Notes Towards a Closer Collaboration Between Organization Theory, Learning Organizations and Organizational Learning in the Search for a New Paradigm
sugarman@lesley.edu
Table of Contents:
Introduction
Part 1: Comparative Studies in Search of "The New
Organization"
Part 2: The Classical Model of Bureaucracy: Max Weber
Part 3
Part 4
References
Introduction
The old paradigm of management and organization has been found seriously deficient and a new paradigm is desperately needed. The "learning organization" (LO) may be seen to represent a major draft towards such a new paradigm, building on a body of work in organizational learning (OL). A preliminary review of this literature led me to think that it needed to be better informed about organization theory (OT); further study led me to think that OT could gain much from paying closer attention to the issues confronting both OL and LO fields. Since this report was intended initially for the use of those already working within the LO perspective, it does not review the literature of LO as such.
This paper does not present a thesis and does not reach a conclusion. It is more a collection of short essays on some key topics in the relationships between OT, OL, and the LO. Each short essay presents what are believed to be a few key ideas, linked to several key publications. It can serve as a "reader's guide" to this field, as well as a "notebook" of ideas.
There are four parts to the paper
Part One, entitled Comparative Studies in Search of "The New Organization" , reviews ten empirical studies of several organizations each, all comparing some new, high performance organizations with others based on the traditional model, and attempting to define the key differences.
Part Two contains a review of the classical model of bureaucracy, followed by reviews of two areas of research that follow broadly in this tradition.
The Classical, Weberian Model of Bureaucracy
A More Recent, Expanded, Structural Approach
The "Other Faces" of Bureaucracy
Part Three focusses on several approaches that take distinctly different, non-Weberian, approaches namely:
An Organization Learning View of Organizations (Simon-March, Argyris-Schon) .
Knowledge and the New Information Technology
The Next Level Up the System: Rolling Back Changes; Locking-in Gains
Part Four: entitled The Next Generation", features some radical and promising ideas, not as fully researched as those previously reviewed.
Comparative Studies in Search of "The New Organization"
For some thirty years observers of the business scene in the developed world have been trying to understand the changed requirements for corporate success. The successful companies of today are different from those of yesterday but what are the key factors that make the difference. What is the model of "the new organization" or the new "high performing organization". Theories of "the new organization" proliferate, many with their own names -- Adhocracy, the Flexible Organization, Organismic Organization, Virtual Organization, Network Organization, Innovative Organization, Intelligent Organization, Matrix Organization, Boundaryless Organization, etc..
Bureaucracy versus "Un-bureaucracy"
From several landmark studies of "the new organization" the conclusion emerges that the new success formulas will be some form of "un-bureaucracy" designed to escape from the limitations of the bureaucracy -- especially its resistance to innovation. Disillusion with bureaucracy peaked in the 1980's and 1990's, but it had been building up for some time. As early as 1967 Burns and Stalker studied electronics firms in the UK, finding that the more innovative and successful ones were "organismic" in their organization, in contrast to the more bureaucratic or "mechanistic" ones. In organismic companies jobs lose much of their formal definition and are constantly redefined; each employee has to understand the overall situation and strategy of the firm; interaction runs laterally as much as vertically, and communication across ranks tends to resemble consultation more than giving orders. Omniscience is not attributed to the boss at the top. Despite the apparent advantages of the organistic approach it is very hard to get managers to change, note Burns and Stalker, suggesting that the reasons have to be sought in the career concerns and the internal political dynamics of the mechanistic organization.
At just the same time Lawrence and Lorsch were studying samples of US firms in several industries, selected to represent some relatively stable and some fast-changing industries. They replicated some of the main findings of Burns and Stalker and also called attention to the fact that successful firms in a fast-changing environment became more highly differentiated (internally) as sales, production, R and D, etc. each specialized in its respective function and adapted to its specific part of the environment. A key success factor was the ability of management to manage the conflict between the different perspectives and sub-cultures of the different parts of the organization.
Rosabeth Moss Kanter published two important studies of innovation (and the lack of it) in some large U.S. corporations. In The Change Masters, (1983) she compares two sets of firms, one more and one less hospitable to change, contrasting two types of management policies, "Segmental" and "Integrative", very similar to the "mechanistic" and "organistic" types in Burns and Stalker. Three new sets of skills are needed to manage in integrative situations: 1) political skills -- persuading others to invest information, resources, and support, 2) ability to manage employee participation and working in teams, and 3) understanding of change. pp. 35-6
Successful organizations are flexible. They have more 'surface' exposed to the environment; many sensing mechanisms. More people with greater skills link organization and environment.
Strategic planning is modified "as you go". Thanks to computers, workers at all levels tend to become 'knowledge workers'. "And one key to managing knowledge workers is to let them alone to use their knowledge ." p. 56
In the traditional (segmental) corporation a sense of security was based on control of boundaries and change is a threat. In an innovating (integrative) organization, by contrast, security will come not from domination but from flexibility ... from quick reaction time, being able to cut across categories to get the best combinations of people for the job. p. 64
The political aspect of innovation. " ... requires campaigning, lobbying, bargaining, negotiating, caucusing, collaborating, and winning votes ... an idea must be sold ... other people must agree to changes in their own areas." p. 216
In When Giants Learn to Dance Kanter studies the attempts of some large companies to become more hospitable to innovation. She shows various ways in which these "giants" can set aside protected areas dedicated to cultivating innovation and examines some of the issues involved in bringing the results of these "newstreams" (not just their products and designs but the working methods they have developed) into the "mainstream". As Lawrence and Lorsch found earlier, the sharp differentiation between these two cultures and the great power of the old, "mainstream" (bureaucratic) culture makes it very difficult for the innovations to survive in the long run. The AutoCo case focuses on just such a situation (Roth and Kleiner).
Studies of some leading Japanese companies which were out-competing their older-established US rivals in the 1970's offer some powerful insights too. The framework of analysis here is to compare, on the one side, the exemplary Japanese companies with, on the other side, some generalizations about typical large U.S. corporations. The results are challenging and good fuel for the analytic fires -- though some important changes have happened since the data were collected and some observers claim that some U.S. corporations have since learned to be more like the Japanese. Or have they really?
The Art of Japanese Management, by Pascale and Athos (1981) focuses mostly on Matsushita but generalizes their conclusions to other leading Japanese companies. Their findings closely parallel those of Ouchi in Theory Z; both highlight management's dedication to building a culture that pays attention to each of seven strategic factors, both "hard" (structural) ones and "soft" (human, cultural) ones. In traditional U.S. companies, by contrast, management pays most attention to the hard strategic factors and little to the soft side. Nor does U.S. business give careful attention to culture-building over many years, finely adjusting each factor to perfect its fit with each other, while in the Matsushita case this culture-building occurred over several decades.
It was the brilliant performance of some Japanese companies in knocking some established U.S. market-dominant companies off their perch which grabbed the attention of the western management world and forced attention to the issue of management paradigms. (This was 10 to 15 years after the first scholars identified the issue.) Now the challenge for the west is not how to make our managers and corporations into facsimiles of the successful Japanese ones of the late 1970's and 1980's. Although understanding those differences is an essential first step, it is just the beginning. Context counts and history moves on. In that time period Japanese companies found a way to out-compete the U.S. companies of that time. Since then the best U.S. companies have learned a lot from those Japanese competitors and both sides are now facing serious competition from a new direction -- the "new dragons" of Asia such as South Korea, Singapore, Malaysia, Taiwan, and coastal China (Vogel). Today, both U.S. and Japanese companies need to ask themselves all over again how they can leverage the advantages and strengths they have relative to the current environment (which includes the new competitors) while overcoming their weaknesses, so as to re-make themselves organizationally in ways that bring to bear their newly-configured competencies against the weaknesses of their formidable new competitors in the new marketplace.
