Organization Theory: Strategy Implementation

ProcessSteven E. Phelan

October, 2008

Overview

Simulation ResultsOrganizations as machines

Strengths and limitations, implications for strategyOrganizations as organisms

Open systemsContingency theoryOrganizational ecology

Brains and CulturesPaths of Glory

Organization Theory

Developed out of sociology

Sociologists tend to believe in institutions and forces greater than the individual (that may even constrain the individual)

Management theory has tended to see managers as free agents

See Democrats on an Elevator videoGive some left and right wing interpretations

Fundamental Tension

Individual vs. Society

Choice vs Constraint

Free agency vs. Determinism

Freedom vs. Inevitability

Pre-ordained, Destiny

We will explore these boundaries in the next two classes

Why, what is the relevance to future CEOs?

Morgan on Metaphor

Morgan justifies his book as teaching metaphors

“Is there value in teaching people to see their organizations in different ways?

What, then, is truth if different people learn to see the same thing in different ways?”

Do you see an old or young woman to the right?

Organizations as

Machines

Organization as machine

Pre-determined goals and objectivesA rational structure of jobs and activitiesIts blueprint becomes an organizational chartPeople are hired to operate the machine and behave in a predetermined wayWhen an organization is seen as a machine it is expected to operate in a routinized, efficient, reliable, and predictable way

My life as a machine

“Whoever uses a machine does all his work like a machine. He who does his work like a machine grows a heart like a machine” He loses his soul!The industrial age left its mark on the imagination, thoughts, and feelings of humansOrganizational life is often routinized with the precision demanded of clockworkPeople arrive at work at a given time, perform a predetermined set of activities, rest at appointed hours, and then resume their tasks until work is over. Employees are expected to behave as if they were parts of a machineDo you agree?

Max Weber

The bureaucratic form routinizes the process of administration exactly as the machine routinizes production.

Bureaucracies provide:

Precision, speed, clarity, regularity, reliability, and efficiency

Through:

A fixed division of tasks, hierarchical supervision, and detailed rules and regulations

Purging Particularism

According to Perrow, one of the major benefits of bureaucracy is purging particularism (incl. nepotism and favoritism)

Loyalty to the king was once everything, incompetence counted for little

Tenure was a early invention that provided freedom from unjust authority, separating the office from the person further controlled it.

Nepotism

Nepotism is still a big problem in a lot of countries – e.g. Italy, Mexico, ChinaWhy is it so bad?

Because there is often little relationship between the social criteria for hiring or promoting people and the characteristics that affect performance in the organizationIt may even hurt performance (lower morale, motivation etc.)

Perrow on corruption

Corruption (or enlightened self-interest) is also a likely to accompany favoritism

Perrow argues corruption is good for the individual and sometimes even good for the organization

“one of the best ways to seize or retain control [of an organization] is to surround oneself with loyal people”

It doesn’t hurt to have a sympathetic friend in government

Bureaucracy and Corruption

Bureaucracy limits corruption:“since official goals are proclaimed, unofficial, unpublicized, and unlegitimated uses can be held up to scrutiny when they are found, and action can be taken.” “The hidden uses of organizations, always present, can be exposed and addressed”

Hierarchy

Downside to hierarchy:

Lack of motivation - ‘not my problem’

Fear of passing bad news or suggesting changes

Buck passing

Delays and sluggishness

Dictatorial/ignorant decisions by superiors

Stifling of independence and creativity

The Upside

Perrow argues that:

A lack of coordination between departments

The failure to exercise authority or be decisive, and

A lack of accountability

are, in fact, much worse problems than the problems identified on the previous slide

Do you agree?

Strengths of the machine metaphor

For Morgan, mechanistic approaches work well when:There is a straightforward task to performThe environment is stable and predictable (to enable efficient division of labor)When one produces the same product time and againWhen efficiency and precision are at a premiumWhen the human parts are compliant and behave as they have been designed

For Perrow:Bureaucracies limit particularism and self-interest, and promote coordination

Limitations of the machine metaphor

Bureaucracies have difficulty adapting to change

They are designed to achieve predetermined goals not innovation

It takes time to get an efficient division of labor through detailed job analysis

Moreover…

Mechanistic approaches result in mindless and unquestioning bureaucracy

Problems can be ignoredCommunication can be ineffectiveParalysis and inaction can lead to backlogsSenior managers can become remoteSpecialization creates myopia and NIH syndromeEmployees know what is expected of them but also what is not expected of themInitiative is discouraged

Using the machine metaphor

What is the alternative to bureaucracy when coordinating a large group of people?

