. In actuality, however, no organization exists that resides in a totally stable or unchanging context. Indeed, contextual change is occurring at a faster rather than a slower pace for most organizations today.
This observation raises an important question about our understanding of the contextual nature of an organization. What conditions would have to exist for an organization to operate in a context in which dimensions are stable over time? The answer to this question lies in viewing every organization as a system.