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Theoretical approaches to organizations vary by the extent to which organizations are viewed as rational systems—instruments rationally constructed to pursue speciﬁc goals—or natural systems—valued social systems struggling to survive. In addition, organizations are variously treated as closed systems—self sufficient, relatively insulated forms—and as open systems—constituted, inﬂuenced, and penetrated by the wider environment. Conceptions of organizations also vary by level of analysis as researchers focus variously on the behavior of individual participants within organizations, the behavior of organizations as collective actors, and the role of organizations as component units within larger populations or ﬁelds of organizations. Organizations are viewed as a construction of the modernist world, but some analysts see them as products and accompaniments of industrialization while others see them as vehicles of rationalization. The proliferation of organizations and their infusion into every arena of contemporary society, results not only from their contribution to the coordination of differentiated, specialized tasks, but also their capacity to symbolize rational procedures and provide frameworks of accountability. Conceptions of organizations and theoretical approaches change over time because organizations themselves undergo change. Organizational forms have evolved from being relatively dependent and embedded in traditional societies to becoming more independent and then most recently to becoming more interdependent with and penetrated by their context. Organizations both increasingly absorb society and are themselves being absorbed into wider, rationalized frameworks.
Organizations are a deﬁning feature of modern societies. Modern societies are distinguished from traditional ones, in part, by the numbers and variety of organizations in existence and their utilization to support collective action in every sector. Organizations are not simply distinctive contexts within which individuals carry out coordinated activities; they are themselves collective actors, given legal recognition, and constituted so as to own and dispose of property, enter into binding contracts, and mobilize effort in the pursuit of speciﬁed goals. Organizations act to increase the reliability of behavior, but in so doing, they often lose ﬂexibility. They are also able to provide greater accountability, maintaining records of how things are done and by whom, but in doing so, may become overly procedural and legalistic. Today’s organizations, operating in a highly rationalized and dynamic environment, face different challenges than early organizations confronting a more traditional and stable context. Conceptions of organizations, theoretical perspectives, and favored levels of analysis undergo change, in part because organizations and organizing processes themselves have changed.
1. Deﬁning Organization
Social theorists have long distinguished the more speciﬁc subtype, organization, from the more generic phenomenon of social organization or, even more broadly, social structure. Social life, even its most primitive forms, exhibits social organization in the sense that there exist patterned regularities in social interaction and in belief systems, each of which inﬂuences the other. Earlier theorists stressed the twin, interdependent components of normative structure, consisting of norms, values, and beliefs, and behavioral structure, consisting of recurring activities and relationships among individuals. Later theorists (Giddens 1984) emphasize schemas, rules, and procedures providing guidelines for practice, and resources, consisting of both human capacities and nonhuman tools and material things of value. The later formulations represent an advance in their recognition of the dual character of social structure, which is regarded as both medium and outcome of social action, social structure both shaping and being shaped by on-going social activities.
The most common deﬁnitional approaches to delineate organization from social organization or social structure employ substantialist formulations, stressing the priority of things or entities (Emirbayer 1997). Two subtypes are identiﬁed: self-action, conceiving of things as acting independently, under their own powers, and interaction, in which the attributes of entities are shaped by encounters with other entities. In contrast to these substantialist approaches, more recent relational perspectives have developed that stress process and dynamics as primary rather than entities. Each of these approaches is discussed and illustrated.
1.1 Substantialist Self-Action Deﬁnitions
The most inﬂuential deﬁnitions of organizations emphasize both the ability of organizations to act independently—the self-action conception—and the features that distinguish them from other social structures. Max Weber, who provided a theoretical foundation for much subsequent work, was among the ﬁrst social theorists to recognize and attempt to characterize the identifying characteristics of organizations. He developed a series of nested deﬁnitions as he endeavored to distinguish organizations from more generic forms. Weber (1922 1968, pp. 26–53) begins by deﬁning a legitimate order as a social relation oriented to a normative framework or set of maxims viewed in some manner as obligatory. (Variations in the nature of these norms gives rise to Weber’s justly famous typology of authority into traditional, charismatic, and rational-legal orders.) Social relations vary in the extent to which they are ‘closed,’ limiting or excluding access to outsiders. Organizations (Verband) are social relationships that are closed, access being limited by the actions of speciﬁc individuals, a chief or director often assisted by an administrative staff. In short, an organization is a closed group with a differentiated ‘organ’ to enforce its boundaries. Enterprises (Betreib) are organizations that have developed a system of continuous purposive activity directed to speciﬁed goals; and a formal organization (Betriebs-verband) is an enterprise based on associative relations resting on rationally motivated adjustments of interests rather than on communal ties, based on kinship ties or the subjective feelings of the parties. The two latter deﬁnitions have been widely employed by subsequent scholars.