To what degree is organizing as a bureaucracy a choice?

To what degree are people in a bureaucracy forced or constrained to act in certain ways?

Do bureaucracies alter what it means to be human?

What seems natural and normal and taken for granted in our work life that really isn’t?

Organizations as

Organisms

Organizations as organisms

This metaphor has its roots in biology and natural selectionPerhaps certain organizations are more “adapted” to specific environmental conditions than othersLed to concepts such as:

Open systemsOrganizational life cyclesFit and the process of adaptation to environmentOrganizational ecology and different species of organizations

Organizational Needs

The Hawthorne studies of the 1920s and 1930s shifted the focus from organization as a technical problem to the human side of organization, especially motivation

Productivity wasn’t just a function of workflow design but also of motivationMaslow’s hierarchy of needs

Physiological, security, social, ego, self-actualizing needs

Implications

The idea of integrating the needs of individuals and organizations became a powerful force

Job enrichment, autonomy, responsibility, recognition, democracy, focus on turnover and absenteeism, HRMSocio-technical systems (STS)

“The design of a technical system always has human consequences and vice versa”

Optimization involves reconciling human needs and technical efficiency

Isn’t this obvious? Why was it so controversial at theat the time (1950s)?

Open systems

Variants of the open systems philosophy became popular with managers in the 1960s with Forrester’s system dynamics and in the 1990s with Senge’s “Fifth discipline”Defined as a system with input OR an entity that changes its behavior in response to conditions outside its boundaries. Systems are rarely ever either open or closed but open to some and closed to other influences

Animals are open to food, plants to sunlightComputers and people are open to informationOrganizations and societies are open to structure

Whether or not a system has outputs does not enter the distinction between open and closed systems.

Systems without inputs are not controllable

Practical implications

Open systems theory emphasizes the importance of the environment (not seen in machine metaphor)Organizations are seen as sets of interrelated subsystems

Molecules, cells, organs, lifeforms, social systems, world, solar system, galaxy, universe

The approach encourages congruencies or alignments between different sub-systems (‘fit’)This led to the development of contingency theory

Contingency theory

There is no best way of organizing. The appropriate form depends on the kind of task or environment – many species of organizations

Management’s job is achieving alignment or fit

Fit applies not only to the org-env but also between sub-systems in an organization

First distinction

Mechanistic vs organic (Burns and Stalker)Changing technology or market conditions pose new problems and challenges that require open and flexible styles of organization and management

Lawrence and Lorsch showed that styles of organization might need to vary between organizational subunits

e.g. R&D departments need to be organized differently from production departments)How is this different from an ideal bureaucracy?

Typologies

This research led to the development of typologies of organizations:

Miles and Snow Prospectors, analyzers, defenders

Mintzberg Machine bureaucracy, divisionalized form, professional

bureaucracy, simple structure, adhocracy

BCG Cash cows, dogs, stars, question marks

Porter Cost leadership, differentiation, focus

Other developments

Organization developmentThe belief that we can diagnose the environment and thus improve internal and external fit

Expert SystemsBurton and Obel even developed an expert system to choose the right structure for an organization

Conflicts are resolved using fuzzy logicWhy am I suspicious of both OD and ES?

Organizational Ecology

Researchers have tracked the births and deaths of companies over time

Liability of newness, smallness, oldnessFaced with new types of competition or environmental circumstances, whole industries or types of organizations may come and goLegitimacy and inertia prevent one type of organization (or species) from changing into another

why are all banks, hospitals, hotels or universities so similar? Is this anti-contingency theory?

Debate: How ‘inert’ are companies in the face of competitive or environmental threats?

