Organizations and ENVIRONMENTS HOWARD E. ALDRICH Comet! University Prentice-Hall, Inc., Englewood Cif's, New Jersey 07632‘er 7 shitty ae 2 Cuan ra for Penny © 1979 by Prentice-Hall, Inc., Englewood Cliffs, N.J. 07632 All rights reserved. No part of this book may be reproduced in any form ot by ‘any means without permission in writing from the publisher. Printed in the United States of America 098765432 Prentice-Hall International, Ine., London Prentice-Hall of Australia Pty. Limited, Sydney Prentice-Hall of Canada, Ld., Toronio Prentice-Hall of India Private Limited, New Dethi Prentice-Hall of Jupan, Ine, Takyo Prentice-Hall of Southeast Asia Pte, Lid., Singapore Whitehall Books Limited, Wellington, New Zealand Contents Preface xi 1 INTRODUCTION 1 The Reality of Organizations 2 Definition of an Organization 4 Goal-directed, 4 Boundary-maintaining, 4 Activity Systems, § Organizational Structure: Central Variables 6 Coordination and Authority, 6 Bureaucratic Structure, 9 Opening Up the Bureaucratic Model of Organizations 13 ‘Organizations in Relation to Environments, 14Sources of Change 18 Leadership, 19 Other Organizations, 20 Social and Cultural Forces, 21 Summary 22 Central Themes of the Book, 23 2 THE POPULATION ECOLOGY MODEL 26 ‘An Overview of the Population Ecology Model 27 ‘Variation, 28. Selection, 29 Retention, 30 Evolutionary Theory: Preliminary Considerations 31 Conservative Darwinism, 32 Reform Darwinism, 32 The Three Stage Process: Variation, Selection, Retention 33 ‘The Occurrence of Variations, 34 Consistent Selection Criteria, 34 A Retention Mechanism, 34 The Three Stage Model Applied to Organizations 35 ‘Variation in Organizational Populations, 35 ‘The Selection Process Applied to Social Organization, 39 Retention Systems in Organizations, 47 A Methodological issue 51 Hypothetical Probability “Predictions”, 52 Retrospective Causal Analyses, 53 ‘The Natural Selection Model Cannot Explain Everything, 54 Summary 54 3 ENVIRONMENTS: SOME GENERAL CONSIDERATIONS 56 Environmental Variation 56 Methodological implications 58 The Environment as Resource Controller 61 Dimensions of Environments 63 Using Multiple Dimensions in Understanding Selection 70 Four Types of Environment, 71 Summary 73 4 VARIATION: INTERDEPENDENCE AND AUTONOMY WITHIN ORGANIZATIONS 75 Limits to Complexity 76 Challenges to Traditional Assumptions, 75 Loose Coupling and Hierarchy 76 ‘Loose Coupling, 77 Hierarchy, 78 The Evolutionary Importance of Hierarchy and Loose Coupling 80 ‘The Importance of Hierarchy, 81 ‘The Importance of Loose Coupling, 82 Error, Chance, and Creativity 86 Chance-Prone Structures: Examples of Anarchy and Creativity, 87 Organizational Disasters, 89 Intraorganizational Contlict 91 Factors Producing Interunit Contiet, 93 Summary, 96 Innovation and Variability 97 ‘The Diffusion of Innovations, 98 ‘The Adoption of Innovations, 102 Summary of Innovation and Variability, 104 Summary 105 5. ENVIRONMENTAL SELECTION: THE ROLE OF RESOURCES AND INFORMATION 106 Rational Selection Versus Environmental Selection 106What Is Being Selected? 108 ‘Organizational Forms, 108 Fitness, 109 Environments as information or Resource Flows 110 Environments as Resource Flows 111 Pure Natural Selection Model, 111 Interorganizational Dependence a lection, 118, Environments as Information Flows 122 The Infarmation Perspective, 122 Issues Raised by the Information Flow View, 125 Combining the Views: An Example 192 Summary 134 6 STRATEGIC CHOICE: OPPORTUNITIES AND CONSTRAINTS 136 Aspects of Strategic Choice 137 Decision Maker Autonomy and Organizational Change, 138 Organizations Mzy Influence Their Environments, 144 Role of Perception in Strategic Choice, 148 Limits to Strategic Choice 149 Constraints on Ctoosing New Environments, 149 Limits to Organizational Influence Over Environments, 153 Participants’ Perceptions of Reality as Limits to Choice, 157 Summary 159 7 THE CREATION OF ORGANIZATIONS 161 Organizational Entrepreneurs: Motives and Incentives 162 The Role of the State 764 Levels of Analysis: World System or Nation-States?, 164 Political Stability, 166 Ideological Legitimation, 167 Direct Nation-State Support and Protection of Organizations, 199 ‘The Role of the State: Summary, 171 Environmental Variability and Niche Generation 172 Market-Oriented Economy, 172 Urbanisation, 173 Political Revolution, 1 Environmental Variability and Niche Generation: ‘Summary, 176 Patterns of Organizational Creation 177 “Technological Innovations, 178 Access fo Wealth and Power, 179 Labor Market Characteristics, 1 An Example of Creation: Credit Reporting Agencies, 181 Constraints on the Vieblty of Now