Other Frameworks for Studying "New Organizations"
The previous section gave a powerful start to our journey through OT. There is, however, a serious limitation to a method that uses a simple, binary typology. While the stark contrast between "bureaucratic" and "un- bureaucratic" types provides a sharp contrast and a very clear initial draft, the real world is obviously far more complex. So it is important not to remain fixated at the binary stage of thinking, but to use it as platform to climb further. So we turn next to two sources which approach the question with either less or more conceptual apparatus, but not using a binary framework. Tom Peters operates relatively free of any explicit theoretical framework, valuable for providing more primary, case-like material; Appelbaum and Batt gathered their data very widely and systematically, analysing it to find not one but several distinct models for "the new organization".
Peters is an acute observer who writes striking case studies of many "new organizations", those doing innovative and non-traditional things. Liberation Management and Living With Chaos, which both contain dozens of case studies, loosely organized around a few themes, are the work of a dedicated naturalist -- very light on analysis and even lighter on theory. They have much value as a rich and important source of data for our own analysis and theorizing.
Appelbaum and Batt, in The New American Workplace, provide yet another different methodological approach to the comparative study of new organizations. They studied much larger numbers of cases than any of the writers reviewed so far -- hundreds of companies -- through secondary analysis of published reports, including large surveys. They trade off an increase in breadth of data and the chance to find varied patterns (not just contrasts along one thematic line), against a loss in depth and the richness of case detail. As compared with the one basic model of "the new organization" provided by our previous authors, they discover six different models for what they call "the high performing organization". Two of these are found in North America; four others are mainly associated with one of the other developed nations. The non-American models are: the Swedish Socio-technical Systems, Japanese Lean Production, Italian Flexible Production, and German Diversified Quality Production.
To identify the American Models of High Performance 200 case studies were reviewed and two distinct models were found: (1) American Lean Production, exemplified by the Baldridge Award criteria, a centralized model of management, and (2) American Team Production, a model based on socio-technical systems thinking, self-managed work, and quality engineering. Differences between the two patterns center largely on differences in HR and IR policies. The Team Production model involves "decentralized decision making through collaborative teamwork" and "joint labor-management structures that allow workers to be represented in decision making at every level of the company." The role of labor unions is noteworthy in the Team Production model: " ... many of the best-practice cases of team production involve unionized workplaces ... by contrast the best-practice cases of lean production ... tend to be in nonunion settings." p. 127
Their observations on the role of unions as a valuable part of implementing the Team Production model bears reflection, since reference to unions is almost totally absent from this literature -- unless it is to mention them as an anathema. This might cause one to believe that most discussion of "new organization" models tacitly assumes the Lean Production model and not the Team one. Unions are significant in another role, for these authors, namely in the role of protecting the gains in organizational reform against later roll-backs or reversal, due to loss of executive support, or counter-attacks and sabotage from the "old guard". (See the later section of this report "Next Level Up the System" for further discussion of the roll-back problem.)
"... a high-performance system is more likely to continue to be sustained in a unionized firm in the intermediate or long run. ... they create institutional relations that are difficult to unravel." p. 128
One final contribution from Appelbaum and Batt bears on the question of organizational effectiveness -- between the two high performance models.
"Performance improvements in both cases appear impressive. These findings contradicts the view held by many ... that the Japanese model of lean production is superior to all other production models and should be applied in every industry." p. 125
References: In Search of "The New Organization"
Eileen Appelbaum & Rosemary Batt, The New American Workplace: Transforming Work Systems in the U.S., Ithaca, NY: ILR Press, 1994.
Tom Burns and J. M. Stalker, The Management of Innovation, London: Tavistock, 1966.
Rosabeth Moss Kanter, The Change Masters, New York, NY: Simon & Schuster, 1983.
------ ---- ----- When Giants Learn to Dance, New York, NY: Simon & Schuster, 1989.
Henry Mintzberg, The Structuring of Organizations, Englewood Cliffs, NJ: Prentice Hall, 1979.
William G. Ouchi, Theory Z: How American Business Can Meet the Japanese Challenge, Reading, MA: Addison Wesley, 1981.
Paul R. Lawrence and Jay W. Lorsch, Organization and Environment: Managing Differentiation and Integration, Boston, MA: Graduate School of Business Admin., Harvard University, 1967.
Richard Tanner Pascale and Anthony G. Athos, The Art of Japanese Management, New York, NY: Simon and Schuster, 1981.
Tom Peters Liberation Management, New York, NY: Knopf, 1992.
------ -------Thriving on Chaos, New York, NY: Knopf, 1987.
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The Classical Model of Bureaucracy: Max Weber
Introduction.
The discipline of OT begins with Max Weber's attempt to define the character of "bureaucracy", a form of organization found in business as well as government, religion, and many other areas, a form defined by its formal structure, and written rules. It was stable and successful over great measures of time, space, and volume, more so than any previous attempt at organization. Weber saw this kind of organization as being a loyal tool in the service of policies set at a higher level, because the employees agreed to work as faithful cogs in the great machine that is bureaucracy. The bureaucrat's employment contract (of which civil service codes would be a current example) offers great job security in exchange for loyalty to official policies and procedures; it expects that the employee will leave personal prejudices and agendas at home and perform the duties of the job impartially, objectively, without prejudice or passion, but just according to "the book". Clearly, the "mechanistic" character that Burns and Stalker identified in their less innovative firms is deeply rooted in this ideal notion of the bureaucracy.
The machine-like character of the bureaucratic model is deeply bound up with the expectation that the individuality of employees can and should be set aside while they work in their organizational roles. This means setting aside the notion that they are people with their own feelings, ideas, and intelligence, for there is no place for these in the workplace. Thus members of mutually hostile ethnic groups should be able to work together, and they should be able to treat customers/clients of the other group equitably under the law and the policies of the organization. In effect the classic model of bureaucracy wants its workers to act like robots. Two developments, however, have brought new perspectives on this idea. One was the accumulation of studies on "the other face" of bureaucracy that revealed how much actual bureaucratic organizations depended on workers stepping out of the robotic roles assigned to them to make adjustments to the ill-fitting machinery; the other development was the introduction of advanced physical robots into factories, which literally replaced many assembly-line jobs and the introduction of software applications which replaced many old clerical functions. These developments in technology force us to define better exactly what the human worker could do better than the robot and the developments in workplace sociology force us to think more clearly about the roles and potential roles of workers in providing "intelligence" and necessary adaptation of standard procedures at the front lines of the organizations. Meanwhile the long-standing concerns of upper management remain, concerns over keeping control of subordinates and ensuring that they conform to top-level policy and strategy guidelines. This is a central issue for OT: the struggle between control forces (or is it rigidity?) and creativity forces (or is it anarchy?); it is a theme which will reappear often (in various guises) in this report.
In a later section we will examine a very different model, originated by Simon and March. This approach puts the individual back in the picture, while it addresses itself very effectively to the question of how organizations maintain order and control. They are able to model very effectively how organizations establish and keep control of their employees -- through various unobtrusive controls whereby the organizations operate as interpretive systems, shaping the way their members see those situations that are critical for the organization.
The notion of OL has not been entirely popular with all OT sociologists. Many who work as management consultants share the structural bias of most U.S. managers) and, while they have seen the need to go beyond the Weberian model, they have been mostly unwilling to entertain the potential of OL models. That is unfortunate since OL can provide ways to understand much better how individuals, organizations, and environments interrelate. More of this later.
One book is an especially good companion for our journey around some landmarks of OT. It is Bidwell's Complex Organizations: A Critical Essay, a lucid overview of the development of OT seen as an evolution through many attempts by practitioners of OT to reinvent the field, in response to the various theoretical movements of organization scholars and the practical concerns of practitioners. From Weber to Simon and March, and beyond, this book will be an indispensable guide.
