For many years environmental adaptation had been an important topic in organizations scholars (Jennings and Seaman , 1994, Hrebiniak and Joyce, 1985). However with a typical interest researchers still see a need for more exploration on how organizations should change (Carley, 1997). This paper will provide a literature study over the environmental adaptation and most important what is the role of organizational identity in the whole process.
Changes to the market regulations or technology or competition push organizations to go along transforming processes (Boeker and Goodstein, 1991). When these changes are thought of having an impact on members’ belief or personal interests, they oppose this change and refuse to adapt to the new identity (Gioia, Schultz & Corley, 2000; van Bekkum, 2009). Therefore environmental adaptation is a vital process for the organization and its members. This paper aims to contribute in this debate and to provide a specific approach to this field for organization members, decision makers or also scholars.
The main track how I am going to explore the research question about “the role of organization identity in environmental adaptation” is through external adaptation and internal one. In other words it will be examined how the organization adapts to external environment such as the market, change of regulations, laws, technology and internal environment such as how does the members of an organization adapt with the change of the identity inside it.
First it will be detailed the methodology used to find the key literature. Second a definition of main concepts will explain their general meaning and how they are used here. In other paragraphs will be explained the role of the environment and the importance of top managers for scanning it. The paper will detail the tracking of organizational adaptation offered by Greenwood and Hinings (1988) and also the two perspectives of organizational identity. Theoretical frameworks will be supported by examples of case studies provided by well-known researchers of the field. The role of identity and its combination with image, culture, and impression management is further analyzed. The paper will end with conclusion of this literature study and suggestions for later studies.
As mentioned above environmental circumstances indicate a strategy to adapt. But before going into theory and empirical insights let’s quickly see what strategy was used in this paper to find the most relevant articles while adapting to the academic setting. First, the search began in all the directories of the digital library of University of Amsterdam. Keywords used in this search were organization identity, organizational identity, organizational adaptation, organizational change and environmental adaptation, which showed in total around 400 articles in the first tables. According to setting adjustment first articles in the list were the ones cited most, what makes me believe that they have a generally known importance in this research field. The abstracts of the first 50 results for each keyword were examined and were further were chosen the articles that appeared most relevant to the topic presented in this paper.
Second, in order to have more than one source of information, the same procedure was done also in Google scholar, with the same keywords and selection, based on how the abstract seemed related to the present issue. Later, after reading some of the articles, relevant papers were tracked through “snow-ball-method”. And last, some of the articles were suggested from researchers on the field. But what was the most relevant thing found in these articles? For this answer the audience has a long but interesting path in order to explore the relationship between organizational identity and environmental adaptation.
As the world evolves and changes every day, so does the environment where different kind of organizations operate. Organizations transform over time (Carley, 1997) and this change as detailed later is often due to the external environment of the organization. The line is simple but needs to be clear. External environmental influences the company to change organizational identity. This transformation of identity needs to be accepted, applied and mirrored from organization’s members, in essence to adapt to the internal settings or environment.
By ‘external environmental’ I mean the circumstances or conditions by which the organizations is surrounded but has no or low influence such as the market, regulations, laws, technology, in other words the environmental outside the organization. On the other hand with ‘internal environment’ I mean the setting inside the organization such as its members or issues that has to do only with that company. This is how these two key words will be used in this paper.
Whereas ‘organizational adaptation’ is used here to explain how member’s of an organization suit to the new strategy of the managers. Moreover this term is defined by Jennings and Seaman (1994) as a period of gradual alters, constant, changing depending on environmental conditions. Researchers considered organizational adaptation as a process that is used by managers to settle or match their operation or structure in the light that dictates the environment (Jennings and Seaman , 1994). Three decades ago Astley and Van de Ven (1983) identified adaptation as a reaction to environmental pressure for demands.
