Internal Environment of an Organization: Definition & Elements

Internal Environment

The Internal Environment of a bank/business consists of all the factors that are directly involved with the organization. These factors have a direct impact on the business/bank’s routine activities. A business/ bank can control the factors of its internal environment.

Elements of Internal Environment

Have a look at the elements of the Internal Environment.

Owners and Shareholders,
Board of Directors,
Employees,
Organizational Culture,
Resources of the Organization and
Organization’s image/goodwill.

(a) Owners and Shareholders

Owners are people who invested in the bank/company and have property rights and claims on the organization. Owners can be the government, an individual, or a group of people who started the bank/ 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.

(b) Board of Directors

The board of directors is the governing body of the bank/company that is elected by stockholders. The Board of Directors is generally composed of the Chairman, the Managing Director, and other directors. The Board generally holds meetings periodically to analyze the bank’s performance and review ongoing activities. The Board formulates and implements the bank’s policy from time to time.

(c) Employees

Employees or the workforce are the most important element of an organization’s internal environment. They perform the regular tasks of the organization and make it function smoothly. Individual employees, Officers’ Association, and CBA 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 bank/ company.

(d) Organizational Culture

Organizational culture is the collective behavior, values, visions, beliefs, and habits of the workforce of a bank/organization. An organization’s culture plays a major role in shaping its success. Culture is an important determinant of how well the organization will perform.

(e) Resources of the Organization

A bank/organization’s resources are the most important part of its internal environment. The resources are physical resources, human resources, financial resources, informational resources, and technological resources.

Physical resources: Land and buildings, warehouses, all kinds of materials, equipment, and machinery, etc.
Financial resources: Capital, Investments, Deposits, Loans, and Advances, etc.
Human resources: Human resources include all employees of the organization, from the top level to the lowest level of the bank/organization.
Informational resources: Informational resources include usable data needed to make effective decisions.
Technological resources: IT Professionals, Information Technology, Networking, Cyber Security, etc.

(f) Organization’s image/goodwill

The reputation of an organization is a very valuable intangible asset. High reputation or goodwill develops a favorable image of the organization in the minds of the public. A negative image destroys the organization’s efforts to attract customers in a competitive world. 5th BPE 2(b), 96th BPE 3(b), 98th BPE 1(a).