Traditionally organizational environment is defined as all elements exist outside the organizational boundaries and an organizational domain is the chosen environmental field of action.

Task environment includes the sectors, which have a direct impact on organization’s ability to achieve its goal.

Environmental complexity is a measure of the number and the degree of dissimilarity of the factors surrounding an organization.

Environmental uncertainty is defined as a function of environmental complexity and speed of change.

Principles of classical management are most fit with the organizations operating in a stable environment since achieving maximum efficiency is a prerequisite to survive. These mechanic structures are characterized by high levels of formalization, rules, procedures, guidelines, instructions and written communication, routine tasks, standardization of production processes, vertical design focus to increase control, rigid culture which favors accomplishments of predefined tasks and competitive behavior towards rivals.

Learning and creativity become vital when organizations face with turbulent environments. In this case, old-fashioned ways of organizing business may restrict learning, creativity and innovation. Turbulent environment requires natural or organic system design. Organizational structure should enable learning and creativity. Applying written rules, guidelines and instructions to employees is not a good idea in this respect. Employees should feel themselves free and powerful to become innovative and creative. Horizontal structures, which aim at enabling information share among units and employees, have to be adopted to increase learning capacity of these organizations. Management has to be tolerant towards faults and mistakes of employees to encourage them to learn.

He divided organizations into three levels: institutional level, managerial level, and technical level. Institutional level should be open because its task is to relate organization with its broader context. However, technical level should be closed and organized rationally. Managerial level should act as a mediator between the other two levels according to Thompson.

Organizations establish buffer units or departments to control uncertainty and to protect their technical cores from external effects. The units which have buffering roles are responsible for absorbing environmental uncertainty. These departments apply systematic procedures during the exchange of resources, supplies, raw materials, labor between an organization and its environment.

The units which have boundary spanning roles,

1) determine and bring information about changes in the environment into the organization and

2) send critical information to the context representing the organization.

These units act as mediators between the internal and external environments of organizations.

These organizations:

1. Participative decentralized

2. Many departments differentiated, extensive boundary spanning

3. Many integrating roles

4. Extensive planning, forecasting, high speed response

Examples: Computer, airlines, aerospace firms

These institutions

1. Formal, centralized

2. Few departments

3. No integrating roles

4. Operations oriented; low-speed response

Examples: Soft drink bottlers, food, processors, container manufacturers

The models of contingency theory provide a basic insight for management practitioners, but they do not capture all the aspects of an organizational context.

There are various strategies to manage dependency relations with the actors in the external environment:

a. Acquisition of suppliers.

b. Developing long term contracts with the critical suppliers

c. Interlocking directorates to assign some members of board of directors to the supplier firms’ boards.

d. Founding joint ventures with the critical firms in terms of resource flow.

e. Joining trade associations.

f. Lobbying.

Organizational form refers to formal structure, technology, normative order, goals and human resources of an organization. 

The term structural inertia means state of being indifferent to external changes. There are internal and external causes of structural inertia.

External constraints are legal barriers to enter and exit from markets, legitimacy considerations, collective rationality problem and high cost of acquiring information from external environment.

The term niche refers to the habitat of organizations providing resources and needs for their survival. No two populations can continuously occupy the same niche

Neo-institutional theory focuses on causes of similarity among organizational forms in the environment. Neo-institutional theory also states that similarity among organizations in terms of structure, workflows and managerial practices can be affected from different institutional forces.

1. Mimetic Isomorphism: Structural arrangements and other types of technical measures may not be sufficient when organizations try to survive in uncertain environments.

2. Coercive Isomorphism: Sometimes impact of legal environment and state institutions on some sectors may be higher than the other areas.

3. Normative Isomorphism: Professions can also play a significant role in the business life. Legitimate ways of founding a new firm or conducting business activities can also be determined by strong professional associations.

Having social ties with the key decision makers and the other organizations can enable flow of resources into an organization. Social capital is the network relations of an actor that can provide benefits. Organizations, which have broad and influential social networks, can have a significant competitive advantage over others that are having few social connections.