What ıs the scıentıfıc explanatıon

SUMMARY OF ORGANIZATIONS AND ORGANIZING

Bahçeşehir University Page 1

Organizational TheorySUMMARY OF ORGANIZATIONS AND ORGANIZING

Reviewd by: Prof. Dr. İlhan Atilla DİCLE

Prep. by: İlhan ÇİFTÇİ

Contents

Chapter 1: The Subject is Organizations: The Verb is Organizing...........................................................4

The Elements of Organizations...........................................................................................................4

Chapter 2: Organizations as Rational Systems........................................................................................5

Taylor and Scientific Management.....................................................................................................5

Fayol and Administrative Theory........................................................................................................6

Weber and Theory of Bureaucracy and Authority..............................................................................6

Simon and Theory of Administrative Behaviour.................................................................................7

Chapter 3: Organizations as Natural System..........................................................................................9

Major Contributions To Natural System...........................................................................................11

Barnard’s Cooperative System.....................................................................................................11

”Hawthorne effect”......................................................................................................................11

Parsons’s AGIL Schema.................................................................................................................12

Selznick’s Institutional Approach..................................................................................................13

Chapter 4: Organizations as Open Systems..........................................................................................13

Organizations as Cybernetic Systems...............................................................................................14

Organizations as Loosely Coupled Systems......................................................................................15

Organizations as Hierarchical Systems.............................................................................................16

Chapter 5: Combining Perspectives, Expanding Levels.........................................................................16

Contingency Theory..........................................................................................................................16

Thompson’s Levels of Model............................................................................................................17

Scott’s Layered of Model..................................................................................................................17

Chapter 6: Conceptions of Environment..............................................................................................20

Organizational Groupings.................................................................................................................20

Environment Typologies...................................................................................................................20

Subjective vs. Objective Definitions of Environments......................................................................21

Organizations and Environments.....................................................................................................21

Chapter 7: Creating Organizations........................................................................................................22

Various Theoretical Perspectives on the Emergence of Organizations.............................................23

Chapter 8: Goals, Power and Control...................................................................................................23

Organizational Goal &The Dominant Coalition.............................................................................24

Anarchies, Adhocracies & Learning..................................................................................................26


Control Systems............................................................................................................................27

Authority......................................................................................................................................28

Chapter 9: The Dyadic Enviroment of Organization.............................................................................28

Transaction Cost Economics.............................................................................................................28

Resource Dependence Theory..........................................................................................................29

Chapter 10: Organization Environment................................................................................................30

Population Ecology...........................................................................................................................31

The New Institutional Approach.......................................................................................................31

Chapter 11: Networks In and Around Organizations............................................................................32

Interlock Networks...........................................................................................................................32

Indirectly Networks..........................................................................................................................32

Chapter 12: Strategy, Structure, and Performance: The Sociology of Organizational Strategy............32

Forces Shaping Industry Competition...............................................................................................32

Threat of entry by new competitors.............................................................................................32

Intensity of rivalry among existing competitors...........................................................................33

Chapter 13: The Rise and Transformation of the Corporate Form.......................................................37

Changing Forms of Organizations.....................................................................................................37

Railroads...........................................................................................................................................37

Corporations in the 20th Century......................................................................................................37

Chapter 14: Changing Contours of Organizations and Organization Theory........................................38

From Unitary to Multiparadigm.......................................................................................................38

From Monocultural to Multicultural Studies....................................................................................38

From Present – Centered to Longitudinal and Historical Analysis....................................................38

From Micro to Macro Units and Levels of Analysis...........................................................................39

From Structure to Process................................................................................................................39


Chapter 1: The Subject is Organizations: The Verb is Organizing

Organizations play a leading role in our modern world. This presence affcets – some would insist that

the proper term is infects – virtually every sector of ceontemporary social life. What organizations

do?, how they changed and how people have thought about them questions will be solved with this

summary.

The Elements of Organizations

Organization charts are enormously useful but convey only a small part of what we mean by

“organizations.” There have been many models that render the diversity and complexity of

organizations manageable by focusing on a few central dimensons- somewhere between an

organization chart and actual organization.

The Essential Ingredients

Essential ingredients of organizations are environment, strategy and goal, work and technology,

formal and informal organization.

Environments are all those of significant elements outside the organization that influence its ability

to survive and achieve its ends.

Strategy describes the choices organizations make about which markets or clients the organization

intends to serve, the basis on which it competes in its domain.

Works describes the tasks that the organization needs to accomplish given the goals it has set for

itself.It includes the character of the work flows and the level of interdependece among the parts of

the organization.

To focus on the technolgy of an organization is to view the organization as a place where energy is

applied to the transformation of materials, as a mechanism for transforming inputs into outputs.

Formal Organization codify more or less explicitly how they do their work and how their parts relate

to each other. Informal organization refers to the emergent characteristics of the organization that

affcet how the organization operates. This includes the organization’s culture, norms, and values:

social networks inside and outside the organization; power and politics; and the actions of leaders.


Culture describes the pattern of values, beliefs, and expectations more or less shared by the

organization’s members.

Three contrasting definitions of organizations have arisen, each associated with one of three

perspectives on organizations: the rational, natural, and open system. The first definition views

organizations as highly formalized collectivities oriented as social systems, forged by consensus or

conflict, seeking to survive. And the third definition views organizations as activities involving

coalitions of participants with varying interests embedded in wider environments. The three

definitions frame analytically useful, if partial, views of organizations based on differing ontological

ceonceptions. And all three perspectives, albeit in varying combinations, continue to guide and

influence the ways we think about organizations and organizing.

Chapter 2: Organizations as Rational Systems

The two prominent characteristics of rational systems are:

Goal Specificity:

Goals are conceptions of desired ends. In the rationalistic view, it is important that goals are clearly

defined and are not vague. Vague goals do not provide a solid basis for formal organisations.

Formalisation:

A structure is formalised:

- to the extent that the rules which are governing behaviour are precisely formulated

- to the extent that roles and role relations are prescribed independently of the personal attributes

and relations of the individuals, who are occupying these positions in the organisation.

Taylor and Scientific Management

Replace rule-of-thumb work methods with methods based on a scientific study of the tasks.

Scientifically select, train, and develop each worker rather than passively leaving them to train

themselves.

Cooperate with the workers to ensure that the scientifically developed methods are being followed.