Chester Barnard, perhaps the most inﬂuential early American organizational theorist, was a telephone executive who drew on his own, practical managerial experiences to develop his conception of the distinctive properties of organizations. Barnard (1938) emphasized the physical, biological, and psychological limitations of individual actors, limitations that greatly constrain their ability to make intelligent choices. Cooperative systems arise to enable individuals to collectively pursue a given purpose, the purpose acting to both support and constrain individual choice and decision making. Such systems are ‘effective’ to the extent that they achieve their purpose; they are ‘efficient’ if they satisfy the motives of individual participants. To be viable, systems must induce participants to make contributions; thus, only efficient systems can survive. Organizations represent a distinctive type of cooperative system: formal organization is ‘that kind of cooperation among men that is conscious, deliberate, purposeful’ (p. 4), although all organizations incorporate both formal and informal systems.
Weber’s intellectual descendants include a host of sociological scholars, from Parsons to Etzioni, Blau, and Albrow. All of these theorists follow Weber in emphasizing goal speciﬁcity and formalization as distinguishing features of organizations and in recognizing the importance of power and hierarchy both in deﬁning goals and controlling access and specifying the terms of participation. Barnard’s followers encompass a diverse collection of researchers, including political scientists Simon and March, economists Arrow and Williamson, and sociologists, Selznick and Perrow. Devotees from political science and economics embrace Barnard’s view of organizations as arising from the limitations of individuals—physical, but more important, cognitive constraints—organizational structures and processes acting to both inform and channel their decision making. These same theorists also stress the rationality of individuals, insisting that their participation and willingness to make contributions is contingent on the continuing receipt of appropriate inducements. Sociologists, by contrast, focus on Barnard’s recognition of the motivating power of purpose and the ways in which organizational structures and procedures themselves become infused with value, so that, as both instruments and ends in themselves, survival of the organization becomes an overriding goal for participants (Selznick 1949). Organizations are observed to dispense with speciﬁc objectives when their pursuit undermines organizational viability.
These views, varied as they are, nevertheless all embrace the substantialist conception of the organization as a durable, coherent, independent entity, capable of self-action. Features distinguishing organizations from other types of social groups are identiﬁed and viewed as enduring. Perhaps the strongest statement of this position is that of March and Simon (1958, p. 4) who, early in the modern era of organization studies, declared that:
Organizations are assemblages of interacting human beings and they are the largest assemblages in our society that have anything resembling a central coordinative system. … The high speciﬁcity of structure and coordination within organizations—as contrasted with the diffuse and variable relations among organizations and among unorganized individuals— marks off the individual organization as a sociological unit comparable in signiﬁcance to the individual organism in biology.
1.2 Substantialist Interaction Deﬁnitions
Soon after the emergence of organizations as a distinctive ﬁeld of academic study, more interactive versions of substantialist conceptions developed that viewed organizations as ‘ﬁxed entities having variable attributes’ that interact to create diverse outcomes (Emirbayer 1997, p. 286). Among the many varieties of such approaches are conceptions of organizations as political systems. Thus, Dahrendorf, elaborating the theoretical model of Marx, views organizations as the products of conﬂict, stability being the result of one group achieving dominance and imposing its interests on others. A modiﬁed version, developed by Cyert and March (1963), views organizations as coalitions of interests, with diverse parties vying for dominance. Even more prominent perspectives emphasized organizations as adapting to the distinctive features of their technical and social environments. For example, contingency theorists (Lawrence and Lorsch 1967) viewed managers as adapting structural features of organizations to the technical demands of their task environments; and Pfeffer and Salancik (1978) developed a resource dependence perspective calling attention to the types of bridging strategies employed by organizations in order to avoid excessive dependence on their exchange partners. Institutional economists such as Williamson (1975) saw organizations as governance structures of varying complexity arising to economize on the transaction costs associated with the exchange of goods and services.