Another crucial term that needs to be clarified is organizational identity. Organizational sociologists Albert and Whetten (1985 in Dutton & Dukerich, 1991) refer to this term as the member’s beliefs described by its central, enduring and distinctive features. Therefore answer of such questions as “Who are we as organization” or “What we stand for?” make the claim of organizational identity valid. Referring to Dutton & Dukerich (1991) it describes what members believe to be the character of their organization. Whereas drawing on organization image these authors define it as how members believe that external organization individuals think about it. This is just a brief explanation because I will go deep in the meaning and position of different group of researchers toward organizational identity.
Fox-Wolfgramm, Boal and Hunt, (1998) suggested that studies which examine change should see the case in multilevel perspective by exploring the external environment (institutional context) and the organizational context. According to them understanding organizational adaptation is limited if models of change are not studied in institutional environment at the same time with the change within an organization. This idea was supported also by other researches that asserted that ignoring this perspective leads to lack of comprehending how change was embedded (Greenwood and Hinings, 1993). Therefore, this paper is based in a multilevel approach seeing the influence of external environment, the adaptation of the environment on it by making a change in the identity. Furthermore changing the identity affect member’s belief and their adaptation with the new identity is being explored. In the end we will see that these perspectives are not divided but a chain reaction that if not followed risk to have significant consequences.
The change of the external environment is of utmost importance for the organizations. The conceptual literature on the issue suggests that the changes in the external environment direct organization toward transformation. (Boeker and Goodstein, 1991). Scanning continuously the external environment is mostly an important obligation of top managers. This later indicates also the level of adaptation inside the organization (Jennings and Seaman, 1994). They have the major task to enhance the position of their organization on the settings where they operate (Jennings and Seaman, 1994) and managing the identity organization when it comes to changing it (van Bekkum, 2009).
The way how organizations gather and process the information about the external environment is an important factor (Jennings and Seaman, 1994). Although this information is needed to determine whether an organization needs to change the strategy or structure, getting it is costly and some limit this activity (Jennings and Seaman, 1994). Such information according to Miller (1989) may be distorted from within the organization due to the sensory mechanism that exists there.
Miles (1982 in Jennings and Seaman, 1994) considers as a fundamental quality of a top manager the ability to manoeuvre his/her organization between and around the external and internal environmental barriers. The previous studies noted that adaptation is a dynamic process where organization’s position might shift as a result of external environment or strategic choices (Hrebiniak, and Joyce, 1985) or in my belief from both of them. Moreover there are still discussions between researchers whether organizational adaptation is derived environmentally or managerially (Astley and Van de Ven, 1983). Decision makers respond to these changes by creating or adapting a strategy (Dutton & Dukerich, 1991).
Researchers argued that strategic choices are important along the adaptation process
(Jennings and Seaman, 1994). By their actions, top managers are the architects of their internal environment to adapt the strategy of change (Dutton and Duncan, 1987). They dictate whether the members are active or passive observers (Jennings and Seaman, 1994). This idea is also supported from Hrebiniak and Joyce (1985) where they assert that the outcome of the struggle to adapt inside the organization depends partly on decision makers. These scholars note that adaptation is the interdependence and interaction between environmental determinism and strategic choice. In Hrebiniak and Joyce (1985) perspective each of these two elements is insufficient alone and they are needed both for a satisfactory adaptation.
In order to understand the steps how an organization adapts changes to their external environment, two researchers, Greenwood and Hinings (1988) introduced the concept of change track. They argued that as organizations move through time, they generate four main tracks that reveal how it changed, if it did. First one is “aborted excursion” that means when an organization moves temporary from the structural coherence returning later to initial archetype. “Reorientation” is the second track where an organization leaves a model and moves to another one. Further, the third track, named “unresolved excursion” is the movement from a coherent model without achieving reorientation. The last track “interta” consists on keeping the existing archetype. Greenwood and Hinings (1988) indicated that tracks are a combination of cognition and behaviour.
