Organisations as tools

Transcription

1 Organisations as tools - still a useful perspective? Paper submitted for Doctoral Course DRE 1006, Norwegian School of Management BI Lars C. Kolberg Department of Public Governance Norwegian School of Management lars.c.kolberg@bi.no 1

2 1 Introduction One of the fundamental question in the field of organisational science is whether organisations can be regarded in some sense as a tool something that can produce a predictable output, or not. Although the very word organisation stems from the Greek word for tool or instrument (Brunsson & Olsen 1998:14), some authors highlight the irrationality and randomness of organisational decision making (March & Olsen 1979, Brunsson 1985). Viewing an organisation as a tool requires a rational view on how organisations work. A hammer wouldn t be very useful if it was random and unpredictable what would happen when it was applied. Likewise it may be argued that organisational design is useful only if it is possible to predict what will result from the design. In a rational system approach according to Scott (1987:22) organisations are collectivities oriented to the pursuit of relatively specific goals and exhibiting relatively highly formalized social structure. Under those conditions it will be possible with some degree of certainty to infer from goals to output the rationality ensures that goals are reached with maximum efficiency through actions (Scott 1987:31). Still, the goals and the output are not necessarily rational in any sense, merely the implementation. A hammer, again, can be used for less rational reasons than hitting nails, and the effect of using it against someone s head would not be very rational, although effective. The classic rational model of organisations, often associated with Weber s view on organisations has been challenged along all its fundamental dimensions. It is thus rare today to view an organisation as a clever designed clockwork, which the leader can use to produce a predictable output from a given input. Still though, elements of the tools perspective persist. While it seems possible to argue that the strict rational system perspective has been abandoned since the launch of Simons concept of bounded rationality (Simon 1958 [1945]), more recent organisational research still entails elements of a rational tools perspective: especially the idea that organisational structure can be designed to enhance goal attainment is still around. A quick note on the terminology and concepts used in the paper is necessary at this point. A research program in the strict Lakatosian sense consist of a hard core of assumptions, that 2

3 are unquestioned within the research program. Around the core is a protective belt of hypotheses, which may be tested and falsified. The shared and unquestioned assumptions are assumed necessary to develop knowledge (Lakatos 1970). The term research perspective has somewhat looser connotations, but still it implies that the research shares common features and assumptions. Being aware of that some of the contributions mentioned in the paper probably reach out beyond a research program in a stringent sense, they still share enough assumptions to make their inclusion fruitful. The term perspective will therefore be employed. Another distinctions should be made between rational system and tools. Some degree of rationality seems like a precondition for viewing organisations as tools. Moreover, it seems plausible to interpret a rational system more narrowly than a tool. A tool can be designed and redesigned to enhance its effect, while a rational system may be rational without involving change. Such a discussion however, stretches outside the limits of this paper. Hence, in the following, the rational system approach is simply taken as a precondition for viewing organisations as tools. This is because a tool by definition has to be rational in the sense of being predictable. The aim of this paper then, is to give a broad overview over central developments in the organisation as tools perspective. In the next section some of the major contributions are considered. The aim is not to review the literature in detail, but to give an overview before the 3rd section considers a general approach to rational systems and a more detailed account of the tools perspective. The following section (4), considers in more detail, the key concepts and mechanisms associated with the organisations as tools perspective. In section 5 critiques of the perspective and more recent developments are considered. Section 6 concludes by asking if the perspective has any relevance today. This will be illustrated by research on Public Management reforms. 2 A crude map Before diving into the concepts and mechanisms of the tools perspective, a quick overview of some of the seminal contributions in the perspective and some reflection on what has followed is presented. Research assuming that organisations are designable tools suitable for achieving goals can be traced back at least to the early decades of the 20 th century. Max 3