In all of these accounts, organizations are still seen as discrete, pregiven units but possessing attributes that vary in response to changing circumstances or external forces. Most open-system theorists, who stress the importance of environment or context on organizational structure and action, retain the substantialist assumption of the organization as entity, as thing, but recognize the vital role of context—in particular, other organizational entities—in shaping through interaction organizational characteristics.
1.3 Relational Deﬁnitions
Although still a minority perspective, a growing number of theorists have proposed adoption of a relational approach in which organizations are viewed as ‘inseparable from the transactional contexts in which they are embedded,’ as deriving their meaning and identity from the roles they play in these encounters (Emirbayer 1997, p. 287). Marx was a prominent general advocate of this approach to social structure, but Weick was the major early proponent of this conception of organizations. He proposes the value of shifting attention from an entity ‘organization’ to a set of processes, ‘organizing’:
We observe either an ongoing process that appears ‘frozen’ and steady because it is glimpsed only brieﬂy, or we observe that the process is continuously changing if we watch for a longer span of time. The point is that the crucial events to be explained are processes, their structuring, modiﬁcation, and dissolving (Weick 1969, p. 16).
This stance has been embraced and elaborated by theorists such as Giddens (1984), who proposes that ‘structure’ be reconceptualized as ‘structuration’: the continual production and reproduction of resources and rules or schemas, as well as by interpretive and postmodernist theorists who emphasize the social construction of reality and the reﬂexive and contextualized nature of knowledge. Among organizational scholars, Silverman (1970) employed an interpretive framework to argue that the dominant ‘systems’ based view of organizations needed to be replaced by an ‘action’ based account. He asserted that action analysis is particularly well suited to addressing neglected issues such as the origins of organizations and organizational change. In a more programmatic statement, Burrell and Morgan (1979) distinguished between theoretical approaches stressing stability and order versus those emphasizing radical change. Their work served to stimulate efforts to advance interpretive and radical structuralist paradigms. Among theorists developing a more interpretive or cultural approach to organizations, a number emphasize the value of appropriating and adapting the tools developed by literary and humanistic scholars and suggest that society and its component units can be viewed and analyzed as ‘texts’: as a structure or grammar of rules and communication acts. Some propose the use of ‘dramaturgic’ approaches, focusing on the expressive dimension of social relations and the role of rituals and ceremonies in expressing commitments and dealing with social uncertainties. Others assert the value of ‘narrative’ analysis that views organizations as ongoing conversations among interacting individuals involved in formulating and reformulating intentions, interpretations, and accounts to themselves and each other (Czarniawska 1997).
Other relational scholars have emphasized not interpretive construction but network connections. Network theorists emphasize the value of viewing organizations as shifting networks of social relations embedded in ﬁelds of wider relational systems. Location or position in the network is viewed as of greater signiﬁcance in shaping organizational behavior than its internal attributes; and both the organization’s powers and constraints on its action are determined by the ever-changing conﬁguration of ties (and the lack thereof) among an organization and counteractors.
Economists have begun to take notice of the organization or ﬁrm as an important unit of analysis. After long treating it as a ‘black box’ whose internal structures and processes were of little analytic interest, some economists recognize that one of the most important features of an organization is its status as an independent legal entity. It is capable of entering into binding contracts in its own name, separate from those involving its individual participants. A substantialist view would simply deﬁne an organization as a contractual node; but a relational version has dloped that views the organization as a ‘nexus of contracts’: the ﬁrm as a ‘focus for a complex process in which the conﬂicting objectives of individuals (some of whom may ‘represent’ other organizations) are brought into equilibrium within a framework of contractual relations’ (Jensen and Meckling 1976, p. 311). How stable is the equilibrium reached is a function of many factors, including changes in legal systems and contracting norms as well as the composition of and changing interests of participants.
Yet another relational model has been developed by ﬁnance economists that is applicable to many types of ﬁrms, but perhaps not to the full range of organizations. These economists view the ﬁrm primarily as a collection of assets earning varying rates of returns: the ﬁrm as portfolio. Such a view favors a diversiﬁcation strategy—as managers are motivated to increase assets and reduce risks by entering into many independent businesses.