Thoughts

The organismic metaphor argues that organizations must be “in fit” with their environment or die

Contingency theory believes managers can adapt to remain ‘in fit’ over time

Org ecology believes that there are limits to how much influence managers have on an organization’s fitness

In either case, how much freedom do managers have?

Strengths of the Organismic Metaphor

Organizations must always pay close attention to their external environments

Survival and evolution become central concerns

Achieving congruence with the environment becomes a key managerial task

Limitations of the Organismic Metaphor

Organizations are not organismsEnvironments are not concrete

Actual vs perceived vs enactedMetaphor overstates degree of functional unity and cohesion in most organizations and top management’s ability to choose subsystem settingsCan lead to social Darwinism and other ideological traps

i.e. the best performing organizations are the fittest and thus the ‘best’No guarantee the best today will be the best tomorrow

Organizations as

Brains

Organizations as brains

The brain has both specialized functions (speech) and distributed functions (memory)Is it possible [and desirable] to design “learning organizations” that have the capacity to be as flexible, resilient, and inventive as the functioning of the brain?Is it possible [and desirable] to distribute capacities for intelligence and control throughout an enterprise so that the system as a whole can self-organize and evolve along with emerging challenges (holographic organizations)?

Applications of this metaphor in strategy

Learning organizations

Knowledge management

E-Commerce, CRM, Data mining, SCM

Virtual Organizations

Self Directed Teams

Why is information so important?

Information is needed to coordinate the firm’s resources

faster innovation of new products,

reduced duplication of efforts,

savings in research and development costs,

learning from expensive mistakes

transmission of best practice

enhanced employee satisfaction.

Knowledge management

Where should this information come from? From top management?

Centralization versus decentralization issue

From information systems? Explicit versus tacit knowledge issue

From people? Coordination versus cooperation issue

How should this knowledge be collected, stored, used? Who should have access? How should people be motivated to share information?

Garvin

In most discussions of organizational learning, 3 critical issues are left out

a plausible definition of learning organizations

clear guidelines for practice

tools for assessing the rate and level of learning

Definition

an organization skilled at creating, acquiring and transferring knowledge, and at modifying its behavior to reflect new knowledge and insights (Garvin, 1994)

Garvin: Distinctive Policies

systematic problem solving

experimentation with new approaches

learning from your own experiences and history

learning from the experiences and best practices of others

transferring knowledge quickly and efficiently throughout the organization

Garvin: Distinctive Practices

insisting on data rather than assumptions (PDCA)

an incentive system that favors risk-taking

demonstration projects that start with a clean slate

widely disseminated case studies and post-project reviews of successes and failures - concept of learning from mistakes

training in best practice

transferring and rotating staff - learning by doing

Why is effective learning so hard?

Argyris and Schon start with 2 theories of action

Theory in use (Model I) what we actually do in practice

Espoused Theory (Model II) what we would like others to think we do

Learning occurs when we explore the fit between model 1 and model 2 and correct errors

But we hate doing this! Why?

Because…

Exposing inconsistency is threatening and psychologically painfulPeople want to avoid embarrassment and blameThey want to be seen as ‘winners’ not ‘losers’However, this also prevents them from discovering the causes of their errorsRedirecting blame causes defensiveness, misunderstanding, and mistrust in organizationsExecutives are so skilled at this behavior that they see no other way of behaving - it is a tacit and automatic way of behaving

Organizational defensive routines

Design and manage situations unilaterally

Advocate our views without encouraging inquiry

Evaluate the thoughts and actions of others in ways that do not encourage testing the validity of the evaluation;

Attribute causes for whatever we are trying to understand--without necessarily validating those attributions;

Unilaterally save face by withholding information or making certain things "undiscussable" in order to minimize upsetting others or making them defensive.

Engage in defensive actions such as blaming, stereotyping, intellectualizing

Keep premises and inferences tacit, lest we lose control.

Remain ‘logical’ by suppressing emotions and conflict

Loops

Single Loop Learning

learning within existing premises of the organization (e.g. how do I make a better widget)

Double Loop Learning

Double loop learning involves surfacing and challenging deeply rooted assumptions and norms of an organization that have previously been inaccessible, either because they were unknown, or known but undiscussable. (e.g. Should we be making widgets at all.)