4 Weber is one of the earliest contributors to a generic theory of organisation. In his writings a rational systems and tools logic is evident (although it seems like he is almost as widely misunderstood as he is cited according to Scott (1992)). Weber views the bureaucratic organisation as an element in the modernisation of society. In contrast to earlier organisational forms built on traditional and charismatic authority, the bureaucracy helps securing formal rationality. Herbert Simon s work (1958 [1945]) also deserves mentioning here. Simon regards organisation to be necessary to aid cognitive limited decision makers in making decisions. Organisations should be designed to maximize the administrative efficiency. Much work in modern decision making theory builds on Simon s reasoning. Another legacy from the tools perspective is contingency theory. Contingency theory is a research program in its own right. Still, it borrows from the organisations as tools perspective. The focus is on the design of the formal structure in order to make organisations fit in different environments (Galbriath 1973). An opening up of the rational tools perspective allowing external factors to affect the organisation may lead rapidly into contingency theory. Adjusting the focus from structure to actors takes off into decision-making theory. New Institutional theory concerned with designing formal structure. Consequently, being a basic building block in various research programmes, an understanding of the key concepts and mechanisms in the tools perspective seems essential. 3 Approaches to organisations as rational tools 3.1 General approach rational systems A broad general definition of the rational system approach focuses on two distinguishing features (Scott 1987:21). 1) The organisation s goals are relatively specific and 2) The organisation has a relative high degree of formalisation. The goal specificity means that organisations are purposeful : organisations are intended to achieve specified goals. Furthermore, a clear stated goal offers criteria for choosing among different courses of action. When goals are translated into preferences for different consequences, it becomes possible to choose between different courses of action. Thus, clear goals serve as a basis for formal organisation and may be seen as a presupposition for rational behaviour. 4

5 Formalisation points to the conscious and deliberate cooperation in the organisation. A formalised structure distributes roles and tasks in the organisation, attempting to make behaviour predictable. The formalisation objectifies the organisational structure, making the organisation more or less independent of its participants an organisation without people (Bennis in Scott 1987:49). Hence, for rational system theorists, the rationality is a feature of the structure. Another consequence of a formalised structure is that it can be viewed as a means, an instrument, which can be modified as necessary to improve performance (Scott 1992:36). Goal specificity and formalisation hence, seems to be necessary conditions for viewing an organisation as a rational system and consequently a tool. With a common specific goal and a formalised structure the organisation becomes to some degree predictable. 3.2 Organisations as tools Drawing on Weber s classic work on bureaucracy, Brunsson and Olsen (1998) offers a more detailed description of what constitute the ideal type (rational) organisation. Further assumptions necessary for viewing an organisation as a tool are made explicit. The 7 features are summarised in the table below: Table 1: Organisation as tools Feature Consequence 1) Clear and definite boundaries Possible to separate the organisation from its environment 2) A central coordination system Decisions at the top guide behaviour 3) Internal differentiation Formal rules are rationally established and they matter! 4) Legitimate organisational The authority of certain positions is order conceived to be legitimate 5) Consistency between Organisational design through formal organisational characteristics structure does matter! and its outputs/outcomes 6) Malleable It is possible to design and redesign the organisation it is a tool 5

6 7) Part of a societal transformation Growth of organisations coupled with modernisation of society With these assumptions made explicit, it is possible to infer that a rational (re)design of the organisation will cause a change in output (e.g. a different level of efficiency). Such an inference seems necessary to really consider the organisation as a tool. When there is a link between the goals and decisions at the top and the behaviour on subordinate levels (2) and it is assumed that rules shape behaviour (3), that the design has an effect on the output (5) and that it is actually possible to change an organisation (6), the organisation work as a predictable tool, given that external interference is avoided (1). 4 Key concepts and mechanisms 4.1 Formalisation in closed systems The classic rational system approach has commonly, been considered a closed system approach. Since the topic of study is how the formalised structure generates or can generate rationality in the organisation, it is primarily the internal characteristics of the organisations that are focussed upon. This focus on the formalised structure within the organisation is obvious in both Scott s (1992) and Brunsson and Olsen s (1998) accounts of the perspective. When an organisation is characterised as having a high degree of formalisation, with clear boundaries, it is possible to view it as detached from external factors. Focussing upon the rationality in implementation, goals and outputs can be excluded from the analysis. Especially, a closed system approach has been attributed to the early contributors in the perspective. Taylor s Scientific Management (Taylor 1984 [1911]), and the administrative theory of Fayol and Gulick & Urwin (in Scott 1987:37) are firmly rooted in closed system thinking, viewing the organisation independent from goals and output (Thompson in Scott 1992:102f). However, the link between rational systems and closed systems is not straightforward. As often, Weber holds an interesting position. Weber has frequently been regarded as a closed system theorist (Evan 1993). Probably this view derives from Thompson s reading of early translations of Weber into English. According to Thompson (in 6