Forms, 189 ‘Work Force Characteristics, ; ‘Market Characteristics and Economic Concentration, 184 Government Regulation, 186 Constraints on Viability: Summary, 187 Summary 188 8 PERSISTENCE AND TRANSFORMATION OF ORGANIZATIONS 189 Preliminary Issues 190 ‘Types of Change, 190 Persistence: A Population Perspective 193 Stinchcombe’s Examples, 193 Explanations for Persistence, 195 Persistence: Individual Organizations 197 Internal Factors in Persistence, 197 External Forees in Persistence, 199 7 203, Transformation: Single Organizations 2 Internal Forces: Growth, Power, and Goals, 204 External Forces in Transformation, 212 ‘Transformation: Summary, 217 Summary 218SE ele ett vil Comtents 8 BOUNDARIES AND ORGANIZATIONAL RESPONSIVENESS 219 Delining Boundaries, Authorities and Members 220 Boundaries and Organizational Authorities, 221 Limits to Organizational Authority, 223 Pressures for Responsiveness in Recruiting Employees, 228 Member Autonomy and Organizational Responsivenoss 232 Responses to Declining Organizational Performance, 233 Under What Conditions are Options Chosen’?, 236 Management's Responses to Exit and Voice, 229 ‘Member Autonomy and Organizational Responsiveness: ‘Summary, 241 Summary 242 10 SPANNING ORGANIZATIONAL BOUNDARIES 249 Interorganizational Contiict and Member Complance 244 Expanding or Constricting Boundaries, 244 Conflict Strategies and Boundary Control, 246 Contlict and Compliance: Summary, 248 Boundery-Spanning Roles 248 Functions of Boundary Roles, 249 ‘The Creation of Boundary Roles, 255 Role Specificity, Diseretion, and Power, 259 Summary 263 11 INTERORGANIZATIONAL RELATIONS 265 Exchange and Dependence 266 Dependence, 267 Dimensions of interorganizational Relations 273 Formalization, 273, Intensity, 275, Reciprocity, 276 Standardization, 277 ‘Summary, 278 Contents ix Interorganizational Relations at the Population Level 278 ‘Organization Sets, 279 Action Sets, 280 Networks, 281 Using the Concept of Organization Set in Studying Change 254 ‘The Interstate Commerce Commission's Capture by Spec Interests 84 bf ‘Change in the “Culture” Industry, 286 GH 42_ MANAGING INTERDEPENDENCE THROU INTERORGANIZATIONAL RELATIONS 292 Proptietary Strategies 203 ‘Aggressive Acti ns, 294 Dyadic Strategies 295 i Choosing Boards of Directors, 295 Research on Boards of Directors, 298, Mergers and Joint Ventures, 303 Historical Patterns of Merger Activity, 304 Explaining Mergers and Joint Ventures, 307 Action Set Formation 316 ‘The Development of Action Sots, 317 ‘Summary 321 19 ORGANIZATIONAL NETWORKS AND ECONOMIC POWER 323, Evolution of Networks 323 Networks and Loose Coupling, 325 Selection Pressures and the Role of ‘Linking. pin Organizations, 327 Network Stability: The Retention Problem, 332 ‘An Example of Network Evolution: The NCAA, 337 Evolution of Networks: Summary, 340% Coments Network ard Economic Power 4 Kinship Ties Betw can Interlocking en Bink Cents Se vor a Economic Pars Summa Summary 349 ee REFERENCES 951 Index 377 Preface J could never understand why sociologists stsdying organizations were appsrent Jy content in focusing on single organizations and ignoring the societal context of What they observed. Periaps things began to go awry when organizational logy slipped out of mainstream sociology inthe 1960s and drifted aimlessly ‘uring a period of great ferment in other sociological specialties. Failing 10 ground their studies in a political and historical context, organizational sociologists lost touch with developments in other disciplines as well. While grand theory was superceded by historcally-informed and period-specific expla- rations in many social scientific investigations, quite a few orgamizationsl sociologists were drawn into ‘systems thecry” and “‘coatingency theories” of ‘dubious historical relevance. While European theorists were delivering body- blows to American theories of straification, social mobility, andthe role ofthe state in advanced industrial societies, much of organizational sociology remained ‘curiously parochial, The promise of organizational sociology, 2s revealed in the work of Philip Selznick, James Thompson, and others was aot entirely lost, however, and during the 1970s a renewed sense of excitement rep into the field. in tying to write a book on organizational sociology for both students and colleggves, I decided there was no point in ether reviewing all ofthe “perspec:all Preface te avanc yeort he pt we deca Sealy ends debts over messes etn ht ve plage Bld fiber Ibn sumped pests genta mepae eeee sh inigs fom al lea des agp apse tig fas mate Beer ad peal eae hea the Une Sasa abond. Wit gh sit ote he ies