Relational approaches celebrate process over structure, becoming over being. What is being processed varies greatly. In some versions it is symbols and words, in others, relationships or contracts, in still others, assets. But in relational approaches, if structures exist it is because they are continually being created and recreated, and if the world has meaning, it is because actors are constructing and reconstructing intentions and accounts and, thereby, their own and others’ identities.
1.4 Deﬁnitional Variation By Perspective
In addition to the differences occasioned by underlying ontological assumptions, conceptions of organizations also vary markedly by theoretical perspective: the underlying images or metaphors that direct the attention of theorists and researchers to some rather than other aspects of organizations. Three perspectives, each embracing a number of schools, have been pervasive during the twentieth century in organizational studies (Scott 1998).
The rational system model of organizations was the dominant perspective from early in the twentieth century to the 1930s. Organizations are viewed as rationally designed instruments for the attainment of speciﬁc goals. A mechanical model provides the guiding image, and emphasis is placed on those features that differentiate organizations from other social groups, such as communities or families. Exemplars include the scientiﬁc management approach of F. W. Taylor, Weber’s theory of bureaucracy (1922 1968), and Simon’s model of (boundedly) rational decision making hierarchies (March and Simon 1958). The twin attributes of goal speciﬁcity and formalization—the deliberate design of roles and social structures—are privileged.
The natural system model of organizations emerged during the 1930s and became dominant in the scholarly community in the 1940s and 1950s. Organizations were viewed as social groups whose participants are joined by common purpose and informal ties, but whose primary goal is the survival of the system. Rational, formal attributes were de-emphasized as attention was focused on interpersonal ties and leadership. An organic image supplanted that of the well-oiled machine; not distinguishing elements, but those common to all social groups were emphasized. Speciﬁc schools included the human relations group, Barnard’s (1938) view of organizations as cooperative systems, and Selznick’s (1949) work examining how organizations are transformed into institutional systems as participants become committed to distinctive values.
During the 1960s, general systems theory swept over the ﬁeld of organization studies giving rise to the open system model of organization. This model emphasized the extent to which organizations were dependent on and penetrated by facets and forces in the wider environment. By contrast, previous models were exposed as giving insufficient attention to actors and forces external to system boundaries. But as open system models surged into the arena, they were quickly coupled with, ﬁrst, rational, then natural system concerns (Scott 1998). Thus, rational-open theorists like Thompson (1967) sought to explain how organizations could attempt to behave rationally even though open to their environments; March and Simon (1958) consider how decision rules can be adjusted to accommodate greater amounts of uncertainty; and Williamson (1975) theorizes that organizations arise and develop more complex governance systems to deal with increasing amounts of uncertainly and complexity. Contingency theory, decision-making theory, and transaction cost theory represent attempts to combine rational and open systems conceptions.
These developments dominated well into the 1970s, but were then joined by a resurgence of natural system theorists attempting to incorporate and take into account open system insights. Principal approaches included socio-technical systems theory, emphasizing the need to design technologies to take into account human and social factors; resource-dependence theory, as developed by Pfeffer and Salancik (1978), stressing the ways in which economic (resource-based) dependencies generated power problems that, in turn, were addressed by political solutions. In general, organizations confronted by increasing levels of interdependence respond by creating more encompassing coordinative and governance systems. Population ecology models (Hannan and Freeman 1989) examine the ways in which similar types of organizations compete for scarce resources within the same environmental niche. And institutional theorists (Meyer and Rowan 1977, DiMaggio and Powell 1983) consider the effects of wider cultural rules and normative structures on the emergence and legitimation of organizations.
Thus, conceptions of organizations have been inﬂuenced by the theoretical stance of scholars, as debates revolved around two axes: (a) the extent to which organizations are means—disposable, deliberately designed instruments for goal attainment—or valueimpregnated, ends-in-themselves; and (b) whether organizations are self-sufficient, relatively insulated forms or substantially constituted, inﬂuenced, and penetrated by the wider environment.