7 Scott 1992:103), Weber fails to acknowledge that policymakers can change the goals, he ignores the complexity of human nature by simply assuming that private life is separate from life as officeholder (a variant of Buchanan s romantic politics ; the assumptions that people behave differently in different spheres); and he cancels out the effect of the clients of bureaucracy. Yet, a parallel reading of the 2 nd (Scott 1987) and 3 rd (Scott 1992) edition of Scott s Organisations reveals that Scott has changed his mind about Weber. While citing Thompson s view in both, in the later edition, he adds the disclaimer that early translations of Weber wrongly read him as a closed system theorist. In the 3 rd edition therefore, Scott points to the interplay between society and organisations in Weber s work. Still though, Scott explicitly put Weber in the closed system category in his typology (Scott 1992:102, table 5-1). Recent (re)readings of Weber have recognized an open system logic. Also in later work within the tools perspective such as March and Simon (March & Simon 1993 [1958]), approaches more open to the environment are used. 4.2 Design of organisations A shared assumption for writers treating organisations as tools is the idea that the organisational structure can be designed. It is the structure that secures rationality through specification of roles and rules. This formalisation limits alternatives and defines choices for individuals (Scott 1992:54). Within this line of reasoning, the organisational structure can be designed to improve the effectiveness and efficiency of the organisation. Albeit agreeing on the importance of structure, differences exist between the contributors to the perspective regarding their approach to design of structure. Writers like Taylor and the early writers on administrative theory discussed in a prescriptive manner how to design efficient and effective organisations. Taylor s stance was that a careful planning of tasks could improve the efficiency of blue-collar workers. Gulick s concern was to develop a framework to guide reorganisations (Hammond 1990). Different organisational forms and principles and therefore change seems central. The tradition from Weber, where Simon can be reasonably included has been more concerned with how a given design can contribute to rationality in the organisation. Hence, the approach is more descriptive than prescriptive. How organisations work is therefore more important than how organisations change. 7

8 These contributors also work on different levels of analysis. The administrative theorist and Weber focus primarily on the structural level. Simon and Taylor work on the actor level, concerned with individuals decisions and tasks respectively (Scott 1987). 4.3 Organisational rationality through structure In the tools perspective rationality in organisations is achieved through organisational structure. The purpose of formal organisations is to achieve goals, as illustrated by Blau and Scott (1962:1) when they describe what organisations have in common: a number of men have become organised into a social unit an organisation that has been established for the explicit purpose of achieving certain goals. It is noteworthy that nothing needs to be said about the content of the goals or the output in such a model. It is the implementation that is rational. This is consistent then with Elster s thin form of rationality, but not with his broad form, in which the causes for action have to be rational and not only consistent (Elster 1983). In Weber s view, the bureaucratic organisation is a vehicle for formal rationality. The bureaucracy is coupled with a rational-legal mode of authority. The rational structures of bureaucracy provide the basis for formal rationality. To Weber then, the bureaucratic organisation work as a tool designed to discipline the performance of participants. Hence, Weber was more concerned with organisational effectiveness (that it has the desired effect) than with efficiency (the relation between output and input). Taylor set out to scientifically analyze and redesign procedures for individual (industrial) workers in order to maximize efficiency (Taylor 1984 [1911]). The scientific management, was even believed to settle conflicts between employers and employees, because the principles would be rational and self-evident. Fayol (in Scott 1992) and Gulick (1969 [1937]) are early proponents of administrative principle theory. The task set forth was to develop principles for organising administration. Different administrative principles were raised, and some universal laws were proposed. Among these were the unity of command principle, the spam of control principle and the departmentalization principle. Clearly the idea of the importance of organisational design was present. In fact, Hammond (1990) points to Gulick s 1937 essay as a foundation for the study of how to design bureaucratic hierarchies. 8