Divide work nearly equally between managers and workers, so that the managers apply scientific

management principles to planning the work and the workers actually perform the tasks.


These principles were implemented in many factories, often increasing productivity by a factor of

three or more. Henry Ford applied Taylor's principles in his automobile factories, and families even

began to perform their household tasks based on the results of time and motion studies.

Fayol and Administrative Theory

Fayol was a qualified engineer and also held a high position industry: managing director of a large

French company. A year after the death of Taylor, he published his most famous book entitled:

General and Industrial Management

While Taylor reorganized from "bottom up", administrative theorists looked at productivity

improvements from the "top down". Early influencers were Henri Fayol (1949 trans.), Mooney and

Reiley (1939) and Gulick and Urwick (1937).

Fayol attempted to develop a science of administration for management. In contrast to a later

management expert, Peter Drucker, he believed that there was a universal science of management

applicable to commerce, industry, politics, religion, war or philanthropy. He was not a theoretician

and was one of the first practicing managers to draw up a list of management principles

Fayol thought that his principles would be useful to all types of managers. He truly advocated the

notion that if a manager wants to be successful, he only needs a certain set of management

principles. If a manager climbed the corporate ladder and reached higher positions, this manager

would depend less on technical knowledge and more knowledge of administration. When Fayol

worked on his principles in France, Taylor’s scientific management was developing “independently”

in the USA. Although he was trained as an engineer, he brilliantly realized that management of an

enterprise required skills other than those he had studied.

Weber and Theory of Bureaucracy and Authority

Max Weber wrote about the emergence of rationality in the West by comparing and contrasting

differing cultures and historical periods.

His typology on authority -- traditional, rational-legal, and charismatic -- proposed that rational-legal

authority was becoming the dominant system (supplanting traditional authority) through the

modern state and capitalism, mainly due to it's "purely technical superiority over any other form of

organization".


Traditional Authority -- resting on the established belief of sanctity of traditions and legitimacy of

those exercising authority under them

Rational-legal authority -- resting on a belief of the legality of patterns of normative rules and the

right of those elevated under those rules to issue commands

Charismatic authority -- resting on devotion to sanctity, heroism, and character of a person, and the

normative rules ordained by him or her.

Bureaucracy arose by sub-dividing the functions that the owner-managers originally did themselves

such as supervision, personnel selection, accounting and financial management, record keeping, job

design, and planning.

Simon and Theory of Administrative Behaviour

Simon (1976) clarified the processes by which goal specificity and formalization contribute to rational

behavior in organizations (Scott p. 45). He criticized Fayol's platitudes and Taylor's "economic man"

assumptions, proposing the "administrative man" who pursues his self-interests but often doesn't

know what they are, is aware of only some of the possible decision alternatives, and is willing to

settle for an adequate solution than continue looking for an optimal one

Simon distinquishes between the decisions a person makes to enter or leave an organization and the

decisions they make as a participant. Organizations simplify decisions and support participants in the

decisions they need to make.

Organizations simplify decisions by restricting the ends toward which activity is directed. Goals

supply the value premises that underly decisions. Value premises (assumptions of desirable ends )

are combined with factual premises to make decisions. The more precise the value premises, the

greater effect they have on decisions.

Participants in high positions make decisions with a higher value component, people in lower

positions make decisions with a higher factual component. The top makes "what" decisions, the

bottom "how" decisions. Choice of ends can only be validated by fiat or consensus, choice of means

empirically.

While goals are often vauge, they can serve as the starting point for a series of mean-ends chains

where one develops a set of means for the overall goal, redefines each mean as a sub-goal, and then

develops means for the sub-goal, branching until the means are activities.


Each goal in the means-end hierarchy is an end to things below it and a mean to those above it.

Activities can only be evaluated against the goals above it. Goals can be delegated to different units

which simplifies the decision making process for participants. Scott notes that "from this perspective,

an organization's hierarchy can be viewed as a congealed set of means-ends chains promoting

consistency of decisions and activities throughout the organization".

According to Perrow (1986), Simon's model stresses unobtrusive control of participants through

training, information, standard operating procedures, etc. -- channeling of attention and information.

Simon also notes the cognitive limitations of decision makers through his and March's concept of

bounded rationality (March and Simon, 1958).

Overall, Simon helps us understand how the decisions of hundreds or thousands of individuals in an

organization can be directed toward ultimate orgnizational goals.

When comparing the various schools, important differences in the approach to the normative

structure can be identified:

Taylor: pragmatic approach, bottom up –method

Administrative theory group: lees pragmatic & more prescriptive, belief in general

principles

Weber was less concerned with discovering methods to improve organisation but

was trying to define characteristics of the bureaucratic structures

The 4 schools used different levels of analysis, Taylor and Simon used the social

psychological level, while Fayol (administrative theory group) and Weber worked at

structural level

Characteristics of the rationalistic perspective:

Control is the means of challenging and co-ordinating behaviour in order to achieve

specified goals

Structure is celebrated, action is ignored


Chapter 3: Organizations as Natural System

Organizations are collectivities (not existed to rational)

Specificity and Formalization as characteristics differentiating organizations from other types

of collectivities (rational) but shared with the social group (natural)

Organizational goals and their relation to the behavior of participants are much more

problematic.

Two general themes characterize of organizational goals:

There is frequently a disparity between the stated and the “real” goals pursued by

organizations.

When the stated goals are actually being pursued, they are never the only goals governing

participants’ behavior

Two Types of Explanations have been proposed to account for the survival instincts of organizations:

The Organizations are social systems charecterized by a number of needs that must be

satisfied if they are to survive.

Other theorists reject such assumptions as being anthropomorphic at worst and unnecessary

at best. They suggest instead that one does have to posit a survival need for the collectivity it

self.

The main difference between the two perspective scholars background


Classical (Rational)Theorist

Natural System

Managerial Experince (Pratical)

IndustryEngineer(Pratical)

Academic Background

Fayol

Mooney

Urwick

Taylor

Mayo

Weber

Gullick

Roethlisberger

Selznick

McGregor

Parsons

Bendix

Dalton

Gouldner

Dahrendorf

Barnard

The rational and the natural analysts concentrated on different types of organizations

The rational system analysts were more likely to investigate industrial firms and state bureaucracies,

while the natural system analysts tended to focus on service and professional organizations-schools,

hospital, and voluntary organizations

Rational system theorists

only selected aspects of behaviors of participants are relevant to the organization.