nfs! as ge fed oe ae re ison, fl oni mcatgolog feaea ni a otal iy date maga ne ea ing framework. Of course, achieving such integration has its cost nara cri tes of the bock will point out). ‘ Sean om begin tee ie tok i homed “Ue what conttions do organizations change?” Thorsica iteration aeross nhac alec toh patos nate ae change caps hc esate af socon Seca iis hue ea nce nce re ‘of mainstream sociology and organizational sociology. sid edo nmi epn ad ng ying ‘ature and distribution of resources in. s” envi her wpnieains' ovine ni th on al adi prsipa neon mang Te ne ‘aes cptee lane wa wk dee a lok in watonl spaces. Organon se eanind ar eperenst etn n sin ong ohana or instah runt, hs sigan age oped eee a tals ovetgtor sig te poptaon soos eet ee with the societal context within which organizations are created, survive or fi i. corti ‘f prominence or sink into obscurity. i dead Sng vos overlie nfl “seapee losin ra ep nt cly sit cach nite wang ‘ctoone utacion iw. pitees tera teade, and other tpi often neglected in ease studies Of aunveys of hole faatonsWhenor posible have pre neo Peerhreal cones Tenia i hal eer which new forms of organizations emerged during the rise of cupitalis inthe Wes an dig tse ate Unie Sees ae ally sestiv net of ror a eos each a toi hb The “cca np ey a et ely con, te sng ces ea oe a ‘eam: bar ate toca eee fae pe deninaion ad ox cnr tr egaaon The sn aero sow oth decoy in opened seg tt Preface xi 2 investigators remain sensitive 1 the issues raised in this book. One chapter, for example, deals with corporate ownerstip and control ané the exercise of economic power, and another (eats organizations as prized objects of intraor- sanicaional strates 1 prefer textbook authors taking a crea stand toward te erate they c= view and thus I have critically reviewed others’ research rather than merely Summarizing it. Thave sought to give students an appreciation ofthe conceptual find methodalogeal issues facing organizational sociology, athe sume time re wealing to my collagues where I stad. Taking my cw from other books I ad Init Te included a great deal of descriptive material that illustrates theoretical brincipfes (or occasionally just adds abit of ight to a otherwise tedious point) ‘Simple ideas are often stumbled upon quite slowly. In etrospect, the roo's of the dss inthis Book sere laid down aboot a decade ago, when I sat through Courses in organizational sociology and hunan ecology in successive terms atthe University of Michigan. Reading James Thompson and Amos Hawiey back-to- back (and then geing on fo poiial sociology) was a mind-expanding expei- tence, andthe possibilities of synthesis have intrigued me ever since. 1 began teaching courses on organizations and environments in the early 1970s, and finally rslized-—as 1 suppose all authors must—that only by suppressing. my tronuntental degree of ignorance in a host of areas would I gain the courage (0 Undertake a book ofthis nature. Happily, Thad long since discovered that ignor- ce is no bar (o obtaining a heating inthe sciences (a philosopher of seiene= explained 19 me, we achieve progress only by rejecting false ideas), and so T plunged ahes “Aiong the way, many friends and acquaintances were implicated in my effor, and to preven them fom denying any conection with this work, I've decided to five them deceit. Many peopl read a fst draft ofthe book —some were pal to, some di i out of friendship, and others shred office space with me! In ai- tion to reading the manuscript, Charles Perow and Mayer Zald have been con- ‘ieting unofficial tutorials for me for slmost ¢ decade, and they set high stan dards for an aspiring author. They disagre in signfcant measure with pars of my argument, and T ve benefited immeasurably from their eritivisms. Bob Ster, Paul Hirsch, and David Knoke made extensive comments, sugested additional references, and contibuied new substantive examples. “Joyce Rothscild- Whit and Jane Weiss heightened my political sen and poined out passages where I stayed from the objective af sessing conflict and change. Jobn Child and {have enjoyed an entesive corespondence over the years and his criicisms sharpened my presentation of strategie choice” and its Timitations, William Cle, Jerry Hage, Dick Hall, Marshall Moyer, Mike Mosh, Bonnie Payne, and Hans Pennings als took the time to make writen coruments and Lam pratful all of hem ‘Many of the book's ideas were initially developed in collaborative writing with others. Diane Herker co-authored a paper on boundary spanning roles with liteswho reminded me that ¥ was only par John Kimberly, who shone win a ict eeps "spent ia Engin and