9 What happens in the rational perspective is a gradual relaxing of the rationality assumptions. Most notably and early, Herbert Simon (1958 [1945]) starts with rejecting the quest for universal administrative principles. In his opinion administrative principles tend to coexist with contradictory principles that seem just as plausible. Therefore he suggests that the mutually incompatible advantages must be balanced against each other. Consequently, Simon still believes in design of formal structure. In his view the rationality is organisational, not individual. According to Simon, organisations are not inhabited by the economic man. The economic man operates under full rationality and information, seeking optimal decisions. Instead Simon put forward the concept of administrative man. Administrative man does not possess complete information and rationality. Therefore, optimal decisions have to be sacrificed for adequate or satisfying ones. With bounded rationality as an assumption, both the formalisation and goal specificity are central for achieving rationality in decisions. Simon explicitly assumes goal specificity. Even though the ultimate goal in organisations may be quite vague, they work as a starting point for a means-ends chain. Each level is considered a means to the level above and a goal to the level beneath. In this hierarchy of goals different norms for correct behaviour exists on different levels, because of the differences in the nature of the tasks carried out. On the lower levels, decisions concern choice of means. Here performance program i.e. standardised responses to given stimuli, can cause the decisions to approach the rational choice models. Consequently, the limited cognitive capacity of organisational members does not imply that rationality is impossible. What is important is to design organisations that guide individual behaviour through simplifying 4.4 A typology The above-mentioned contributors to the perspective differ on the importance of organisational change, and on their level of analysis. When these two variables are combined, a multidimensional typology (Blau & Scott 1962:41) is arrived at. In the table below the early contributors are positioned according to the two variables, and the possible legacy of each contribution is pointed to: 9

10 Table 2: Approaches to structure, level of analysis and legacies from the tools perspective Rationality in organisations Design and change Actor Simon Decision making Taylor Total Quality Management Structure Weber Structural perspective Fayol, Gulick & Urwin Contingency approach The upper right cell in the table shows Weber as an antecedent of the structural perspective on organisations, a perspective arguing that organisations can be analysed in terms of architectural variables (Evan 1993:4). The lower right cell shows how the contingency theory can reasonably be said to work in the tradition from the administrative principles research, being concerned with design and change on the structural level. The lower left cell contains Taylor. His concern with design issues on an actor level is often seen as the foundation of modern management such as Total Quality Management and Best Practice. Finally, in the upper left cell, Simon is located as an originator of modern decision-making, his focus being how actors make decision in structural context 5 Discussion Indeed, to view organisations as an instrument or a tool in a strict sense as something that can be used to achieve something (as I use a spanner to increase my fingers leverage) we need numerous assumptions. Is there consensus around goals? Does anybody have the power to decide on design issues? Are decisions implemented as intended? Does structure have an effect on actor behaviour? Etc Absolute rational decision making models where organisational choice is seen as a product of predetermined preferences, predetermined alternatives and known techniques for utility maximation is rare to find in its pure form (March & Olsen 1979). Large parts of the idea of organisations as tools are therefore moderated in the literature. Still however, other parts have survived. Below, the discussion 10

11 will be centred around the closed system assumptions, views on rationality and on the possibility of designing organisations. 5.1 From closed to open systems Closed system approaches deny the possible effect of the organisations environment. As demonstrated above, the idea of closed systems might not be so closely interrelated with the tools perspective after all. Already at an early stage within the perspective, open system models were used. Weber s use of an open system approach was touched upon above. Also the work of March and Simon (1993) requires an open system understanding. They argue that performance programs can routinise organisational decision-making. However, due to uncertainty in the environment, problem solving which involves searching for alternatives cannot be standardised. In other words environmental factors influence the organisation. They also question the rational choice assumptions that goals exist prior to and external to action. They suggest instead that, actions may produce goals as readily as goals produce action (March & Simon 1993). Our knowledge and our preferences are created in part from our experience with earlier choices. Dominant or not, writers have challenged the notion of organisations as closed systems from different angles, and developed more open system approaches in different directions. Philip Selznick s (1966 [1949]) study of the Tennessee Valley Authority marks one departure from the closed system thinking. He acknowledges that organisations are initially designed to be tools for achieving goals. Then he departs by taking into account that there are nonrational dimensions of organisational behaviour that may not be controlled by formal structure: The use of organizational instrumentalities is always to some degree precarious, for it is virtual impossible to enforce automatic response to the desires or commands of those who must employ them (Selznick 1966 [1949]:10). Organisational members brings values and views with them, and the organisations confront constraints and pressures from the environment, resulting in distinctive organisational characters the organisations become infused with values, they become institutionalized. The approach to organisations, then, is opened up for external influence and irrational elements are acknowledged. The institutionalist perspective is an important legacy from Selznick. 11