Natural system theorists:

Such behaviors have an impact on the task behavior of participants and hence are emprically

relevant to an understanding of organizational behavior

Organizations as social contexs affect the participants’ well being, a situation that has

normative significance to anyone concerned with bettering the human condition.


Major Contributions To Natural System

Barnard’s Cooperative System

Barnard stressed that organizations are essentiallay cooperative systems, integrating the contributions of their individual participants.

Organizations rely on the willingness of participants to make contributions.

Many ideas that are consistent with a rational system conception of organizations what sets them apart is his insistence on the nonmaterial, informal, interpersonel, and, indeed moral basis of cooperation.

The most critical ingredient to successful organization is the formation of a collective purpose that becomes morally binding on participants. Developing and imparting a mission is the distinctive “function of the executive.”

The necessity of survival can override the morality of purpose.

”Hawthorne effect”

Between 1924 and 1932, at a factory called the Hawthorne Works, (a Western Electric manufacturing facility outside Chicago IL, U.S.A.), a series of experiments on factory workers were carried out.

Hawthorne Works had commissioned a study to see if its workers would become more productive in higher or lower levels of light. It was found that the workers' productivity seemed to improve when changes were made and slumped when the study was concluded. It was suggested that the productivity gain was due to the motivational effect of the interest being shown in them.

However, it was then found that subjects improved their performance in response NOT to changes in experimental manipulation in illumination of their task area BUT simply in response to the fact that they are being studied. In 1955, the term was coined by Henry A. Landsberger when analyzing the experiments from 1924-1932.

In a 2009 reassessment of the original data, University of Chicago economists John List and Steven Levitt found that productivity varied due to other factors such as the weekly cycle of work or the seasonal temperature and so the initial conclusions were overstated and the effect was weak or illusory.

Although illumination research of workplace lighting formed the basis of the Hawthorne effect, other changes such as maintaining clean work stations, clearing floors of obstacles, and even relocating workstations resulted in increased productivity for short periods of time.


In appropriate sense, the Hawthorne effect is a term used to identify any type of short lived increase in productivity.

Parsons’s AGIL Schema

He developed a very explicit model detailing the needs that must be met if a social system is to survive. The model is identified AGIL.


Adaptation: The problem of acquiring sufficient resources

Goal Attainment: The problem of setting and implementing goals

Integration: The problem of maintaining solidarity or coordination among the subunits of the system.

Latencey: The problem of creating, preserving, and transmitting the system’s distinctive culture and

values

Selznick’s Institutional Approach

He was a student of bureaucrarcy under Merton at Colombia but an intellectual descendant of Michels and Bernard, developed his own unique system model, one that has recently been refurbished and elaborated to constitute an influential approach to the analysis of organizations known as institutional theory.

“The important thing about the organizations is that, though they are tools, each nevertheless has a life of its own.”

He agrees rational system except:

individuals who participate in the organization as “wholes” rather than acting merely in terms of their formal roles

Organizational structures that include the formal aspects but also the complex informal systems that link participants with one another and with others external to the official boundaries

Institutionalization: The process by which an organization “takes on a special character” and “achieves a distinctive competence or, perhaps a trained or built – in capacity”(Selznick 1996)

Thus institutionalization refers to a morally neutral process: “the emergence of orderly, stable, socially integrating patterns out of unstable, loosely organized or narrowly technical activities” Selznick argued that teh most significant aspect of institutionalization is the process by which structures or activities become “infused with value beyond the technical requirements at hand”

He views organizational structure as an adaptive organism shaped in a reaction to the characteristics and commitments of participants as well as to influences from the external enviroment

Chapter 4: Organizations as Open Systems

The open system perspective emerged as a part of the intellectual ferment following World War II,

although its roots are much older. The general movement created new areas of study, such as

cybernetics and information theory; stimulated new applications, such as systems engineering and

operations research; transformed existing disciplines, inclıding the study of organizations; and

proposed closer linkages among scientific disciplines. The latter interest was fostered especially by

general system theory. Its founder, biologist Luwing von Bertalanffy, was concerned about growing

compartmentalization of science. Open system theory was intially developed by Ludwig von

Bertanlanffy (1956), a biologist, but it was immediately applicable across all disciplines. It defines the


concept of a system, where "all systems are characterized by an assemblage or combination of parts

whose relations make them interdependent". As one moves from mechanical to organic and social

systems, the the interactions between parts in the system become more complex and variable.

In mechanical systems the parts are highly constrained. In social systems, the connections are loosely

coupled. Also important is the flow of materials, energy, and information across system boundaries

separating the system from its environment. Simpler systems transmit primarily energy, while higher

order systems transmit information.

Open systems like organizations are "multi-cephalous : many heads are present to receive

information, make decisions, direct action". Individual and subgroups form and leave coalitions.

Boundaries are amorphous, permeable, and ever changing. But the system must exchage resources

with the environment to survive.

Organizations as Cybernetic Systems

in the second-half of the 20th century, cybernetics is equally applicable to physical and social (that is,

language-based) systems.

Cybernetics is preeminent when the system under scrutiny is involved in a closed signal loop, where

action by the system in an environment causes some change in the environment and that change is

manifest to the system via information, or feedback, that causes the system to adapt to new

conditions: the system changes its behavior. This "circular causal" relationship is necessary and

sufficient for a cybernetic perspective

Contemporary cybernetics began as an interdisciplinary study connecting the fields of control

systems, electrical network theory, mechanical engineering, logic modeling, evolutionary biology,

neuroscience, anthropology, and psychology in the 1940s, often attributed to the Macy Conferences.

Other fields of study which have influenced or been influenced by cybernetics include game theory,

system theory (a mathematical counterpart to cybernetics), sociology, psychology (especially

neuropsychology, behavioral psychology, cognitive psychology), philosophy, and architecture.


Organizations as Loosely Coupled Systems

Understanding an organization as a loose coupling of actors, rewards, and technology may help

better explain how organizations adapt to their environments and survive amidst uncertainties.

Weick observes that manifests of loosely coupled systems often are:

situations where several means can produce the same result lack of coordination absence of regulations highly connect networks with very slow feedback times

While these manifests appear negative, they actually may help the organization by:

allowing the organization to temporarily persist through rapid environmental fluctuations improving the organization's sensitivity to the environment allowing local adaptations and creative solutions to develop allow sub-system breakdown without damaging the entire organization allow more self-determination by actors

In general, loosely coupled systems probably are cheaper to coordinate, but are very difficult to

systematically change.