Based on these tracks Fox-Wolfgramm, Boal and Hunt, (1998), investigated during seven years two banks in West Texas with a stable strategic orientation but with different approaches. The study was examined their response to major changes in the banking industry due to increasing regulatory pressure that addressed discriminating problems with loans in some communities. They noticed that one bank demonstrated ‘defender model’ that is a strongly centralised formalised archetype, focused on the efficiency of their existing structure. The other bank belonged to the ‘prospector model’ which means that was more dynamic, targeting market opportunities and having as a spotlight product innovation.
The defender company, as predicted, was less opened to change because of the needs of market and had less capacity for change due to regulatory pressure. The surprising finding was that also prospectors resisted to change but for different reasons. The first bank, the defender one, opposed changing with the argument that this transformation did not fit to its identity. Alternatively the top managers of the prospector bank resisted change because they believed that their organization was fulfilling the requests of state authorities, so did not need to change.
Organizations create their own identity in order to affect organizational behaviour and when they need to transform this behaviour, it is time to change the organizational identity (Van Tonder, 2004 in van Bekkum, 2009). Examining organizations researched found that successful strategic changes were previously associated with an identity change (Gioia and Thomas, 1996 ). Despite if the change is needed, the transformation process is engaged if it appears that by doing so, the organization gets closer to its goal (Carley 1997).
Gioia, Schultz & Corley,(2000) claimed that organizational identity has to be constantly in change and must learn how to do it. They give the example of Hewlett Packard (H-P Way) that changed many times over the years. When we talk about organization identity members understand their organization identity not only from the answer of the question “who are we?” but also by strategy used, arguments, language, work place, logo or building (van Bekkum, 2009). The power of identity of an organization leads to the stronger the identity of an organization, the stronger is also the grouping themselves with that identity (van Bekkum, 2009).
Researchers suggest that organizational identity affect environmental adaptation (Dutton & Duckerich, 1991; Fox-Wolffgram, Boal & Hunt). When an organization changes due to circumstances, it is members’ core belief that influences its ability to adapt (van Bekkum, 2009). They create their beliefs in the interaction with each other, with the decision makers, with the external setting outside the organization (Hatch & Schultz, 2008 in van Bekkum, 2009).
According to van Bekkum (2009) members’ belief is more likely to be changed when decision makers institutionalize the desired identity of the organization. Such strategic adaptation, necessitate that the manager knows the capacities and abilities of the members to anticipate reactions. They focus on what is most important for the organization such as salaries, investments or work efficiency (Carely, 1997).
Two perspectives on Organizational Identity
Organizational identity has the power to mould the sense of people about decisions they make, events and how they response them (Lerpord, Ravasi, van Rekom, and Soenen, 2007). In an article published in 2006 Ravasi and Schultz analyze two different approaches to organizational identity, social actor perspective and social constructionist perspective.
The first group of researchers consider identity as a set of claims institutionally made where the organization explicitly expresses what represents. They put stress on sense giving function of claiming the identity, therefore providing members with a guide for the behaviour and a connection how other institutions should relate to them. Decision makers try to influence internal and external individuals by these statements.
On the other hand, other scholars according to Ravasi and Schultz (2006) see the identity inside organizations as shared interpretative schemes which provide meaning to member’s experience. This is the Social Constructionist Perspective that points out the sense making of the identity. So, in case of identity change top managers want from their members to have a new sense of the organization. In addition, they emphasize that by promoting new concepts decision makers response to external environmental changes. Although Social Constructionists do not deny the importance of claims, they point out that that the organizations adapt best to a changing environment when claims about the identity are associated with collective understanding.
Following Ravasi and Schultz (2006) combination of these two approaches suggest that members constantly regain shared understanding and revise institutional claims by sensegiving or sensemaking process, creating organizational identity. In my view this can be also the opposite such as organizational identity gave and made sense to the organization and it is not aroused from them. Therefore, in order to understand “responses to identity-threatening environmental changes” we should take into account both perspectives (Ravasi and Schultz 2006, p 436).