The Classical, Weberian Model of Bureaucracy
Bureaucratic organizations are a central feature of modern, western economies and public administration; they have been at the center of our civilization since the Industrial Revolution that began around 1800. Max Weber first called attention to the epochal significance of bureaucracy and organizational sociologists have never forgotten its profound importance to our social order. In historical context, they have noted, bureaucracy brought many advantages over older, tribal, patrimonial, political, arbitrary forms of organization that preceded it. It is more stable and dependable -- the police and fire departments are there when needed; it is less corrupt and more impartial; in an era where most workers had low skills and little readiness for factory work the bureaucratic paradigm provided discipline, direction, and hence steady output. So it became the dominant form of work organization in the modern world.
Bureaucratic organizations, formally, are defined by these main features:
- hierarchy of control
- specialization of function
- centralization of information and control
- formal rules, policies and procedures govern behavior (Bidwell, Weber.)
These key, defining features have been extensively analysed and tested empirically. We shall look briefly at three further aspects of this model.
Normative Features of Bureaucracy:
For each of the defining features of the model, it hypothesizes certain results following from specific aspects of the structure, as follows:
| Structures | Results |
| Rules | Formalization |
| Division of Labor | Specialization |
| Supervision | Hierarchy |
| Centralization | |
| Records, files | Accountability |
| Merit system of | Qualified workforce. |
| employment: | Motivation for good performance. |
| - qualifications | Person and job are separate. |
| - salaries | Personal feelings do not affect job performance. |
| - career security | Employees have rights to privacy. |
The Virtues Claimed For Bureaucracy:
In its prime, operating under favorable environmental conditions, proponents of the bureaucratic model claim the following favorable outcomes:
- Dependable. Predictable.
- Volume production.
- Efficient (unit cost).
- Fair (within the rules).
- Accountable
- "Under control".
The Problems/Weaknesses of Bureaucracy:
Critics of the model point out many, serious problems, many of which may be seen as one of the "virtues" gone too far or inappropriately matched to the needs of the situation:
- Standardization.
- Resistance to change.
- Mediocrity. Low quality outputs.
- Lack of work satisfaction.
- Loss of motivation.
- Means replace ends in de facto priorities.
- Sub-units optimize own goals, not larger goals.
- Sub-cultures and fragmentation. ("Chimneys.")
No problem of the bureaucratic approach to management is more fundamental than the problem that means replace ends as operative priorities. Sub-units sub-optimizing may be treated as a closely related phenomenon. When business-folk criticize government, they state that there is no "bottom line" accountability; when they pay attention to their own problems, they note that corporate level management experiences constant difficulties in getting the separate units and functions to collaborate in the way that is needed for corporate success. This problem has much to do with the fact that organizations depend on people, not robots, to implement their policies and programs and those people, while they may leave some of their personal "baggage" at home, are concerned with their own career security, advancement, and comfort. The key question here is: Is it possible for organizations to be structured and managed in such a way that there is substantial similarity of interest between the goals of the whole, the goals of its component parts, and the personal goals of employees? Serious new approaches, such as the LO must address this question, I believe, and must provide a plausible answer for how to achieve a better convergence of interests than is usually found.
Further analysis of the means-and-ends problem could use the structural-functional framework of Talcott Parsons, who identified four key, universal functions that must be performed by every social system. Though this scholar has currently lost the acclaim his work enjoyed in the 1960's, this is an important idea and tool. The four functions of all social systems, according to Parsons, are (AGIL):
- Adaptation to the environment (securing resources and managing external stakeholders);
- Goal attainment (managing resources to achieve "bottom line" results);
- Integration of the system's parts (managing conflicts between components);
- Latency or maintenance of the latent patterns that culturally define the system.
This AGIL model does not just apply at one level but applies at every level of the hierarchy of systems and sub-systems. Thus any system (what is considered as a system because the observer chooses to focus on that level) has all four AGIL functions at one level. But any one of these AGIL functions, also may be seen as a system in its own right, containing all four functions. While its obligation to the larger system is (for example) to promote supplier relations, or train new employees, or to produce one part of a larger product, it is also a complete system itself. This helps to understand why every sub-unit in an organization tends to focus more on its own needs and goals and less on those of its parent organization than the latter wishes. Just as all human beings tend to see themselves at the center of their subjective world, they extend this behavior to their work-groups, which become their main priority and point of reference, over the parent organization which is their legal employer.
What is a sub-system in the eyes of the parent organization (and hence incomplete) can easily redefine itself as a whole system and refocus its priorities accordingly. Until larger systems can find ways to make their sub-systems feel "whole" when they see themselves as part of the larger system, these sub-systems will continue to give the goals of the larger system less priority than they need and will over-value their own work as an end in itself, not as something which must contribute to a greater good. This problem has most definitely not been solved within the confines of the bureaucratic model; rather it is our inheritance from that tradition of management.
References: The Classical Model of Bureaucracy: Max Weber
Charles Bidwell, Complex Organizations: A Critical Essay, 3rd ed., New York, NY: Random House, 1986.
Talcott Parsons, E. Shils, and K. Naegele, (eds.), Theories of Society, New York, NY: Free Press, 1961. See especially Parsons, "An Outline of the Social System".
Max Weber, (Trans. H. H. Gerth and C. Wright Mills.) From Max Weber: Essays in Sociology, New York, NY: Oxford University Press, 1958.
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A More Recent, Expanded, Structural Approach
Mintzberg provides a typology of six major types of organization structure, which takes us beyond the binary framework of Part One. Although he correlates several structural features with these types, method of coordination seems especially useful for our purposes. This typology contains three forms of the old paradigm (bureaucratic) organization: machine organization or traditional bureaucracy (such as the factory or insurance company), the professional organization (such as the hospital or law firm), and the divisionalized organization (a cluster of the former types under common ownership and direction). Whereas machine organizations are coordinated mainly by the standardization of their work processes in policies and procedures, professional organizations are coordinated mainly through the prior training and education of their employees in their respective professions. Thus, introducing change is likely to be very different in each of these two types of "old paradigm" organizations.
Corresponding to the "new" column of the former, binary analysis, three forms of "un-bureaucracy" are found in Mintzberg's typology: the entrepreneurial organization, the innovative organization or adhocracy (the clearest case of "the new organization"), and the missionary organization (less likely to be found in business than among non-profit groups with a very ideological or religious mission and charismatic leadership). In Mintzberg's view, the innovative organization or adhocracy is the best-suited of all types to situations that demand new approaches and special products on a regular basis. Waterman in Adhocracy: The Power to Change provides a very concrete explanation of adhocracy with many practical guidelines for setting up such an organization.
Mintzberg is one of very few writers on OT who pays any attention to the life-cycle of the organization. He notes that a new business typically starts out as a "simple structure" without much formal structure, rules, or middle management Those businesses that prosper and grow often take on "professional management" which creates bureaucratic structures. The shift from entrepreneurial leadership to bureaucratic management puts a priority on efficiencies, including economies of scale, by standardizing all work processes.
In discussions of the need for innovation it is often claimed that the greatest problem with bureaucratic organizations is that they stifle the entrepreneurial spirits who wish to introduce new products, new ideas, and new methods. These discussants may then invoke the spirit of the small, entrepreneurial organization as exemplifying what is needed. Yet there is an inconsistency and important error here, for what method of coordination characterizes the entrepreneurial organization? According to Mintzberg, it is "direct supervision" -- especially by the founder-owner. Is this a work situation that brings out innovation by all -- or just the boss? More research is needed. Under what conditions does the entrepreneurial organization serve as a model for the "new organization" with continuous innovation. In a sense the entrepreneurial organization calls the entire two-column analysis into question, for it does not fit either side.