Loose coupling "conveys the image that coupled events are responsive, but that each event has it's

individual identity and the coupling can vary over time'. It also suggests that you can break many


organizations into largely self-functioning subsystems, and loose coupling is really the "glue" that

holds them together.

Two coupling elements often discussed are technical couplings (between technology, task, role) that

are task-induced and authority couplings (positions, offices, rewards, sanctions) that somehow hold

the organization together.

This is not to say that open systems do not have boundaries. They do, of course, and must expend

energy in boundary maintenance.

Organizations as Hierarchical Systems

General systems theorists also stress that hierarchy is a fundamental feature of complex systems –

not hierarchy in the sense of status or power differences, but hierarchy as a mechanism of clustering.

Systems are composed of multiple subsytems, and systems are themselves contained within larger

systems. This is such a common feature of virtually all complex systems that it is easily overlooked.

Chapter 5: Combining Perspectives, Expanding Levels

Contingency Theory

Contingency theory is a class of behavioural theory that claims that there is no best way to organize a

corporation, to lead a company, or to make decisions. Instead, the optimal course of action is

contingent (dependent) upon the internal and external situation. Several contingency approaches

were developed concurrently in the late 1960s

They suggested that previous theories such as Weber's bureaucracy and Taylor's scientific

management had failed because they neglected that management style and organizational structure

were influenced by various aspects of the environment: the contingency factors. There could not be

"one best way" for leadership or organization.

Historically, contingency theory has sought to formulate broad generalizations about the formal

structures that are typically associated with or best fit the use of different technologies. The

perspective originated with the work of Joan Woodward (1958), who argued that technologies

directly determine differences in such organizational attributes as span of control, centralization of

authority, and the formalization of rules and procedures.


Scott describes the Contingency Theory in the following manner: "The best way to organize depends

on the nature of the environment to which the organization must relate". Other researchers

including Paul Lawrence, Jay Lorsch, and James D. Thompson were complementing to this statement

and were more interested in the impact of contingency factors on organizational structure. Their

structural contingency theory was the dominant paradigm of organizational structural theories for

most of the 1970s. A major empirical test was furnished by Johannes M Pennings who examined the

interaction between environmental uncertainty, organization structure and various aspects of

performance.

Thompson’s Levels of Model

James D. Thompson in his work Organizations in Action states that all three perspectives apply in

differing amounts to different organizations, and suggests researchers should be more flexible in

their approach. He borrows Parson's levels (technical, managerial, and institutional) and claims that

the rational perspective is more suitable to the technical level, the natural to the managerial, and the

open to the institutional level .

Thompson states that organizations "strive to be rational although they are natural and open

systems". Rational notions of effectiveness and efficiency presume a closed system. Organizations

attempt to seal off their technical core from external uncertaintities as much as possible. At the

institutional level the organization is open to the environment and must adapt to its changes. At the

managerial level managers mediate between the open institutional level and closed technical level

and need the flexibility of informal structures prevalent in the natural system perspective to ensure

organizational survival.

Scott’s Layered of Model

Scott works out three ideal typical perspectives on organizations: organizations as rational systems,

organizations as natural systems and organizations as open systems. Although these categories are

certainly not new, the comprehensiveness of the discussion is very valuable. Within the rational

perspective, organizations are seen as strongly formalized entities aimed at the fulfillment of specific

goals. Within this mechanistic approach toward organizations, the formal structure is emphasized.

However, within the natural systems approach, organizations are seen as fundamental social


collectivities attempting to fulfill their own individual needs. The natural system theorists put a

greater emphasize on the informal and social structure of the organization as well. Finally, the open

system approach pays particular attention to the reciprocal ties and the mutual dependence

between organizations (with different interests) and the environment. The open character of the

system is the most important difference between this and the other two previous perspectives.

According to Scott, this theoretical division uses ideal types which “partially conflict, partially overlap,

and partially complement one another” (Scott, 2003:31). This statement is not problematic in so far

as the perspectives are not presented as mutually exclusive. However, Scott takes the view that an

attempt to integrate these perspectives is necessary



Levels of Analysis1900 - 1930 1930 - 1960 1960 - 1970 1970 - Rational Models Natural Models Rational Models Natural Models

Social Scientific Management Human Relations Bounded Rationality OrganizingPsychological Taylor (1911) Whyte (1959) March and Simon (1958) Weick (1969)

Decision MakingSimon (1945)

Structural Bureaucratic Theory Cooperative Systems Contingency Theory Sociotechnical SystemsWeber (1946) Barnard (1938) Lawrence and Lorsch (1967) Miller and Rice (1967)

Administrative Theory Human Relations Comparative structureFayol (1919) Mayo (1945) Woodward (1965)

Pugh et al. (1969)Blau (1970)

Ecological Transaction Cost Organizational EcologyWilliamson (1975) Hannan and Freeman (1977)

Knowledge - based Resource DependenceNonaka and Takeuchi (1995) Pfeffer and Salancik (1978)

Institutional TheorySelznick (1949)Meyer and Rowan (1977)DiMaggio and Powell (1983)

Closed System Models Open System Models

Chapter 6: Conceptions of Environment

Organizational environment refers to the forces that can make an impact. Forces made up

opportunities and threats. Organizations dose not exist in isolation. It works with the overall

environment. Scholars have divided these environmental factors into two main parts as, Internal

Environment, External Environment

Organizational Groupings

Scott notes four common groupings of organizations in research at the ecological level:

An organization set refers to the fact that an organization has different relations based on which partner in the environment it is dealing with (supplier, customer, agency, etc.).

Organizational population: aggregates of organizations that is alike in some respect (that have similar blueprint in organizational action).

Areal organizational fields: looks at a collection of organizations within a geographical area. It has been labeled ecological community model, inter-organizational model, or the collective-action model, and tends to focus on the network of relations between organizations in the same area.

Functional organization fields: collection of organizations that critically influence the focal organization (suppliers, customers, owners, regulators, competitors, etc.)

Organizational fields and environments evolve over time. Organizations may develop temporary alliances with other organizations for specific purposes (even when competing in other arenas).

Environment Typologies

Various researchers have developed typologies to describe organizational environments. Emery and Trist classified them by extent of ‘interlocking relationships’ and Warren based his on ‘decision-making structure’.