Adaption to the inside organization environment depends on members will, to accept changes managers projected. If the identity of the organization is threatened members try to resist the pressure of modifying the current identity and image (Dutton and Dukerich, 1991).
Several studies highlighted the relation between identity (who they think they are) and image (how they think they are perceived) (Gioia & Thomas, 1996; Gioia, Schultz, & Corley, 2000) and in my belief their combination affects significantly organizational adaptation.
Clearly, extensive environment changes might put on risk the sustainability of the identity (Bouchikhi & Kimberly, 2003). The response to these environment changes are influenced by perception and desired image (Ravasi and Schultz, 2006). Gioia, Schultz, and Corley (2000) noted that comparing external and internal perceptions generate attempts to modify identity or image.
Dutton and Dukerich (1991) pointed on the relevance identity and image as it was shown that they both affect organizational adaptation. Both of them are relevant also in time, past, present and future (Fox-Wolfgramm, Boal, and Hunt, 1998). By having an image or a clear changed identity of who they want to become in the future is more likely that members adapt to organization change.
In order to see the affect that has the interplay of identity and image Dutton and Dukerich (1991) examined how the New York Port of Authority faced the issue of homeless people in the end of 80’s. This is a case where the organization needed to be adopted externally and internally, so it needed to deal with the homeless people that were living at the port and they needed to adapt their members with the strategy they chose to react to this issue. Dutton and Dukerich (1991) found that the identity of Port Authority was a key role to restrict the emotions, actions, interpretations and issues. Identity and image helped on creating a model of responding to the main issue of homeless people that were living there.
New York Port Authority, managers first weakened the image of the organization whereas later they reconsidered their pushed by a deteriorating (weakening) organizational image, reconsidered their tough attitude toward homeless people. They adapted a position more social responsible and that fitted with the traditional commitment toward this part of the city.
Apart identity members are very keen about the image because gives them thoughts about others belief about the organization and later to them personally (Dutton and Dukerich ,1991)
As researchers found out members felt bad personally when the image of the company was damaged and they were motivated to take actions and change the external opinion about Port’s Authority image. They assume that identity and image are crucial to be aware how issues are perceived, emotions evoked, response generated and how are connected these behaviours.
Adaptation to internal and external environment was helped by the organizational identity and image that linked member’s thought and behaviour towards organizational actions.
In addition, consistency combined with identity and image help explain the motivation of people to accept to reject organizational initiatives (Dutton and Dukerich, 1991). This study helps understand how external image (how members think their organization is perceived) was a measure of workers inside the Port Authority of organization’s action. These projected images are also a spark of “energising” the members by inspiring another concept for the organization (Ravasi and Schultz, 2006).
Bruninge (2007) investigated the largest bank of Scandinavia in the new millennium, during radical external environment changes such as immersing of the internet banking. As Handelsbanken build its operations in local branches it seemed impossible to implement a centralising project over a totally decentralised organization without changing the bank identity. This bank had a strong identity and as mentioned above, strong identities are less likely to change or they face more resistance. The management team tried to make the changes without challenging their identity, due also to the fact that local branches were independent in actions from the headquarters.
After having resistance they made to each branch a different website and each one operated separately. In the beginning the bank was criticized from external stakeholders but essentially their strategy was successful. The present case showed that keeping the identity in environment changes may be better; at least this is the suggestion of Bruninge (2007). This was a very interesting example how the organization adapted to the external and internal environment, creating its changes based on the identity but without changing its core value. In other words the bank adopted its approach toward a market where internet banking became a necessity and on the other hand saved the autonomy of each branch, keeping the decentralised structure as previously.
Further, this is consistent with the approach of Dutton and Dukerich (1991) who indicated that resistance is high in changes that lead to conflict with identity. However other authors such as Gioa, Schultz and Corley (2000) challenged this point of view pointing that identity is fluid and that stability is created by maintaining labels. Handelsbanken study favours the idea of a stable identity because instead of sacrificing the decentralised bank identity as a demand of technological development, top managers found other solutions to keep and strengthen that identity.