Even the innovative organization or adhocracy has its drawbacks. As Mintzberg notes, it is a costly form of organization due to its "high cost of communications". Since it is producing a high proportion of one-shot (or low volume) products there is no opportunity to capture economies of scale. Moreover, this type of organization is geared up to have its best resources readily available to the creative team -- again high costs due to idle time and underutilization. A further down-side to this type of organization is the high level of overt conflict and "political activity" that is necessary to negotiate the many boundary issues and ambiguities involved in working in a un-bureaucratic context that does not provide fixed categories and policies for everything.
References
Henry Mintzberg, The Structuring of Organizations, Englewood Cliffs, NJ: Prentice Hall, 1979.
Robert H. Waterman, Adhocracy: The Power to Change, New York, NY: Norton, 1991.
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The Other Faces of Bureaucracy
When Weber first wrote about bureaucracy his ideal type was contrasted with older types of authority based on traditional (e.g. feudal) social and legal ties or personal-charismatic relationships. For Weber, looking at the early stages of the industrial revolution, bureaucracy was more impersonal, rational, dependable, and efficient than the system that had existed earlier. Now, however, we find it less efficient and less effective than the emerging "unbureaucracies" or "new organizations". For the needs of our current environment bureaucratic (or "mechanistic") models will not suffice; what is needed is something entirely more "organismic".
Even in its own day the bureaucratic paradigm did not give an accurate picture of how the system actually operated. Studies of bureaucratic workplaces from twenty years ago began to show the limits and dysfunctions of the strict bureaucracy. Communication, especially up the hierarchy, is often systematically distorted, concealing "bad news" from the boss. The assumed expertise of higher levels to solve problems at lower levels is wrong , because they lack the information possessed by lower level workers, who may be reluctant to share it. Sometimes the failure to share the information is due to fear of punishment or the boss' refusal to listen; sometimes it is due to the secretiveness of the subordinates. Either way, studies showed that informal adaptations can develop in the nooks and crannies (unsupervised areas) of bureaucracy, creating local, unofficial (and sometimes covert) solutions to operating problems not officially recognized at higher levels. Sometimes these informal arrangements were aligned with the goals of the host organization; sometimes they served the goals of the sub-unit rather than those of the whole organization; and sometimes they involved sabotaging efforts of the administration to tighten controls on the rank and file (Blau and Meyer, Gerloff).
Often enough the informal adaptations worked (on balance) in the interests of the larger organization, solving problems effectively without any fuss or bothering the boss. Some sterling examples of "communities of practice" have been studied, showing how (for example) in one company that provides and services office machines the service technicians (who were assumed to work separately) in fact talked to each other extensively and evolved patterns of sharing stories and tips about specific machine problems and trouble-shooting methods. The body of knowledge passed around amongst these peers helped them to become more expert, more rapidly and also led to the discovery of new solutions to problems that were not even in the official repair manuals (Seely Brown and Duguid).
We do not know how widespread are these highly integrated "communities of practice", though some of the facilitating factors are becoming understood. They may be the high end of the spectrum which includes many kinds and levels of unofficial collaboration, some of it increasing productivity, some more oriented to increasing worker autonomy. Work sociologists have asked whether managers could increase the effectiveness of their organizations by encouraging and supporting such informal adaptations, but others (especially rank and filers) believe that such attempts are usually clumsy and counter-productive. Note that the Quality movement attempts to capture this widespread, informal, creative energy through its own quality improvement projects and mechanisms. This is a huge literature attempting to define the conditions for successfully tapping into and directing this "informal or native organization" of the workforce for the benefit of the official goals of the organization. Serious attempts to do so, respecting the workers, have usually run headlong into trouble with "higher authority" sooner or later, because this thinking violates important premises of the traditional mental models of management. The attempt to overcome this difficulty is perhaps the defining purpose of the LO movement.
This kind of thinking about "the other face of bureaucracy" opens many questions about whether the old paradigm is useful, even as a heuristic analytic device. It begins to look as if the notion of "formal organization" as depicted by the conventional "organization chart" or "table of organization" is more misleading than helpful, once we reflect on the facts that actual lines of communication are quite different and that local sub-cultures may support norms and mental models quite different from the official (old paradigm) model. Among sociologists the classical, Weberian model gave way to a "natural systems" model and they began to pay attention to the negotiations between (representatives of) an organization and elements of its environment as well as coalition-building and other forms of internal negotiations between components or groupings (Bidwell, Kanter). Natural systems and open systems models came to replace the classical model of bureaucracy, paving the way towards better understanding of organization dynamics and change. Another conceptual innovation, network analysis, was also necessary.
References: Other Faces of Bureaucracy
Charles Bidwell, Complex Organizations: A Critical Essay, 3rd ed., New York, NY: Random House, 1986.
Peter Blau and M. W. Meyer, Bureaucracy in Modern Society, New York, NY: Random House, 1971.
John Seely Brown and Paul Duguid, "Organizational Learning and Communities-of-Practice: Toward a Unified View of Working, Learning, and Innovation," Organization Science, Feb., 1991, pp. 40- 57.
Edwin A. Gerloff, Organizational Theory and Design, New York, NY: McGraw Hill, 1985.
Rosabeth Moss Kanter, The Change Masters, New York, NY: Simon & Schuster, 1983.
------ ---- ----- When Giants Learn to Dance, New York, NY: Simon & Schuster, 1989.
George Roth, "From Individual and Team Learning to Systems Learning," in Cavaleri and Fearon (eds.) Managing So Organizations Can Learn, Oxford, UK: Blackwell, 1996. (Also available as COL Working Paper.)
Max Weber, (Trans. H. H. Gerth and C. Wright Mills.) From Max Weber: Essays in Sociology, New York, NY: Oxford University Press, 1958.
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New paradigm thinking about organizations needs conceptual tools that go beyond those that were adequate for the old model. So, while sociologists at one time found the concepts of group, organization, boundary, and formal structure to be quite serviceable, we now see that something more is needed. The concept of organization culture has been helpful in some respects. However, a new sociological framework was needed that could cope with the fact that organizational boundaries were not a good enough guide to mapping and understanding behavior, either within organizations or between them. This is the conceptual gap that "networks" has attempted to fill, providing an approach to the analysis of relationships within an organization and relationships between members of one organization and others. Examples of networks include, for example: a firm and its suppliers; all those involved in the development of a new product design -- both within and outside the firm; all the new product innovators, involving several products; the R and D scientists in a certain industry might form a network; and all the businesses in a regional industry which do much mutual contracting might also be a network. Professionals in the same field, working for different employers have traditionally formed networks, sometimes supported by a formal association
Nohria and Eccles define network as "a fluid, flexible, and dense pattern of working relationships that cut across various intra- and inter-organizational boundaries." (p. 289) A network is defined by its ties or relationships between members. Thus A, B, and C may be members of the same network but each one's network may not share the same other members. D may be related to A and C, but not to B. To the extend that these networks converged on a common membership, we would approach a bounded group with common membership identity, as in the older model -- an organization or a community. It seems, though, that the looser model works better for analysing important situations that do not conform to the assumptions of the older model. Each person's network is built link-by-link, as opposed to the old model which assumed that one became a "member" of a group or organization and suddenly acquired a new set of fellows, even if one does not meet then all until later. Each new link creates many other potential links between those previously linked to A and those linked to B, after A and B form their link.
Networks have norms, link-by-link; their members share common interests; and there are sanctions available in case of non-conformity -- especially being cut off from the network and related benefits. Network members exchange benefits, including information, and the norms relate especially to the terms of reciprocity. Because of these norms there is trust in well-established networks. But unlike closed groups or communities with high trust factors, networks overlap members and permit considerable diversity of content. They are more effective than "pure markets" where all are strangers. They can generate trust and broker trust, through sponsorship of new members. Thus Uzzi has shown in a study of the New York garment industry how, for example, A who has found Q to be a dependable, trust-worthy partner, may recommend Q to her partner, B, who is not acquainted with Q. Based on B's trust of A and their history of doing business together, B may trust the stranger Q with a contract he would not otherwise offer to a stranger. Networks may grow through sponsorship like this. In an integrated network Q will not let B down, out of respect for the relationship with A. Thus network may be a more refined tool of analysis than the older ones of group/organization and culture.