12 Contingency theory also obviously draws upon an open system approach. A central element in the classical contribution of Lawrence and Lorsch (1967) is that the success of different organisational forms is dependent (contingent) upon the organisation s environment. Forms that are well adapted to the environment will survive. In addition, newer network analyses also represent open system approaches. Contact and influence are not assumed to follow institutional boundaries. Rather, networks are formed between organisations from different fields and on different levels. The Governance perspective focuses on the challenges raised when the Westminster model of the state, which resembles a closed system with welldefined roles and authority, is abandoned. Instead the state is viewed as a collection of self organising interdependent networks (Rhodes 1997). The closed system assumptions used in some of the early writings of the tools perspective appear to have been replaced by different forms of open system approaches. Scott (1992:121), recognizes that the development has proceeded in that way. To outline an explanation, one could use a modification of Lawrence and Lorsch s (1967) contingency arguments: In the early 20 th century, the organisation s environment was relative stable. Closed system approaches would then appear more plausible than in the 1950s and later on when it became increasingly obvious that organisations were situated in and dependent upon changing environments. 5.2 Rationality In his 1945 essay Herbert Simon launched an early attack demonstrating the limitations of the economic man (Miller, Hickson & Wilson 1996). The concepts of bounded rationality and satisficing were further developed in Simon s work together with March (March & Simon 1993 [1958]). With limited cognitive capacity and situated in complex organisations, the conditions of perfect rationality are not reachable for decision makers. Yet, actors intend to be rational and the behaviour is not irrational. Even though the perfect rationality of the economic man has been left, organisations are not necessarily associated with irrationality and randomness. In the introduction to the 2nd edition of Organizations, March and Simon write about the book: it is probably fair to place it in the rational section of the library the people who inhabit the book are imagined to 12

13 have reasons for what they do. Those reasons inform both their choices and their justifications for their choices (March & Simon 1993). They continue with discussing the limited consequential rationality model: That people often have reasons for what they do is quite different from assuming that they reliably select actions that would be objectively rational in the light of their goals. Thus, organisations are assumed to be procedurally rational: The intent and the way actions are justified is rational, but the actions are not necessarily rational. Such a view on rationality has become more or less the norm in modern theories on decision making (March & Simon 1993:9). In other publications together with Johan P. Olsen and with Michael Cohen, March has moved even further away from the rationality assumptions in rational choice theory. In Ambiguity and Choice in Organisations (March & Olsen 1979), they question all the fundamental ideas about organisational choice: 1) That individual preferences shape individual choice, 2) that individual behaviour shape organisational behaviour, 3) that organisational acts trigger environmental acts (responses) and 4) that environmental acts affect individual preferences. They suggest that time and attention are scarce resources for organisational members, making participation in decision situations fluid. Moreover, the organisational technology (connecting means and ends) is often not understood by the organisational members. In addition, preferences are often inconsistent and ill-defined. What the organisation provides in such a situation of ambiguous choice is a structure that specifies rights to participate in decisions. Decisions are made when the independent streams of choice opportunities, problems, participants and solutions are connected. This is the garbage can decision model initially published by Cohen, March and Olsen (1972). That model is just about as remote as possible from classic rational decision models. 5.3 Designability As mentioned above, what really unites the various approaches within the tools perspective is the belief in design of organisational structure. This is also where the legacy of the tools perspective is most visible in other approaches. The observed focus on formalisation and organisational structure in the tools perspective derive from the ideas that the structure matters for organisational processes, and that structure can be (or is) designed 13