Adaptation is closed to another important issue such as the organizational culture that in combination again with organizational identity shape member’s behaviour toward an external or environmental change (Dutton and Dukerich, 1991). Organization’s biography, which can be considered part of the culture, has significant influence on how they respond to change (Greenwood and Hinings, 1993). Ravasi and Schultz (2006) confirmed a dynamic connection between identity, culture and image in an organization. They defined organizational culture as a mental assumption that manages how people perceive in an appropriate behaviour.
These authors investigated one of the famous Danish video-audio producer, Bang & Olufsen, during three competetive and external environment threats in twenty five years, which addressed issues of their identity and core beliefs. As a special case, the company revised all three times its identity claim to have an environment adaptation. B&O decision makers aimed at creating new perceptions about their identity and revised the old one aiming to bring forward the sense making phase. On the other hand members put a lot of importance to the old identity and organizational cultural heritage.
In another study of Humphreys & Brown,(2002) where a British institute of high education did not get the “university status”, its members refused the change because they interpreted as their sense self, tradition and history. Both studies showed that these changes of identity interfered with organizational structures, tradition and practises.
It is really important for the model of change how issues are interpreted (Dutton & Duncan, 1987) because its members keep watching organizations actions. The idea that organization identity influence how members interpret issues and behave toward them is explored in some studies of organizational adaptation (Dutton and Dukerich, 1991). Individuals inside organizations can react and perform according to the sense they make from different issues. Identity and image create the possibility to better understand the rapport between interpretations of issues and actions of organization’s members (Dutton and Dukerich, 1991).
A major spark for altering the interpretation of issues may be the changes happening in a public issue area (Dutton and Dukerich, 1991).
Due to the large area where organizations operate strategic adaptation can be applied in different patterns. In 1997, Carley examined three types of strategic adaptation such as the change in members (hiring or firing them), linkage (reassignment to other managers) and general (where both of the first strategies could be applied. She found that organizations with complex adaptive members, performance can be better if they just change the structure.
Members can be influenced by internal and external influence what make them re-examine the identity of their organization (Ravasi and Schultz, 2006). Not only changes can create issues for the members but also issues of the members can lead to changes such as strikes, supply shortage or new technology (Dutton and Dukerich, 1991). These issues can be transformed in a problem or a support for the company which activate decisions. They can also create neglect or inaction as a response to unwanted changes and refusing to adapt (Dutton and Dukerich, 1991).
The idea presented half a century ago of Ervin Goffman (1959) in the article “The presentation of everydaylife” about impression management detail about a simple human element; managing or trying to influence others opinion. That is what Dutton and Dukerich, (1991) find in their research: members attempts to foster how others should evaluate their organization. Therefore impression management is a important key point in order to find out the link over time between organizations and environment.
The identity helps members to make sense of what the organization is (its structure) and what they do (their tasks) (Fiol, 1991, van Bekkam 2009). This sense making helps also managers for a smooth and easy adaptation of the change they might propose. In essence as organizations try to manage their external environment changes they increasingly need their members to adapt to the new strategy (Stanley, Meyer and Topolnytsky, 2005). Therefore there is not always just an order that comes probably with e-mail asking employees to adapt but more an interaction to give and get a meaning of the new transformation of the company.
Members become aware of their organization identity from several sense making sources (van Bekkam 2009). Dutton and Dukerich, (1991) put a lot of stress in the connection between self-concepts of employees, motivation to act in different issues and their organization. They consider this link as “new way of thinking about the organizational adaptation process, a perspective in which organizational impression management is an important driving force in adaptation” (p 550). According to them members are motivated to have a good image about the organization, or to improve it if needed, in relation with issues and actions.