Three books of collected articles on network analysis provide many examples of the application of this method (Nohria and Eccles, Thompson et al., and Wellman and Berkowitz). For a very thorough, up-to-date and well-organized review of the network literature see Marshall van Alstyne's paper.
References: Network Analysis
Nitin Nohria and Robert G. Eccles (eds.), Networks and Organizations: Structure, Form, and Action, Boston, MA: Harvard Business School Press, 1992.
Grahame Thompson, J. Frances, R. Levacic, and J. Mitchell (eds.), Markets, Hierarchies, and Networks: The Coordination of Social Life, London: Sage Publications and the Open University, 1991.
Brian Uzzi, "The Sources and Consequences of Embeddedness for the Economic Performance of Organizations: The Network Effect", American Sociological Review, August, 1996, pp. 674-698.
Marshall van Alstyne, "The State of Network Organization: A Survey in Three Frameworks", forthcoming in Journal of Organizational Computing.
Barry Wellman and S. D. Berkowitz (eds.), Social Structures: A Network Approach, New York, NY: Cambridge Univ. Press,1988.
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The Next Level Up the System: Rolling Back Changes; Locking-in Gains
Organizational reform projects that move the organization away from the traditional, bureaucratic model are very vulnerable to being reversed -- even after they have succeed in meeting their goals, and even after they have been officially declared "a success" by higher levels of management. The bureaucratic jungle metaphorically recaptures quite easily and quickly the clearing that was made at such great cost. The typical scenario, e.g. AutoCo (Kleiner and Roth, also Roth) is one in which the change project covers only a segment of a much larger organization. It depends upon the protection of a powerful "champion" at a senior level. Whenever that person leaves or loses commitment to the project, the forces of the larger bureaucratic culture and power structure move automatically to undermine the change-bearing divisions -- merely by operating in the ways they normally do. It is not necessary to postulate "enemies that move in to attack" in any consciously antagonistic way, though that may also be true. The innovative segment with its "un-bureaucratic" modes of operating, with disdain for traditional controls and boundaries, is threatening to large and significant groups whose careers and self-concepts are built on the old models.
Given that seemingly natural dynamic for the "old guard" and the old ways to roll back over the incursions of the new ones, what can OT and research contribute to understanding factors which may affect the outcome of this struggle to preserve the gains made by innovative elements? This analysis will take us especially to areas higher up the systemic hierarchy. The first part of such an exploration will be to consider some panaceas offered for the problem. One such approach is the "internal markets" approach, which sets up constitutional changes throughout an organization that favor innovation. It presupposes the commitment of top leadership to significant change. What the consequences of internal markets may be is still controversial but an important avenue to explore.
Two sets of advocates for the internal markets approach have published their views (each without citing the other). Both make strong arguments from "common sense" that internal markets will act like external markets to eliminate much inefficiency and they cite illustrations. They address they concern that markets carry their own inefficiencies especially in the area of coordination by claiming that recent developments in information technology have radically reduced the cost and raised the efficiency of coordination (Malone). The two books advocating for internal markets are: Gifford and Elizabeth Pinchot, The End of Bureaucracy and the Rise of the Intelligent Organization, San Francisco, CA: Berret-Koehler, 1994; and William E Halal, et al, Internal Markets, New York, NY: Wiley, 1991.
The scenario presented is a structure that organizes the corporation in the form of an internal market, headed by a chief executive and small head office, presiding over an array of semi-autonomous work groups which are free to contract internally or externally for their needs. A bill of rights guarantees the right of each component to manage its own resources within the strategic plan of the corporation, being financially accountable to head office while setting its own budget. The primary accountability of each component is to its customers, internal and external, more than to head office -- except for financial accountability to head office as provider of its capital. These basic relationships are written into the by-laws of the corporation and hence not easily changed -- though not unchangeable.
Writing in the collection edited by Halal et al., Senge argues that internal markets will not automatically solve all the problems that beset bureaucracies, since (for example) self-managing groups will be just as incompetent in systems thinking as any bureaucratic chiefs unless they have the benefit of the necessary training. Changing to internal markets may be a necessary but not sufficient condition for the improvement of organizational management. Senge is skeptical of the advantages claimed for internal markets:
"In our work over the past 15 years, we have been guided by a premise, right or wrong, that fundamental changes in how organizations work require fundamental changes in how we think and interact. Changes in the 'outer world' do not necessarily produce change in the 'inner world'. . . I am skeptical of what can be accomplished by changed in structure alone. . . What leads us to believe that lots of local managers, focused on their own profits will be any more far-sighted than a few corporate managers focused on corp. profits? Will they be any better at systems thinking? . . What good is it to have more free movement of information if people cannot discuss the information that is most important but that is also the most threatening [and undiscussable]? pp. 88-89 This is an important, questioning perspective in a book which adopts a tone of advocacy, supported by a slim base of a few successful cases. That comment applies at least as much to the Gifford book. Taken with the requisite grains of salt, though, these books can be good fodder for our analytical picnic, especially in this part of the menu where options are so thin.
Establishing internal markets requires top management to make a commitment to change across a broad front. Instituting the internal market policies makes a greater commitment than merely backing an innovative project in a single division. It is a "greater commitment" in the sense that it seems like it would be harder to reverse such a policy. But what makes policies harder or easier to change? The investment of credibility is surely one factor -- a relative one, not very strong. A company can change its own by-laws any time the directors choose and other policies more easily. But when there is a contract between the company and an autonomous entity, such as a union, or a community corporation, or a government agency, then commitment is truly strong. At the end of Part One we noted the finding of Appelbaum and Batt on the importance of unions in assuring the long-term survival of team production methods. Could there be any other stakeholder group favoring change, which had equivalent power to hold top management to a long-term commitment? How would they ensure this? Through board of director membership? Through the organized pressure of large investors, especially pension fund and other institutional investors? This is an important area for further exploration, though there is not much published.
In this section we have looked at factors within individual organizations that affect the ability of change projects to survive. We must also look beyond the individual organizations to factors in the environment that play a part in determining the possibility of organizational change. This is the realm of public policy and law, the realm of broad cultural factors and social institutions, and the realm of macro-economics. These and similar factors are taken as "givens" beyond our control by the average manager, entrepreneur, consultant or citizen. Yet, from another vantage point, they may not be given and fixed. Public policy and law, as it affects corporate taxation, workers' benefits and rights, stock trading, and the acquisition of companies changes. For example, a publicly-held U.S. company which sets aside a large sum for investment in long-term capacity building makes itself vulnerable to takeover but legal protections could be crafted to mitigate that problem. Investment analysts and writers do not understand about OL, the LO, and new thinking in organizations, in particular the importance of long-terms capacity-building in knowledge development. So that companies which do make such investments are marked down for their drop in current earnings and the cost of long term investment without any understanding of the likely eventual returns. Education of opinion-leaders is needed, perhaps, but who will pay for it?
Public opinion in a democracy is one of the factors that drives such changes. Large institutional investors are coming to play a less passive role vis a vis the management of companies in which they invest. For them to develop criteria and standards for management policy could be very influential. We need to understand better the dynamics of the larger capitalist system in which business firms play out their separate destinies. Questions need to be asked about the social obligations of corporations and the limits on profit maximization -- the ethics of business (not just ethics in business). The point of these examples is mainly to flag the importance of an area of OT that does not yet exist in any coherent way but which is desperately needed.