2. Emergence Of Organizations
Organizations are viewed as a construction of the modernist world, but there is much debate as to whether they represent accompaniments to and products of industrialization or, more generally, vehicles of rationalization. From Adam Smith to Clark Kerr and Alfred Chandler, economists have viewed organizations as handmaidens to industrialization. The subdivision of tasks enables specialization and mechanization, but is usually accompanied by agglomeration—the gathering of workers together in a common location—and requires coordination to integrate discrete tasks, typically through a command and control structure. A more recent, but compatible conception advanced by institutional economists (Williamson 1975), views organizations as operating to reduce transactions costs occasioned by the cognitive constraints (bounded rationality) of individual actors and the need to regulate opportunism among exchange partners. In either case, organizations are viewed as emerging to enhance efficiency: to reduce costs, whether of production or transactions.
Many of the most prevalent features of organizations—rules, formalized roles, dedicated machines and established work routines—are intended to contribute to the reliability of performance. However, as often noted, these same mechanisms often prevent the organization from changing quickly enough to keep pace with environmental demands (Hannan and Freeman 1989).
Sociological institutionalists argue that organizations should be viewed as a cultural construction: a product of increasing rationalization as generalized means–ends rules are promulgated and become valued independent of their contributions to heightened effectiveness and efficiency. The proliferation of organizations, and their infusion into virtually every arena of contemporary society, is viewed as resulting not only from their contribution to the coordination of differentiated, specialized tasks but also to their capacity to symbolize rational (rule-based, means– ends) procedures (Meyer and Rowan 1977). The formal structure of organization, hierarchical controls and the compilation of records all contribute to insuring the accountability of organization performance and thereby enhance their legitimacy. However, these same structures are also associated with red tape and ritualistic practices.
Viewed historically, organizations represent new types of social forms in that they are collective or corporate actors, accorded rights, capacities, resources that are independent of those of any of its individual participants. Coleman (1974) employs changes in the law as important indicators of the growing independence and powers of organizations as they developed during the early modern epoch. Institutionalists such as Meyer, Dobbin, and Shenhav view the same process as fueled primarily by the growth of a scientiﬁc ethos emerging during the enlightenment that created abstract and general categories to classify and enumerate ﬁrst the biological and physical universe and subsequently the social world. Local knowledge and culture, over time, succumbed to a new inductive epistemology viewed as universal. In the realm of purposive social organization, engineers and managers envisioned and then gradually helped to bring about the development of a single type of social entity (the ‘organization’) and a generic set of skills (‘managerial’) for their maintenance. It is a vision that has been embraced and, hence, reinforced by, the emergence of an academic discipline and profession devoted to the pursuit of organizational studies.
3. Levels Of Analysis
The concept of organization is employed at various levels of analysis. More micro approaches treat organizations as distinctive types of social contexts that, in turn, affect the behavior and attitudes of their participants, whether considered as individuals or as groups or teams. Thus, the ﬁrst level concentrates on organization behavior. Viewed as social contexts, organizations are generally thought to be ‘strong situations’: much effort and various techniques and devices are employed in an attempt to inﬂuence participant behavior. Positions are typically predeﬁned, roles are prescribed, rules formulated, authority relations speciﬁed, information selectively routed, specialized tools and equipment provided, training offered, incentives created and sanctions employed, and beliefs and values inculcated. As Pfeffer (1997, p. 100) observes: ‘control is at once the essential problem of management and organization and the implicit focus of much of organization studies.’ Theorists differ in the relative priority they assign to different modes of control, whether economic, social, or cultural; but organizations are apt to combine many varieties of incentives and constraints in such a manner as to maximize the likelihood of compliance.
Moving up one level from a focus on organizational behavior, many analysts focus on the structural and other features of the organization qua organization. Here the organizational arrangements—extent of formalization, bureaucratization, centralization, mechanization, professionalization—rather than serving primarily as hallmarks of the setting become attributes of the corporate actor to be themselves described and explained. Extensive comparative research has been conducted attempting to account for the widely varying features of organizational structure. Among the causal factors examined are the characteristics of the task and institutional (including cultural and political) environments, the demography of participants, and the life cycle of the organization. When a particular organization is singled out and its context described as it relates to this focal unit, an organization set level is being employed. This level developed in association with the early stages of the open systems perspective and serves to facilitate examination of the particular information and resource ﬂows and types of relations affecting the organization of interest. It is instructive to replace general descriptions of environmental variables such as complexity and uncertainty with speciﬁc information on who is providing what information and resources under what terms to the focal organization. This level of analysis has been particularly supportive of analysts employing resource dependence, transaction cost, and strategic management approaches (Pfeffer and Salancik 1978, Thompson 1967, Williamson 1975).