The socio-technical perspective (Emery and Trist, 1965) defines four fields:

Placid, randomized environments (resources unchanging, random distribution)

Placid, clustered environments (resources unchanging, but location becomes important for survival)


Disturbed, reactive environments (org. strategy to get resources important for survival)

Turbulent environments (all actors are interconnected, and overall field becomes an important force)

Warren based his typology on decision making structure:

Social-choice context

Coalitional context

Federative context

Subjective vs. Objective Definitions of Environments

Lawrence and Lorsch (1967) and Weick (1979) suggest that basing it on participant's perceptions is

the best (if not only) way. Weick notes that participants enact their environment, selectively

perceiving and modifying their environment, often unconsciously.

March (Cohen and March, 1974) adds to this through definition of an attention structure to

"describe the distribution of connections among people, types of information sent and received,

distribution of problems, and (decision rules) “.

Ultimately, we can't separate subjective (enacted) and objective characterizations of environments.

Parts of the environment can affect organizational outcomes even if they are not perceived.

What we measure depends on what we are trying to predict -- predicting organizational choices may

rely on participant perceptions, but predicting organizational outcomes requires additional

information potentially unknown to the participants.

Organizations and Environments

Contingency and resource dependency theorists argue that organizations can adapt to

environmental changes, while population ecologists emphasize structural inertia that prevents

adaptation -- more optimal organizational forms are selected, and less optimal ones are replaced.

Organizations can absorb part of the environment (through vertical integration) or return part of

their organization to the environment (outsourcing). All of this makes boundary definitions difficult.


The prevalent view is that modern organizational environments are becoming more complex at an

increasing rate (Emery and Trist, 1965), largely through technical change. This means that

uncertainty also increases, and the ratio of externally to internally induced changes also is increasing.

This trend is still unclear, however. And there are instances where changing governance structures

and technical changes may actually reduce uncertainty.

Chapter 7: Creating Organizations

Why are there organizations, and what are the conditions that foster the creation of organizations?

These are important questions in organizational theory. Scott notes that "...the history of the

development of modern society is also a history of the development of special purpose

organizations..." Various historical trends helped create modern organizations:

The Changing Relations of Individual and Corporate Actors

In pre-modern organizations, the participants were wholly contained in their organizations, who had

full authority over them. Their rights and interests were determined by the membership. They were

built on a strict hierarchy. Over time individuals gained rights, and corporate actors also gained rights

and were allowed to pursue interests too (often under a charter of the ruler).

These new corporate actors no longer contained their individual actors but just the resources

invested by the owners. They now contracted to individual participants to engage in certain activities

for wages. Individuals were only partially involved now. This trend created a surgence of

individualism that cooincided with the development of special-purpose organizations.

Societal Conditions Favoring the Devlopment of Organizations

Stinchcombe (1965) suggests that "the capacity of a population to develop and support special

purpose organizations is determined by general factors like literacy, specialized advanced schooling,

urbanization, money economy, and political revolution (Scott p. 153). Others like Parsons and

Eisenstadt add role and institutional differentiation, allocation or roles by achievement instead of by

other criteria, and competition for resources.


Stinchcombe adds that these factors have helped motivate individual to form organizations and have

improved the chance that this new form will survive. "Stinchcome (also) asserts that organizations

suffer from the liability of newness -- new organizations and in particular new forms of organization

are likely to fail"

Various Theoretical Perspectives on the Emergence of Organizations

Each theoretical perspective has a different explanation as to why organizations are created. The

rational system perspective emphasizes that organizations are formed to improve efficiency and

effectiveness through division of labor, reduced transaction costs, more efficient information

processing, and more effective monitoring of agents. "From a rational system perspective,

organizations arise to take advantage of the production economies offered by an elaborate division

of labor and to meet the cognitive and control challenges posed complex and uncertain

environments"

"From a natural system perspective, institutionalists propose that organizations emerge as an

embodiment of rationalized belief systems that proliferate in the wider social environment. Marxists

argue that organizations arise as structures created by capitalists to expropriate surplus value from

productive labor".

But all parties agree that industrialization has caused the growth of large organizations.

Resource Mobilization

Organizations emerge through the collective mobilization of resources in pursuit of a goal. How an

organization is formed is partly the result of it's intial resource mix, incentives, membership

demographics, and ability to acquire resources. The failure rate of new organizations is high.

Chapter 8: Goals, Power and Control

5 alternatives uses for organizational goals

Cognitive – Rational Approach Cathetic (Motivational) – Natural System Symbolic – Institutional Approach


http://faculty.babson.edu/krollag/org_site/encyclop/mobil_res.html

Justification Evaluative

Simon (1964: 1997) has most forcefully urged the distinction btw individual goals that govern a

participant’s decision to join or remain in an organization, and organizational goals that are expected

to govern decisions of individuals as participants.

Organizational Goal &The Dominant Coalition

Acc. to The Classical Economist’s is to point to the goals of the entrepreneur and to equate the

organization’s goals within this person’s objectives.

The most satisfactory basis for adressing the question of who sets organizational goals is provided by

Cyert and March (1963)

Acc. To Cyert and March; organizational goals being set by a negotiation process that occurs among

members of the dominant coalition.

Participants and Stakeholder

Owners and Managers : Those who own property, whether in the form of capital, land, machinery, or

disposable goods, have “ a socially defensible right to make a decision on how to use” these

resources.

Owners delegate control over resources to managers who are expected to act on their behalf.


Participants and Stakeholder

Owners and Managers

LaborBoundary RolesExternal Actors

Modes of Capital

Size of Coalition

Uses of PowerMissues of Power

CrimeCorruption

Labor: Organizations depend on the energies and skills of workers who carry out the work of

transforming resources.,

Boundary Roles: Enviromental changes lead to change organization unit and power. Environmental

change is determined internal structure

External Actors:

Power over organizations is not restricted to those within its formal boundaries (Mintzberg, 1983)

The power of external constituencies to shape organizational objectives has been clear. (Selznick

1983)

“Political economy” perspective provides a systematic framework for examining both internal and

external sources of power affecting organizations (Zald 1970)

Modes of Capital

The power of capital resides in

Financial Capital: Property, ownership, cash, investments, creditworthiness

Human Capital: Personel attributes and skills, education and experince

Social Capital: Putnam defines “those features of social organization, such as networks, norms and trust that facilitate coordination and cooperation for mutual benefit”

Size of Coalition

Acc. Galbraith (1967) one of the most fundamental changes in the organization of the modern

corporation has been the shift from an entrepreneurial mode in which a single powerful person

dominates the enterprise to a flatter structure in which power is more widely diffused.