Gifford and Elizabeth Pinchot, The End of Bureaucracy and the Rise of the Intelligent Organization, San Francisco, CA: Berret-Koehler, 1994.
William E. Halal, Ali Geranmayeh, John Pourdehnad, (eds.), Internal Markets, New York, NY: John Wiley, 1993.
An Organization Learning View of Organizations (Simon-March, Argyris-Schon)
Another important paradigm in OT is that of Simon and March, which is well summarized by Bidwell (ch. 4). Whereas the Weberian paradigm is essentially based on formal structure, the Simon and March one, in contrast, is based on unobtrusive processes of control whereby the organization regularly controls the behavior of its employees. More important than the highly visible formal rules, job descriptions, supervisory hierarchies with control of reward systems, contracts of employment, etc. which characterize the Weber model, March and Simon show many invisible processes without which the formal mechanisms would be ineffective. Those who steer the organization over the years have many ways to structure the organization's internal environment such that the subordinate sees the right things in the right light. Supervisors giving orders is only a small part of the control process; much more powerful is this invisible shaping of decisional premises, in which many participate.
Unobtrusive control operates through many mechanisms including: uncertainty absorption, organization vocabularies, programmed tasks, standardization of materials, frequency of communication, channel usage, and interdependence of programs and units. These controls result in: limiting information content and flow (hence limiting decisional premises), setting up expectations, directing attention to certain places and away from others, limiting the search for alternatives, solutions, and setting the threshold for danger signals.
"Uncertainty absorption" includes the organization vocabulary and related mental models, outside of which communication is difficult, while inside it is easy and "natural". In effect this is control of "reality". Constructionism tells us that the individual constructs socially an understanding of reality; March and Simon show what this means when built into the structure of the typical organization. They are describing the same organizations as Weber but their model sees different phenomena. What they see is very compatible with the viewpoint of later writers on "organization culture", explaining organization stability and their resistance to change (Schein). (Bidwell, ch. 4, "The Neo-Weberian Model").
The notion of OL has not been popular with all OT sociologists. Many who work as management consultants share the structural bias of most U.S. managers and, while they have seen the need to go beyond the Weberian model, they have been mostly unwilling to entertain the potential of OL models. That is unfortunate since OL can provide ways to understand much better how individuals, organizations, and environments interrelate. This difference in viewpoint may be considered a schism in OT between structuralists (in the tradition of Weber) and others (in the tradition of March and Simon). Structuralists view themselves as the true sociologists and the others as psychologizing eclectics, but those who follow in the footsteps of Simon and March have a very important contribution to make, since they comprehend the structural view more than their critics realize and so they can link the structural factors to the interpretive processes and learning processes that give life to organizations. And, when the theorist focuses on understanding not just stability but the capability for change then this more complex model shows its value. This can be seen in the much-cited article by Daft and Weick. First, they consider the organization in relation to its environment. Organizations are open social systems that process information from the (uncertain) environment. "Building up interpretations about the environment is a basic requirement of individuals and organizations." p. 284
Organizations are on level 8 of Boulding's 9-point scale of complexity but are usually treated by researchers at much lower (mechanical) levels. At the higher levels (more complex systems) the interpretation of incoming data is an essential function. "Organization interpretation is formally defined as the process of translating events and developing shared understanding and conceptual schemes among members of upper management." p. 286 Organizations depend on individuals to do all of their work, both overt and unobtrusive, yet the organization is somehow more than just a collection of individuals. Through the roles they play in and for the organization there comes to be an "organization". When this organization achieves control over the behavior of its members, it is only through the actions of some other members. So who controls them?
"The distinctive feature of organization level information activity is sharing. . . Passing a startling observation among members ... enables managers to converge on an approximate interpretation.. . . the thread of coherence among managers is what characterizes organization interpretations.. Reaching convergence among members characterizes the act of organizing and enables the organization to interpret as a system. The third assumption is that strategic-level managers formulate the organization's interpretation. When one speaks of organization interpretation. one really means interpretation by a small group at the top of the organization hierarchy. . . Organizations can be conceptualized as a series of nested systems and each sub-system may deal with a different external sector. Upper managers bring together and interpret information for the system as a whole." pp. 284-5
The OL approach to OT puts the individual, as a thinking, questioning, adapting creature, back in the picture after the efforts of Weber to remove this element. The classical, Weberian approach to OT was a useful contribution in its day, explaining some major historical developments of the later industrial revolution. However, its over-emphasis on formal structures and policies contributed to the imbalance in modern management practice and thinking in the USA and some other countries, which overemphasizes "hard" structures and underplays the importance of "soft" structures that take much longer to establish and change (Athos and Pascale). With individuals back in the picture, no longer just loyal robots with no minds of their own, we are on our way to a more realistic OT. We can model more effectively how organizations mostly keep their employees functioning in the grooves they need them to follow, using unobtrusive controls whereby the organizations operate as interpretive systems, shaping their members' perceptions of situations, assumptions, and alternatives. But this is not the whole story for there is another implication of the OL approach. If the functioning of the organization depends on everyone following the almost-invisible grooves which include the assumptions and mental models of the members, then change may be brought about through intervening in those same processes to modify the thinking of the members and to re-align the grooves. That is the approach of Argyris and Schon, Senge, and other writers of the LO school. And there is more of importance to OT.
We have made statements such as "how organizations keep their employees functioning" or "the organization depends on everyone following the grooves." This language uses "organization" as a shorthand, but what is it really? In some strict, concrete sense, there is no such tangible entity; it is an abstraction from the sum total of all its members and their actions in role over time. But their actions today are the product of the past which has created what we called "grooves" or norms, through a process of "sociation". Conflict theorists in OT have maintained that using language such as "the organization" cloaks the fact that organizational elites are acting in their own interests, while representing them to be the interests of all. For all these reasons there has been great reluctance among sociologists in OT to entertain notions that seem to reify "the organization" -- to consider it a real entity, not just an abstraction. (In law, of course, the corporation is a very real entity, with serious powers to enter into contracts, hold property, sue and be sued, etc., when the designated officers make the appropriate moves.) OL is a very dubious concept to the true structuralist, for learning is an activity of individuals, one which even involves consciousness in many definitions. To suggest that organizations learn, therefore raises for such people all the concerns of reification. And yet later OL theorists Argyris and Schon have taken these concerns by the throat and addressed them quite effectively.
Argyris and Schon differentiate between individual learning and organization learning (OL). Members of an organization may simply follow the routines (overt and otherwise) that have been laid down for them in the organization. If they choose not simply to act like robots, they may use their intelligence to identify problems with achieving the goals of the organization by following the routines of the organization, and they may further experiment to test their ideas for a better way to do this part of their job. So far they have engaged in individual learning and, in this example it is oriented positively towards the goals of the organization. (In other examples it might be neutral -- finding ways to get more time for themselves, or negative -- ways to cheat the organization.) These are the kinds of behavior found by studies of informal patterns of adaptation or "the other face of bureaucracy". At some point this individual learning could become "OL" -- when the employee reports back to other employees and to authority figures about the improvement discovered. If , and only if, it is favorably received, validated, and adopted as an approved, improved method, and communicated to others in the organization, then it represents "OL".
OL means that the organization's normative "routines" (policies and procedures) have been modified. "The organization" has changed its routines; it has responded to new knowledge generated by one or more of its employees; the response was a decision made by other members with the authority to do so. All the elements in this example consist of individual behavior of people acting in certain roles within the organization. They acted (individually) for "the organization", an abstraction which changed as a result. This is how an organization responds to changes in its environment -- through the action of certain individual members, who individually encounter some part of the environment, for example, in the form of a customer inquiry, or a supplier problem, or a demand from a regulatory agency, or a news item that suggests a marketing opportunity. The response to this environmental stimulus may fall within the routine behavior patterns of the employee, as s/he acts on behalf of the organization. In such cases the employee does his/her job as usual.
