Three types of Perceived Uncertainty about the Environment: State, Effect, and Response Uncertainty
Authors: F.J. Milliken
Publication Year: 1987
Journal: MIT Sloan Management Review
The research literature on environmental uncertainty is briefly reviewed to illustrate problems and inconsistencies in conceptualizing and measuring the construct. Three types of perceived uncertainty about the environment are described and their implications for the behavior of an organization's administrators are discussed. The failure to differentiate between these types may explain some of the confusion about environmental uncertainty.
Uncertainty can be difficult to predict because of its nature but it becomes even more difficult if we can’t understand different constituents, its effect and preparedness for response. After reading the article one can directly derive that Milliken tried to explain environmental uncertainties or perceived environment uncertainties in 3 different forms namely State, Effect and Response uncertainty explaining it in different context for better conceptualization. State Uncertainty – explains inability to predict change in organizational key constituent (e.g. supplier, government, competitor, consumer etc.). A company may be heavily impacted with regulatory change by government or may get benefited at the same time but it’s difficult to predict probability of occurring such changes. Other example could be demographic change within society due to change in technology which may create unforeseen requirement for change within organization. In short there are several external factor co-exist which may be directly or indirectly act as key constituent of an organization leading to unexpected change categorized as state uncertainty by Milliken. Effect Uncertainty – One can’t be prepared for something if impact of change is unpredictable, effect uncertainty describes the inability to predict nature of impact on organization after any change. E.g. if a storm is progressing towards a city then it doesn’t give any idea about how much damage it can bring? Effect of storm can only be described well if its speed and direction (in which cities storm will travel) can be accurately predicted. In other words if cause (storm) and effect (direction towards cities) relationship is not known or unpredictable then those situations can be classified under effect uncertainty. Response Uncertainty – If we think about a situation where specific event is unpredictable then it’s equally difficult to be prepared to respond to such events when it occurs. This describes response uncertainty where Milliken explains lack of knowledge of response options and inability to predict the consequences for particular situation within organization. In nutshell Milliken tried to explain uncertainties in three different categories making it easy to understand correlate and interlink relationships among such unpredictable situations. For example State, Effect and Response uncertainties can be interlinked to each other. The topic environmental uncertainty or perceived uncertainty is itself difficult to conceptualize and understand, but one can really understand it better after going through this article. Hence overall this article was very well described to explain nature of uncertainties.