Triple loop learning

Requires double loop learning in a sensitive way

TLL requires trust, listening skills, sharing of power, tolerance of diverse views, and ability to resist saving face

Thoughts

If people are programmed to act defensively and ‘save face’ then are they really in control of their behavior?

Can we really overcome defensive tendencies and engage in tolerance, listening, and power sharing?

How much of this is learned behavior?

Strengths of the brain metaphor

Clear guidelines for creating a learning organizationWe learn how information technology can support organizationsWe gain a new theory of management based on knowledgeDecentralized decision making is powerful

Limitations of the brain metaphor

There may be conflict between the requirements of learning and the realities of power and control

Information is not knowledge

Assumes defenses can be overcome (easily)

Organizations as

Cultures

Organizations as Cultures

Culture: “the way we do things around here”

National cultures

Regional cultures

Organizational cultures

Departmental cultures

National cultures

Concept that management style should change to remain effective in different countriesEthnocentric vs polycentric stylesCultural dimensions:

Hofstede: masculinity, power-distance, uncertainty avoidance, individualityTrompenaars: universalism/particularism, neutral/affective, time orientation, achievement/ascription

How can we become more effective managers in global situations?

Some key questions

Where does culture come from? How is it sustained?

How do we create or change a culture?

Where does culture come from?

Leadership (setting mission/vision)Selznick (1957) says purpose-setting is essence of leadership

Shared valuesReligious groups, etc.

Stories, legends, myths, symbolsReward systemsProfessional values

e.g. engineers, doctors, accountantsHistorical accidentsMorgan makes a big deal about enactment – what is it and why is it important?Hegemony

Indoctrination of masses, coalition with powerful

Changing a culturetrigger shifts in the established mindsetbreakdown habitual behavior patterns including routines, structures and rewardsmove outside established information channelsuse data and analysis to shock peopleintroduce new people and outsidersco-opt or break adversarial political alliancesrevamp employee communication mechanismstraining and developmentuse symbolism , ritual, and enactmentreward new behavior, celebrate successprovide leadership

Thoughts

If there are patterns of behavior attributable to national, organizational, or professional culture (and indoctrination) then how free are managers to make choices?

Manager is culture-bound

Employees are culture-bound

Stakeholders are culture-bound

Strengths of the cultural metaphor

Emphasizes the symbolic significance of what we doWe learn that organization and shared meaning may be one and the sameWe see how success hinges on the creation of shared meaningLeaders and managers gain a new understanding of their impacts and rolesWe see that organizations and their environments may be enacted domains

Limitations of the cultural metaphor

The metaphor can be used to support ideological manipulation and controlCulture is holistic and cannot readily be managed by a simple checklistImportant dimensions are invisible and what is easily seen may be relatively unimportantCulture usually has a deep political dimension

Paths of Glory (1957)

“The boast of heraldry, the pomp of pow’r,And all that beauty, all that wealth e’er gave,Awaits alike th’inevitable hour.The paths of glory lead but to the grave.”

Thomas Grey “Elegy Written in a Country Churchyard”

What is the title of the film meant to convey to us?

Paths of Glory (1957)

Shot in B&W although color was economical

Cost only $900,000 to make

How does B&W change our perceptions?

Trivia

Inspired by real events

The female singer at the end would become Stanley Kubrick’s wife

Not shown in France until 1975

Questions

To what degree were the characters cogs in a bureaucratic machine (and to what degree did they have free will)?

The Condemned

Other Soldiers

Firing Squad

Judges/Prosecutor

Colonel Dax

General Mireau

General Broulard

Questions

Was there particularism in the movie? Did bureaucracy help or hinder it? How would you change the rules?

Did the generals’ “defensive routines” inhibit learning? What was the lesson to be learned?

Is it significant (from a cultural POV) that the film focused on the French army in WW1?

Questions

Kubrick described the film as “anti-authoritarian ignorance” rather than “anti-war”. Do you agree? Would modern IT have changed the level of ignorance?

What is the thematic significance of the final sequence in which French soldiers listen to a German girl sing about home?

How do modern organizations reflect similar themes?

Think about Enron