If we wish, we may say that "the organization responded to the environment". That is true, as an abstraction and a convenient shorthand. More concretely, we should say that individual employee did so. If the stimulus suggested to the employee that there could be a better way than the usual routine, then a decision has to be made (at the individual level) whether to bring back this suggestion for organizational endorsement. (Individual employees may choose to keep their local innovations to themselves, fearing non-approval or an extended period of review when they cannot move forward on the project.) There are many issues here for organizations that want to promote more OL and innovation; but from a viewpoint of OT we should note that the concept of OL provides a key element in a theoretical model considerably more advanced than anything previously available, one in which the three key areas of individual factors, organizational factors, and environmental factors can all be connected to each other.
Structuralist concerns for optimizing the formal structure and policies can be helpful when kept in balance with other factors. Organization culture (Schein) has gained currency, focusing on some of the same factors as Simon and March's unobtrusive controls. Those who are guided by the ideas of the LO seek to change organizations so that they become more like the "un-bureaucracies" of part one and they see this transformation as requiring, not merely structural changes, but more important changes in personal thinking and habits of mastery, mental models, and modes of working and learning together as teams. They take all the concepts of unobtrusive controls and aim to use them as leverage points for change. LO practitioners show members of the organization who wish to see change how to surface, challenge, and replace the hidden assumptions. In effect, the members of the organization agree to dismantle some of the unobtrusive controls, replacing them with different, negotiated ones. This is deconstruction, not as a scholarly, critical exercise, but deconstruction in the field, reforming or transforming the organization.
References: An Organization Learning View of Organizations
Chris Argyris and Donald A. Schon, Organizational Learning II, Reading, MA: Addison Wesley, 1996.
Charles Bidwell, Complex Organizations: A Critical Essay, 3rd ed., New York, NY: Random House, 1986.
Richard L. Daft and Karl E. Weick, "Toward a Model of Organizations as Interpretation Systems", Academy of Management Review, 1984, 9:2, PP. 284-295.
Barbara Levitt and James G. March, "Organizational Learning", Annual Review of Sociology, 1988.
Edgar H. Schein, Organizatonal Culture and Leadership, 2nd ed., San Francisco, CA: Jossey Bass, 1993.
Herbert A. Simon, "Bounded Rationality and Organizational Learning", Organization Science, 2:1, (Feb., 1991), pp. 125-136.
Max Weber, (Trans. H. H. Gerth and C. Wright Mills.) From Max Weber: Essays in Sociology, New York, NY: Oxford University Press, 1958.
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Knowledge and the New Information Technology
Today's organizations face unprecedented competition, at home and abroad, forcing them to offer unprecedented levels of service -- whatever stage or sector of the productive process they find themselves. Service is a major part of every business and knowledge is a major component of good service. Hence the ability to manage knowledge, its collection, production, sharing, creation, transformation, and utilization, has become a key success factor for every organization, with major impacts on how it must be organized and managed.
"There is little question that the 'intangibles' of databases, peronal know-how, technological understanding, communication networks, market knowledge, brand acceptance, distribution capabilities, organizational flexibility and effective motivation are the true assets of most companies and the primary sources of their future income streams." (Quinn, p. 243)
The OL perspective on OT focuses attention on learning as a central function. Learning consists of constructing new knowledge (understanding) through taking in and processing information through the cognitive structures of the brain. According to Argyris, "learning" is correcting errors (including surprises, and wrong predictions). One corrects them by adjusting the data or revising the cognitive structures that produced the failed expectations. Knowledge, produced through learning, flows through organizations to become output, usually combined with physical product, and it is a part of every process. Knowledge, therefore, makes up a significant part of the fabric of the organization.
Nonaka and Takeuchi in The Knowledge Creating Company have developed a theory of the successful Japanese company that centers on the processes of creating knowledge, especially new product ideas and designs. Their theory of organization includes a theory of knowledge, to make a compelling case.
"People do not just receive new knowledge passively; they interpret it actively ... Thus what makes sense in one context can ... lose meaning when communicated to people in a different context. .. The major job of managers is to direct this confusion toward purposeful knowledge creation. Both senior and middle managers do this by providing employees with a conceptual framework ... Middle managers serve as a bridge between the visionary ideals of the top and the often chaotic reality of those on the front line of business." pp. 14-15.
Knowledge is the ultimate renewable resource that can be replicated without limit. The marginal costs of creating copies of knowledge products are very small -- especially in digital form where the marginal cost all but vanishes, but the costs of passing on significant knowledge (human understanding) to one more person (i.e. the costs of communication or education), are greater and not trivial. A major new discipline is being created to study the implications of the new information technologies and their impacts on many areas, both management in general (Applegate) and related areas such as training and development (Argyris et al., Davis and Botkin). The network analysis approach to OT was influenced by the new IT and is used to analyse communication patterns over the new digital networks. In many ways it promotes the features of the "new organization": non-hierarchical communication is made easier and collaboration among widely separated partners becomes more feasible. E-mail systems document even fleeting communications without effort. Factors such as these make it easier to organize and manage in less traditional ways and also easier to study organizations that use such technology through "listening in" on the electronic network.
Electronic networks promote network ways of thinking about organizations but do they instigate new conceptual models? The concept of knowledge as central to the fabric of organizations, that is introduced in several forms in the OL literature, opens the door to radically new ways of conceiving them. This will be the special focus of Part Three, coming next.
References: Knowledge and the New Information Technology
Lynda Applegate, "Managing in an Information Age: Overview and Syllabus", HBS course outline and bibliography, Oct., 1995. Available through HBS website.
Chris Argyris, William Bridges, Bonnie Deane, R. M. Kanter, Tom Peters, Peter M. Senge, et al., "The Future of Workplace Learning and Performance", Training and Development, May, 1994.
Stan Davis and Jim Botkin, The Monster under the Bed, New York, NY: Simon and Schuster, 1994.
Ikujiro Nonaka and H. Takeuchi, The Knowledge Creating Company, New York, NY: Oxford Univ. Press, 1996.
Henry Mintzberg and James Brian Quinn, The Strategy Process, 2nd ed.; Englewood Cliffs, NJ: Prentice Hall, 199.
James Brian Quinn, The Intelligent Enterprise: A Knowledge and Service Based Paradigm for Industry, New York, NY: Free Press, 1992.
Thomas W. Malone and John F. Rockart, "Computers, Networks, and the Corporation", Scientific American, Sept., 1991, p. 128-136.
Thomas W. Malone, "Inventing the Organizations of the 21st Century: A proposal for a new research and education initiative". MIT Sloan School, Oct., 1995.
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Part Four: The Next Generation.
Some Ideas That May Be Crucial for the Final Breakthrough to a New Paradigm
Some Key Factors: A Recap
We are moving towards the new paradigm of management, building on the work of comparative studies on "the new organization" and on various theoretical attempts to replace the classical bureaucratic model, including the work of the LO practitioners and theorists. Obviously, the new paradigm will be profoundly different from the old one. Where the old one was mechanistic and defined largely by its formal structure and policies, the new model is likely to include both hard and soft structures, with major attention to process. While the larger marketplace can be defined by process (competition) the individual firm is defined traditionally by the boundary it creates around itself and by its business theory (Drucker). The boundary was intended to cushion the pounding of the environments and the internal structure was intended to organize the activities of employees under the control of the bosses.
In a post-modern world there are far fewer fixed reference points of structure by which to orient, so network analysis becomes necessary to understand the more fluid situation. Corporations become partners in ventures that are vital to their businesses; they invest in each other. Key suppliers and customer companies enter quite freely into each other's domains and cause them to adapt methods at least as intimately as if they were part of the same company. Outsourcing replaces vertical integration, resulting in more cross-boundary dependencies. Within organizations internal boundaries are under attack.