The organizational population level is deﬁned so as to identity and encompass all instances or a geographically bounded aggregation of all organizations of the same type. This level roughly parallels that of an industry, except that attention is limited to organizations of the same general type. The concern here is not the individual organization but the organizational form: variously deﬁned as similar structures, a common blueprint or archetype, or distinctive constitutive information. Researchers working at this level examine the conditions under which new ways of organizing and new types of routines arise and coalesce so as to constitute a recognizable, accepted form for the pursuit of speciﬁed goals. Analysts of populations examine the conditions under which populations of organizations emerge, grow, decline, and fail (Hannan and Freeman 1989).
At the macro end of the scale, theorists have identiﬁed the organizational ﬁeld as an important level linking individual organizations and organizational systems to wider, societal structures and processes. Organizational ﬁelds are deﬁned to be ‘those organizations that, in the aggregate, constitute a recognized area of institutional life: key suppliers, resource and product consumers, regulatory agencies, and other organizations that produce similar services and products’ (DiMaggio and Powell 1983, p. 143). Fields are made up of multiple populations of organizations and their respective organization sets. Organizational ﬁelds vary greatly in terms of the extent of their organization, the degree of their structuration; and the emergence, development, and decline of organizational ﬁelds has become an important new focus of study.
4. Changing Theories; Changing Organizations
It would be odd indeed if there were no relation between our changing deﬁnitions and conceptions of organizations and changes in the phenomena itself. Over the past few centuries, organizations have evolved from relatively embedded and dependent components of traditional society to more independent systems that attempted to insulate themselves from the surrounding society, to systems that are much more open, more ﬂexible, and more penetrated by their context. Since the beginning of the industrial period, organizations have developed from highly centralized to more decentralized structures; and they have tended to move from more tightly to more loosely coupled systems. Rather than having their component units be ﬁxed jobs and departments, they are increasingly made up of more diffusely deﬁned skill categories whose participants are grouped into changing conﬁgurations of teams and project groups. Also, jobs formerly linked densely in internal labor markets providing clear career lines to employees are now more often held by temporary workers or independent contractors whose mobility routes cross organizational boundaries. Rather than attempting to incorporate all functions within the same hierarchical ownership structure, organizations increasingly ﬁnd ways to contract work out to relationally-linked independent ﬁrms or to develop alliances with a shifting set of independent partners. New developments in information processing allow the collaboration of geographical remote partners and various combinations of off-site, part-time, and loosely-linked participants. And ownership is no longer viewed as necessary—and in some situations is seen to undermine—control of essential resources and services.
Some theorists, such as Perrow (1991), argue that organizations have increasingly ‘absorbed society,’ taking over one after another societal functions. ‘Activities that once were performed by relatively autonomous and usually small informal groups (e.g., family, neighborhood) and small autonomous organizations (small businesses, local government, local church) are now performed by large bureaucracies’ (p. 726). The corporation is increasingly the source of friends, marriage partners, counseling, medical care, recreation, food services, and retirement options for individual participants.
While there is much truth in this claim, Meyer (1983) stresses the obverse proposition: modern society increasingly absorbs formal organizations. Contemporary societies and international organizations generate many types of rationalized rules, occupations and experts. In order to keep abreast of the latest developments and to exhibit the requisite symbols and forms, organizations conform to the prescriptions— and incorporate representative members of—the relevant professions. And, because these rationalities are various and organized around somewhat divergent purposes, ‘the institutionalization of rational organization tends to lower the formal rationality of speciﬁc organizations.’ Organizations as discrete units look less like rational structures and more like ‘holding companies incorporating various institutionally de- ﬁned packages’ (p. 262). In short, organizations are only one of many carriers of rationality in the modern world, and as the prevalence of these cultural patterns increases, organizations are less likely to determine and are more likely to absorb and reﬂect these diverse logics.
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