Leaf (2009) claims that we need to understand as an adaptive mechanism the individual rationality of employees that is a product of self of self. Furthermore he claims that the efficiency and adaptation is low when the organization cannot operate for mutual advantage. So members seek also for personal motivation in suggestions for change. Dilemmas are higher when a job is frustrating and the members is uncertain that more effort will bring a better situation for him or her (Staw and Ross, 1990).
But what is the role of organizational identity in environmental adaptation? One of the answers lays on changing behaviour by changing the identity. Van Bekkam (2009) suggests that before growing up the new identity the belief of the old one has to be broken, so decision makers before sensegiving they will start on sensebreaking. He asserts that a new identity with ‘broad relevance’ has more chances to be accepted by individuals inside the organization. However actions of the members may gradually edit the new identity by putting more or less stress to specific features (Dutton and Dukerich, 1991).
The final theoretical framework presented here is the one of Chakravarthy (1982) who asserted three levels of organizational adaptation; high, medium and low level. He indicated that performance will be different in each part of adaptation. Chakravarthy (1982) suggested that organizations that are highly adapted are flexible and decentralised which is in contradiction with the example offered previously with the Scandinavian bank.
Still the question what leads to successful adaptation has ground to be explored. Flexibility is mentioned also by Carley (1997) as a pillar of successful adaptors. They tent to reassign agents, hire or fire more and making smart changes (Carley 1997). Gioia, Schultz and Corley (2000) says that good adaptation brings success, enlargement of the organization, improvement of performance, less isolated members and less refused decisions.
Members’ core belief is more likely to change when decision makers express the desired image publicly to external stakeholders (van Bekkum, 2009). On the other side when the identity is strong, there is less adaptation (Lerpord, Ravasi, van Rekom and Soenen, 2007).
For this issue Van Bekkum (2009) suggests that by creating ambiguity about the identity can influence on accepting the new one. Finally organizational scholars rarely emphasised other external factors that might affect adaptation such as size of the organization (Jennings and Seaman, 1994)., country culture or members age.
This paper argued the role of the organizational identity in environmental adaptation. As noticed it was chosen a multilevel perspective to see the affect that external and internal environment may bring to organizational adaptation. Furthermore the role of organizational identity proved of utmost important.
Through sections evidence and theory provided argued that external environment change lead to a new strategy of change that mostly concluded with the revision or radical change of organizational identity. This was the first step of the connection between organizational identity and environment adaptation. In other words the organization needed to adapt to the external environment due to change of technology, regulation or competition, and adapted to that through a new identity change.
Through the theoretical framework offered by Greenwood and Hinings (1988) and the support that with empirical data from Fox-Wolfgramm, Boal and Hunt, (1998), this paper analyzed four tracks of organizational adaptation. It became clear how prospectors and defender organizations, resisted to change for totally different reasons, both strongly connected to organizational identity during environment adaptation.
I argue here that the power of organizational identity, the identification that members have with it and its role on creating members belief create necessary connection to better understand and later implement environmental adaptation. Analyzes such as mentioned above provided us with two perspective of organizational identity. A combination of them leads to the conclusion that sensegiving and sensemaking created by institutional claims and a shared understanding have a major importance in the process of adaptation.
The contribution of Dutton and Dukerich (1991) in grounding the idea that image of an organization is closely linked with organizational identity which has a direct effect in determining how members of an organization are adapted to the new changes. The impression management, interpretation of issues and role of the culture during an organizational adaptation showed to be closely connected and highly influential in organizational identity.
Along this paper several intriguing question might have place for further explanation. First how the interpretations of decision makers about the external and internal environment affect organizational adaptation? Second does it influence members experience and contacts in an organizational adaptation? Third, do the organizations that adapt fast have a different structure of identity organization or do they follow a specific pattern? And last how organizational identity intertwines with members life and in these cases what does it mean for them identity change?
In conclusion, organizational identity plays key role on analyzing how environmental adaptation. Going through this path I tried to create a clear picture that begins from external environmental change till the final stage of organizational adaptation and as argued in every section of this process organizational identity is the bridge where this behaviour is created and supported.
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