The prime role of knowledge in modern organizations also contributes greatly to the new fluidity of structures. Knowledge becomes a crucial part of the product and the production process; and despite the efforts of intellectual property lawyers, knowledge cannot be controled at any boundaries. People seek out the knowledge they need -- whereever it may be; and people give away knowledge within networks of exchange, which may cross formal boundaries. The flows are controled more by communities of practice or profession than by company policy and legal threats. The new organizational models replace 'either-or' choices with 'both-and' situations. Enter paradox. With many more variables whirling into the picture and time-frames becoming ever-shorter, apparent chaos results -- or is it ultra-complexity with self-organizing mechanisms available, if we can find them, trust them, and use them?
New Concepts : Self-organizing systems.
Self-organizing systems thinking is one of the concepts that Margaret Wheatley in Leadership and the New Science introduces, along with other glimpses into the "new science" and suggestions or hints as to how they might apply to managing organizations. She touches on quantum physics, a subject which Danah Zohar makes the focus of her two books which attempt to extrapolate its post-Newtonian mental models to psychology and OT. A good introduction to self-organizing systems is Mitchell Waldrop, Complexity: The Emerging Science at the Edge of Order and Chaos) which provides a richly detailed account of several areas of complexity thinking, showing how it is being applied to understanding a wide range of phenomena, including biological evolution, the functioning of the human brain, the immune system, and the market economy.
The relevance of this material to LO and OL is supported in a Harvard Business Review article by David H. Freedman in which he claims, " ... the learning organization has characteristics remarkably similar to the complex adaptive systems that scientists are discovering in nature..." p. 37 The skeptical view would point out that self-organizing systems in nature seem to work at the extremes (evolution operates over vast spans of time) and seem to require very large numbers of failures for each success (as in sexual reproduction). While the marketplace as a whole generates high levels of early business failures, could the organizational level tolerate comparable levels? Then again, do we know what actual levels of failure really are within organizations? How would one define areas for study, or units? Please note this research opportunity.
"Chaords." There are two remarkable cases of large and clearly successful self-organizing systems. One is the Internet, which is widely recognized to represent a new form of organization; the other is equally well-known as a hugely successful, global business, though its unique organization is not known to many. It is the VISA credit card, a household name, yet few people know that this mega-business success story is the realization of one individual's radical vision for a new organizational form. That vision is Dee Hock's idea of the organization as a "chaord", a "chaotically organized complex" or a self-organizing system with characteristics of both order and chaos. In one sense, VISA is an old-fashioned co-op, jointly owned by its member banks and financial companies. The umbrella body (co-op) maintains a bare but effective skeleton of shared mission, common advertizing, and shared IT structure for clearing transactions. Member instititions pursue their separate and competing goals, which they may typically do by traditional, bureaucratic methods. However, the VISA organization itself is chaordic in the way it was established, with a radical re-thinking of the credit card business and a highly unconventional governance structure -- though it shapes and makes possible (but does not control) a group of businesses worth close to a trillion dollars, it is not a public stock corporation.
The self-management of work groups has been advocated from time to time and implemented in limited locations. (See Appelbaum and Batt on "the American team model".). It is not always clear how far up the organization the advocates would apply this principle, but those who seek a new paradigm should look seriously at this approach. Fred Emery is the doyen of this school of thought and consulting practice. Though he has, himself, published little to expound his views, certain of his associates have written on his behalf (Emery, Cabana). "Participative design" revises the principles of socio-technical systems while keeping the same goals. Emery calls it "a redesign of the process of redesigning organizations", a model for "democratizing decision making", based on two critical questions: 1) what decisions about control and coordination of work are necessary for effective group working? 2) to what extent can these decisions be located in the group doing the work? (Emery, p. 7)
The self-managing systems model may be considered the other side of the coin to the internal markets model. Both are opposed to the traditional, authoritarian model of management. Both are premissed on reward for results, along with responsibility for results -- just like being in business for oneself, except under the roof of the parent company and with specific, limited obligations to them. With a little hyperpole, we could contrast the new kind of relationship (under self-management or internal markets) that a particular department has with top management as being almost like they are independent contractors, as opposed to the conventional situation where the subordinate department has the status of an indentured servant who must ask for every need and who may be reassigned to some other company priority at short notice. Giving up this traditional authority is anathema to managers, however great the advantages of self-managing teams and internal markets are shown to be, as Jay W. Forrester pointed out over thirty years ago (Forrester, in Internal Markets, Halal et al., eds., pp. 52-66.)
Paradox is likely to be a key element of the new paradigm. "Everything is its opposite", states Dee Hock. A central paradox is that the leader's goal is not for the organization to be in balance or equilibrium, since energy for creative change comes from being off-balance. Or, as Tom Peters writes, you're only in control when things are out of control. Meg Wheatley considers the state of near-chaos as having special power for transformation.
The word "paradox" appears in more and more book titles and articles but that does not always indicate a real attention to paradox defined as apparent contradiction, hiding a deeper relationship between the elements in tension. To appreciate the new relationship requires thinking about the situation in quite different ways from the ways of thinking that suggest paradox and incompatibility.
Ian Mitroff who is deeply committed to a paradoxical view, complains bitterly that this interest is shared by few of those who write about management. One exception is Richard Tanner Pascale, whose book Managing on the Edge is a fine example of how a new model incorporating paradox can be developed and applied rigorously in a closely reasoned study. Many who study organizations find paradoxes but Pascale has made the concept of paradox central to his new paradigm. Managing paradox, he writes, is central to the job of top leadership. The goal of a CEO should be to manage a number of predictable paradoxes -- to manage them; not to seek to eliminate them.
The first universal paradox arises out of the conflict between two basic needs of any organization: one is the need for "Fit" or consistency between its various component parts; the other is the need for "Split" or separation when the unit gets too big for a sense of belonging. Thus the "Fit and Split" dilemma or paradox, is the struggle to reconcile (not to "balance") these two forces. Pascale next gives us the paradox of "Contend" and "Transcend". "Contend" refers to the importance of surfacing and dealing with the issues that divide the organization, instead of covering them over, as usual. "Fit and Split" always brings up such issues of contention, as do each of the "7-S" policy issues . Each of these paradoxes/conflicts/dilemmas must be managed -- not compromised. In so doing, the successful executive will "transcend" old paradigms. Thus paradox is central to the role of leadership in Pascale's OT.
Not a Conclusion but a New Framing of the Central Conundrum
Alas, I cannot end this paper with a clear conclusion as to what the new paradigm will look like. I think it will contain key elements of the Simon-March and OL approach, plus self-organizing systems; I think that knowledge creation will occupy an important role and I think that digitial technology will play two roles -- one in implementing the new way and one in providing a metaphor for understanding it. Also I think that we shall need to operate with paradox in order to understand and use the new paradigm.
One final attempt to frame the question that animates this search cannot be resisted. We need more than a theory of adhocracy or innovative organizations operating under conditions that call for a stream of new products or under start-up conditions; we need a theory that explains how organizations can exploit new products after they have been created, as well as continuing to renew them, as well as continuing to introduce new products. In other words, how can the new organization type function at all stages of the life-cycle? Or do we need a new way for organizations to collaborate across the organizational life-cycle? We need to find a way out of the traditional conundrum in which the "old guard" management protects the "cash cows" (and their personal career assets), while undermining or watering down the innovative products that they have requested. As career innovaters know, it is not enough to produce what the market wants, if you work for a traditional organization. You must also survive the organizational politics in which protecting old assets commands more power and priority than building up new assets. While the value of old assets is proven and a matter of history (double-entendre); the value of new assets is speculative. This is the risk that markets adjudicate. Organizations have come between the market and the consumer -- in some ways that are beneficial and some that are not. This is the conundrum to be solved by the new paradigm, as I now see it. Good luck to us all.
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