Thompson (1967) argues that the size of the dominat coalition, is affected both by the nature of

organization’s technology and by its task and institutional environments.

Uses of Power:

What difference, if any, does it make when power shifts from one group to another or is shared with

a wider range of individuals and by the organization.


Missues of Power:

Crime: A useful distinction differentiates criminal acts organizations into “occupational” and

“corporate” crimes.

Occupational Crimes are committed by individual employees against their employers for their own

gain.

Corporate Crimes are committed by individual employees acting on behalf of the corporation itself.

Corruption: is by no means limited to developing societies, or societies in transition to a differing

mode of governance. Enron, Worldcl etc.

Anarchies, Adhocracies & Learning

All systems provide for the development of a set of goals by which organizational decisions can be made.

Rational System Perspective -> Bureaucratic – Administrative Model

Natural and Open System Perspective -> Coalitional – Bargaining Model

Decisions and Structures

Thompson and Tuden (1959) focus on decisions and structures by constrcuting typology that combines 2 dimensons:

How much agreement there is among organizational particiapnats about the goals or preferred outcomes of the system,

How much agreement there is about the means or the causal processes by which these outcomes can be realized.

The cross – classification of ends – and – means distinction produces 4 types of decision contexts, each of which is calls for different decision strategy:


Beliefs About Causation Preferences About Outcomes

Agreement Disagreement

Agreement Computation Compromise

[bureaucracy] [legislature]

Disagreement Judgement Inspiration

[collegium] [charismatic leader]

Organized Anarchies

Acc. to March and his colleagues, decision making under conditions of “inconsistent and ill – defined

preferences,” “uncler technologies”, and “fluid participation” lead to change or shift in members

decision. These conditions are identified Organized Anarchy.

Turbulent Environments

A major factor often accounting for the absence of clearly specified goals is the nature of some

organizational environments. If environments are turbulent, then it is difficult to establish clear and

specific objectives around which to design a structure and orient participant activities.

Unstable enviroments undermine clear and consistent goalsi just as they unsettle rigid formalized

structures.

Conceptions of Goals and Theoretical Models

Grandori (1987) argues that there is a close relation between an analyst’s conception of

organizational goals and the choice of a theorretical model for explaining organization structure.

She takes contingency theory as the base line model, a model assumes that organizations are

pursuing single or consistent objectives that are capable of rationally adapting their structure to fit

changing circumstances.

Control Systems

Power: Emerson views power as relational, situational, and at least potentially reciprocal.


Power in Formal Organization: It is determined at least in part by design: sanctioning powers are

attached to positions, avaliable to any individual who occupies one, regardless of his or her personal

qualities. Power is not personal but structıral.

Power in Informal Organization: It is based on the characteristics of individuals – individual

differences that can function as resources allowing some to reward and punish others.

Authority

Acc. Weber (1947): No organization is likely to be content with establishing a power structure; in

addition, it will attempt to create am authority structure. Most social scientists define authority as

ligitimate power. Acc. to Dornbusch and Scott (1975) mentioned two types of authority : endorsed

and authorized

Endorsed Power or Authority of endorsement: Social norms that regulate power relations provide

the legitimate control structures, Who –what group of participants- defines and enforces these

norms. In most informal groups, there is only one possible source: the set of participants who are

subject to the exercise of power and hence are subordinates of the power wielder. This subordinate

group can limit and regulate the exercise of power over them by a superordinate.

Authorized power or Authority by authorization: A familiar safeguard built into most hierarchies is

teh principle of appeal, by which subordinates who feel that their immediate superior is making

unfair or unreasonable demands on them, may turn to their superior’s boss with the expectation that

he or she will enforce authority norms that curb the superior’s power.

Chapter 9: The Dyadic Enviroment of Organization

This topic is related to micro economics. It is stressed Transaction Cost Economics and Resource

Dependence Theory.

Transaction Cost Economics

Transaction Cost Economics mostly granted with Ronald Coase. He wondered two questions:

Why speciliazed exchange economy such as ours, are there firms?

What is a firm?


Firm is “the system of specialized relationships which comes into existence when the direction of

resources is dependent on an entrepreneur” rather than on price mechanism.

Where the firms boundaries come from as they are transformed from raw materials to final

consumption?

At each step of production, along the chain, value is added. “Value” is an operational definition.

Transaction Cost Economics provides tools for analyzing where the boundaries around organizations

arise.

Organizations are open systems. It stresses produced goods and services exchange between outside

of the system rather than production system and technology used by the organization.

Produced goods and services exchange is more important than production.

Summary of the Transaction Cost Economics is:

Organizations want to work at least cost to produce goods and services. One of the way to ensure

less cost is cheap transaction costs. Although high level management can decrease cost, boundaries

rationality, and personal benefits sometimes prevent it.

Resource Dependence Theory

Resource Dependence Theory is one of many theories of organizational studies regarding the

behavior of organizations. In many ways, the predictions of Resource Dependence Theory are similar

to those of Transaction Economics, but it also shares some aspects with Institutional Theory.

Foundation of the Resource Dependence Theory was James Thompson in 1967. Aldrich, Pfeffer

and Salancik provided this theory improvement also.

Organizations use received inputs, to survive its existence. Inputs consist goods and services such as;

equipment, energy, knowledge, talent, labor force etc.

Variety, relative price and importance, acquisition of inputs are changed from organizations. Critical

value of inputs are differ also. There may be inconsistency to provide some inputs. Organizations

take measures to prevent input bottleneck such as:

Licensing , Joint Ventures, Consortia , Legal Agreements , Common BOD members


Precautions prevent to cut operational activities. Moreover it provides to reach resources easily.

Organizations, who do not get precaution to provide input, face to suffer get input.

Resource Dependency Approach emphasizes the open system. This approach stresses the

relationship between organization structure and behavior with other organizations to sustain its

presence.

Organizations must be integrated its environment to survive its existence. Resource dependency and

scare ratio of necessities determine the organizations environment dependency in the form of

quality and scope.

Organizations are active rather than passive with respect to its environment. This means,

determination of their future realize their own decisions. This seperated the resource dependency

theory from ecology approach.