14 In contingency theory a central element is to design organisations to fit the environment (Galbriath 1973). To be effective, organisations must adapt their structure to their environment. Deliberate design is therefore assumed possible. This rational element figures very strong in Thompson s classical work: Under norms of rationality, organizations group positions to minimize coordination costs (Thompson 1967:57). Whereas the aim in contingency theory is to achieve a fit with the task environment, New Institutionalism suggests the need for a fit with the institutional environment. Organisations must incorporate the prevailing organisational forms, practices and procedures in order to increase their legitimacy. This is not however, a rational response to increase efficiency, but rather an adoption of myths, leaving a loose coupling between organisational form and the actual day-to-day work activities (Meyer & Rowan 1977). Organisational structure can be designed, but it does not necessarily have an effect on organisational behaviour. The New Public Management (NPM) reforms in the public sector are another example of belief in the possibility of organisational design. The theoretical foundation underpinning the reforms is various economic approaches such as Transaction Cost analysis, Agency theory, Property right theory, New Institutional Economics and Public Choice (Hodge 2000). One central tenet in NPM reforms has consequently become that the public sector could and should be redesigned in the image of private sector organisations in order to be more efficient. This view clearly has connotations of organisations being tools that can be designed and redesigned. Consider as an example the definition of public management reform from an influential book written by Pollitt & Bouckaert: public management reforms consist of deliberate changes to the structure and processes of public sector organisations with the objective of getting them (in some sense) to run better (Pollitt & Bouckaert 2000:8). As should be clear by now, different approaches vary with regard to why organisations should be designed. This is illustrated in the table below: 14

15 Table 3: Design of organisations - for different reasons Perspective Tools perspective Contingency theory New Institutionalism NPM Design Design to be effective / efficient Design to fit task environment Design to be legitimate Design to be marketlike (=efficient) 6 Conclusions Today, hardly anybody believes in purely closed system approaches to organisations. Within various open system approaches, the notion of highly formalised organisations within clear and definite boundaries becomes problematic. In political science, the concept of governance has become influential. The notion of the state as the unquestioned centre of authority is often replaced by the image of the hollow-state (Rhodes 1994). When functions are lost upwards (EU) downwards (special bodies) and outwards (agencies), interdependencies in networks becomes a more dominant feature than command through hierarchies. Interdependencies imply that also the second concept of tools perspective - that of clear goals - is questioned. Nevertheless, the design of organisations, assumed possible in various approaches, requires some degree of rationality, or rather predictability. As stressed above: when an organisation is rational it is possible to predict with some certainty what outcome a given input produces. Implementation of structural changes in public sector reforms for instance, suggests that organisational design is believed to have an impact on organisational output. Changes in public organisations such as privatization, and enhanced competition are often claimed to have significant effects: When carried out sensibly, it [privatization] leads to greater productivity and better economic performance (Savas 2000:147). The most obvious advantage of competition is greater efficiency: more bang for the buck (Osborne & Gaebler 1992:80). Obviously, these and similar positive accounts, may be examples of institutionalised myths of how to organise, that are taken for granted (Meyer & Rowan 1977). Still, survey results indicate that public sector reforms are embarked upon because they are believed to have an effect on the running of government (Hodge 2000), making a government that works better and costs less (Gore 1993). 15

16 Other strands of literature stresses the possible negative impacts of this marketisation of the public sector. Especially the fear that NPM may undermine political control (Christensen & Lægreid 2002). The degree to which this will actually happens might also be a design issue (From & Kolberg 2003). It has become commonplace to assume that design from leaders and adoption to environment both can explain some of organisational change (Brunsson & Olsen 1998). Theorists like Johan P. Olsen stresses the need for an understanding of the internal dynamics of organisations to understand organisational emergence, change and demise. Deliberate change of organisational design might be possible and effective. It requires however, complex change processes with a view to the interdependencies with the environment rather than ideal type quick-fixes. Therefore, an understanding of the tools perspective and in particular its limitations, is still important. 16

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