Chapter 10: Organization Environment

The newly formulated population ecology approach to organizations and the refurbished “new”

institutional approaches to organizations both burst on the scene in the late 1970s. Both approaches

defocalized attention on a single organization and its immediate environment to examine wider

systems- comprised either of similar kinds of organizations (populations) or of organizations

operating in the same domain (fields).


Population Ecology

Population ecology or natural selection has been considered in social systems since the 1940's, but

was best defined by Hannan and Freeman (1977) and Aldrich (1979). It primarily applies to

populations of organizations, and tries to explain why some organizational forms survive and others

fade away.

They propose that organizational forms with the best fit to environmental characteristics will be

selected and proliferate. In natural selection, a variety of forms are created, some are selected for

better fit, and the form is retained through reproduction or duplication. They contend that

organizations usually don't change or adapt but are replaced by organizations with forms that better

fit the current environment. It has become very popular due to its defined and accepted biological

paradigm and it's quantitative methodologies.

One important concept from population ecology is density dependence, which suggests that the

concentration of a certain organizational form follows a curvilinear approach -- rising legitimacy

increases founding rates early on and later competition reduces founding rates.

The New Institutional Approach

Institutional theorists examine the rules norms, and beliefsthat constrain and support social

structures and processes, including organizations. While economists and political scientists stress the

importance of rules and regulations (both externally) in the guise of the state and internally in the

form of governance systems), sociologists and organizational theorists have emphasized the role of

shared norms and beliefs that proivde the cultural foundations of social order. Social order, including

organizations in all their forms, is not simply constrained by institutional rules; it is constituted by

cultural models. Such models are sometimes conflicting, always contested, giving rise to different

kinds of actors, interests and appropriate actions. The examination of such processes at work within

organizational fields has provided valuable insights into the co-evolution of organizational forms and

institutiional patterns.


Chapter 11: Networks In and Around Organizations

Network thinking has a long history in sociology. Many consider Georg Simmel (1955), a German

contemporary of Weber, to be a founder of the sociology of networks with his discussion of the

dynamics of triads and the “web of group affiliations” Triads is, of course, small networks, but they

have interesting possibilities. A friend of my friend may be a friend, an enemy of my friend is likely

to be an enemy- but there are more interesting possibilities when my friend acts as a broker (keeping

the two of us separate and acting as conduit), an arbitrator (mediating conflicts between us), or a

spoiler (fomenting conflicts between us)

Any organization or other social system can be represented as a network. Indeed, “network” is a

general concept applicable at any level of analysis. A few examples of networks will illustrate this.

Nodes can be people tied by friendship or acquaintanceship, as in the triads described by Simmel.

Interlock Networks

Interlock networks is related to different companies hold Board of Director Members on their Board.

Sabancı Group in Turkey shows the best application of interlocking networks. For instance, Kordsa

and Brisa hold BOD Member to their Board mutually.

Indirectly Networks

Indirectly network is related to different companies hold Board of Director Members on other

company Board. For instance, Kordsa and Brisa hold BOD Member on Enerjisa Board.

This application provides information of companies each other and managing reciprocal.

Chapter 12: Strategy, Structure, and Performance: The Sociology of Organizational Strategy

Forces Shaping Industry Competition

Threat of entry by new competitors


Economies of scale, in microeconomics, are the cost advantages that a business obtains due to

expansion. They are factors that cause a producer’s average cost per unit to fall as scale is increased.

Economies of scale is a long run concept and refers to reductions in unit cost as the size of a facility,

or scale, increases.[1] Diseconomies of scale are the opposite. Economies of scale may be utilized by

any size firm expanding its scale of operation. The common ones are purchasing (bulk buying of

materials through long-term contracts), managerial (increasing the specialization of managers),

financial (obtaining lower-interest charges when borrowing from banks and having access to a

greater range of financial instruments), and marketing (spreading the cost of advertising over a

greater range of output in media markets). Each of these factors reduces the long run average costs

(LRAC) of production by shifting the short-run average total cost (SRATC) curve down and to the

right.

Loyalty: The state or quality of being loyal

Switching costs: The negative costs that a consumer incurs as a result of changing suppliers,

brands or products. Although most prevalent switching costs are monetary in nature, there are also

psychological, effort- and time-based switching costs.

Intensity of rivalry among existing competitors

The intensity of rivalry among competitors in an industry refers to the extent to which firms within an industry put pressure on one another and limit each other’s profit potential. If rivalry is fierce, competitors are trying to steal profit and market share from one another. This reduces profit potential for all firms within the industry. According to Porter’s 5 forces industry analysis framework, the intensity of rivalry among existing firms is one of the forces that shape the competitive structure of an industry.

The intensity of rivalry in an industry affects the competitive environment for the existing competitors and influences the ability of existing firms to achieve profitability. High intensity of rivalry means competitors are aggressively targeting each other’s markets and aggressively pricing products. This represents potential costs to all competitors within the industry.

High intensity of competitive rivalry can make an industry more competitive and decrease profit potential for the existing firms. On the other hand, low intensity of competitive rivalry makes an industry less competitive and increases profit potential for the existing firms.

Intensity of Rivalry – Determining Factors


Several factors determine the intensity of competitive rivalry in an industry. If the industry consists of

numerous competitors, industry rivalry will be more intense. If the competitors are of equal size or

market share, the intensity of rivalry will increase. If industry growth is slow, the intensity of rivalry

will be high. If the industry’s fixed costs are high, competitive rivalry will be intense. If the industry’s

products are undifferentiated or are commodities, rivalry will be intense. If brand loyalty is

insignificant and consumer switching costs are low, this will intensify industry rivalry. If competitors

are strategically diverse – they position themselves differently from other competitors – industry

rivalry will be intense. An industry with excess production capacity will have greater rivalry among

competitors. And finally, high exit barriers – costs or losses incurred as a result of ceasing operations

– will cause intensity of rivalry among industry firms to increase.

And of course, if the opposite is true for any of these factors, the intensity of rivalry among

competitors will be low. For example, a small number of firms in the industry, a clear market leader,

fast industry growth, low fixed costs, highly differentiated products, prevalent brand loyalties, high

consumer switching costs, no excess production capacity, lack of strategic diversity among

competitors, and low exit barriers all indicate that the intensity of rivalry among existing firms is low.

Intensity of Rivalry – Analysis

When analyzing a given industry, all of the aforementioned factors regarding the intensity of rivalry

among existing competitors may not apply. But some, if not many, certainly will. And of the factors

that do apply, some may indicate high intensity of rivalry and some may indicate low intensity of

rivalry. The results will not always be straightforward. Therefore it is necessary to consider the

nuances of the analysis and the particular circumstances of the given firm and industry when using

these data to evaluate the competitive structure and profit potential of a market.

Intensity of Rivalry is High if:

Competitors are numerous, Competitors have equal size, Competitors have equal market share

Industry growth is slow, Fixed costs are high, Products are undifferentiated, Brand loyalty is

insignificant, Consumer switching costs are low, Competitors are strategically diverse, There is

excess production capacity, Exit barriers are high


Intensity of Rivalry is Low if:

Competitors are few, Competitors have unequal size, Competitors have unequal market share

Industry growth is fast, Fixed costs are low, Products are differentiated, Brand loyalty is significant,

Consumer switching costs are high, Competitors are not strategically diverse, There is no excess

production capacity, Exit barriers are low

Intensity of Rivalry Interpretation

When conducting Porter’s 5 forces industry analysis, low intensity of rivalry makes an industry more

attractive and increases profit potential for the firms already competing within that industry, while

high intensity of rivalry makes an industry less attractive and decreases profit potential for the firms

already competing within that industry. The intensity of rivalry among existing firms is one of the

factors to consider when analyzing the structural environment of an industry using Porter’s 5 forces

framework.

o Pressure from substitute products

o Bargaining power of buyers

o Bargaining power of suppliers

How are Strategies and Structures Chosen

o Overall cost leadership

o Differentiation Porter

o Focus

o Prospectors

o Defenders Miles and Snow

o Analyzers

How are Strategies and Structures Chosen (cont.)

o Plan: intended course of action

o Ploy: manoeuvre intended to mislead

o Pattern: consistency of actions Mintzberg

o Position: a location that specifies the domain of action


o Perspective: a way of perceiving the events

Founding Conditions

o Available labour

o Information and other technologies

o Contracting laws to create organizations

Law and Public Policy

o Sets the ground rules for possible structures

o Regulatory changes can eliminate existing forms and enable new ones

Organizational Performance

Multiple criteria and indicators

o Outcomes: focus is on the specific characteristics of materials or objects on which the organization has performed.

o Processes: focus is on the quantity or quality of activities carried on by the organization.

o Structure: assess the capacity of the organization for effective performance.

Shareholder value

Internal assessment of performance

o Bounded rationality of mangers

o The match between organizational structure/practices and their environment

o The parallelism between individual and corporate goals

External assessment of performance

o Standard-setting bodies

Rating agencies


Chapter 13: The Rise and Transformation of the Corporate Form

Changing Forms of Organizations

Predecessors of modern corporations

o The guilds in the Middle Age

o Chartered companies that held monopolies on trade during the age of empire

Corporations are differed from earlier, traditional forms by having;

o Separate legal personality

o Unlimited life

o Limited liability

These features enabled the organizations to grow to vast size and influence.

Railroads New methods for managing rationally the larger masses of men, money and materials were

developed.

Railroads incubated the private, professionally managed corporations in the second half of the nineteenth century, and mass-production manufacturers established the characteristic features of the contemporary corporation, which are;

o Multidivisional structure

o Professional management

o Ownership by dispersed shareholders

Railroads are associated with the development of the functional, unitary or U-form structure, composed of a central management unit and several functionally organized departments.

Corporations in the 20th Century

The twentieth century corporations have a multidivisional or M-form structure, which consisted of a general corporate office and several product-based or regional divisions, each of which contained functionally differentiated departments.

Globalization, information technology and competitive pressures have reversed prior trends towards increasing scale and scope in many industries.


Contemporary multinationals challenge many of the categories and assumptions of modernist theory.

Corporations have come to look more like states in the range of their activities, while states have come to look more like business corporations as both compete for each others’ business.

Chapter 14: Changing Contours of Organizations and Organization Theory

5 major trend to explain changing organization enviroment

From Unitary to Multiparadigm From Monocultural to Multicultural Studies From Present – cnetered to Longitudinal and Historical Analysiss From Micro to Macro Units and Levels of Analysis From Structure to Process

From Unitary to Multiparadigm

It should be examined from two dimensions:

Sources of Multiplicity:

Organization studies are the amalgam of sciences. It has been studied from the perspectives of socilogy, psychology, political science, social science. Scholors bring their disciplinary habits with them to their object of study.

Proposed Solutions:

Given the complexity of the problem posed by multiple paradigms, it is not suprising that the solutions proposed cover a similarly wide range.

From Monocultural to Multicultural Studies


Myopic View and Signs of Process

Acc. to myopic view, social experince is filtered through cultural lenses.Although their exists great variance of cultural experince and expression within most societies, on the one hand, and societies are struggling to maintain relevance in a globalizing world, on the other, nation states and their associated cultural systems continue to be significant and influential social contexts for organizations. Changing myopic view has been defined Signs of Process.


From Present – Centered to Longitudinal and Historical Analysis

It should be examined from three dimensions:

It’s about time:

Social Mechanisms:

Longtudinal Studies:

From Micro to Macro Units and Levels of Analysis


Levels of Unit: From an earlier, simpler time when all organizations were local, situated in spesific geographically delimited contexts, we now find ourselves in a world in which the reach of many organizations is worldwide.

Levels of Analysis:

Organizations today are no longer stable and fixed, but transitory and flexible.

Operations are more expand, and merge with related forms.Not also boundaries of fileds and industries also undergo change.

From Structure to Process

It should be examined from three dimensions:

Changing Conception of Structure:

A process view is taken not only of internal operations of the organization, but of the organization itself as a system persisting overtime. Recent decades organizations are:

Organizations as shifting coalitions of participants (Cyert & March, 1963)

Organizations as shifting relational networks (Burt, 1982, Nohria & Eccles, 1992)

Organizations as a “nexus of contracts” (Jensen & Meckling, 1976)

Organizations as a fluid “network of treaties” (Powell, 2001)

Organizations as “portfolio of financial assets”

Organizations as ongoing narratives of conversations among participants


The Boundary Problem:

The world of organizations circa 2000 is vastly different from that of 1950 or 1900.

The Rhythm of Field Development:

No scientific field develops in a predictable or orderly manner.

Uncertain and shifting process that charecterize organizational field development also apply to any scientific field.


Documents

What ıs the scıentıfıc explanatıon