Gonna or se boven opportunity fo i Trading and eftion one se of ogunnatonal saioken eat ey Epike Aiken or sagen it. The ltraional ae or ea Cente or Evian Stale tLendon and Nets a Welk, Wits Foe ished obscure references, and ‘contributed nSieoe ante aaeeine Pentel Ed Sion cninnd atta kN ene Pag, Kity Waring, and Alison Gree feed wake ty, Set tl Date ied me cp wok eo ee ene old en inde ey wae vost marine Ves slnhcd Cer Cone aa ridge, oF spent a week in Pen-y-Gwyd. A f 1 Introduction “The major focus of this book is on organizational change—the conditions under which organizations are created, grow, establish relations with important actors {in their environments, adopt tactics for survival, and, quite often, fail, Organiza tional sociology normally focuses on the internal workings of organizations, fol~ lowing a tradition begun with Frederick W. Taylor's “scientific management” cerlicr in this century, and continued by Elton Mayo, Chester Barnard, Melville Dalton, and others. 1 will argue that this perspective is uot wiong, but rather that itis incomplete. Many questions of interest co organizational sociologists todsy require & perspective on organizations that takes account not anly of the internal strueture of organizations but also the fores in their environments that set Timits o organizational discretion, Many social scientists have begun (o incorporate en- vironmental concepts into their work in the past decade, with James Thompson’s book (1967) perhaps being the major turning point ‘The large volume of research and writing on organizations and their environ- rmieats is a relatively recent development, but an interest in organizational envi- ronments is not Max Weber's historical and comparative studies in the late nineteenth and early twentieth centuries examined the effect of social structure on bureaucracy; Selznick’s studies ofthe Tennessee Valley Authority (1949) and the 12 Invoduetion Communist Party (1960) explicitly inchuded the environment as a major external constraint; and endix (1956) analyzed the relationship between managerial ideologies and seca! structure in an historical study of England, Russia, the United States, ani Bast Germany. Economists, especially those working iain. ‘dustcial economics, have examined the conditions under which fms acquire ower to modify situations of economic competition t their advantage (Scherer, 1970), thus aequiting power over their markets. Anthropologists and sociologists theorizing about societal evolution have, of necessity, treated “environment” as 8 central topic (Waite, 1949; Parsons, 1966). My objective ia this book is not to develop another theory of organizations, but rather to show that the literature on organizations can be recast into an organizationenvironment framework that brings together research on internal ‘ofganizational structure and organizational environments. This is accomplished by elaborating upen a three-stage population ecology model that makes explicit the conditions under which organizations (or any socal sysicins) change thes structure and processes. Conversely, I will also use the model to account for stability and lack of change. ‘THE REALITY OF ORGANIZATIONS Organizations are all around us and thus we tend to take their existence for ‘ranted. They are simply @.non-problematic element in our everyday lives and, #8 such, we shut chem out of our consciousness. They hover around the edges of ur life-space as rater vague entities, for most of us experience life in terms of Dersoncto:person ard not person-to-organization relations, When do we notice the reality of organizations? Organizations typically become evident to ws when a ‘problem or crisis occurs. For example, he introduction of a computor course scheduling system throws registration for college classes into disarray, and stu denis want to know "stho's responsible?"; our new car it recalled by the man. Uufscturer to conect a defective engine mount, and we are made dimly aware of the existence of a federal ageney monitoring auto safety standards. ln « particw larly severe winter there is suddenly not enough natural gas to aaisfy customer demand, causing shops and factories to shut dawn and forcing millions out of work. We learn thet there probably is enough natural gas to sétisfy short tema needs, but because of @ complex regulatory system producers find it cheaper to ‘sellin intrastate racer than in interstate markets. Fuel exists, but organizations ‘cannot of will wot deliver it to us. In each instance, the realty of organizations as possessing an existence inde. Pendent of their menabers and with power over peoples’ lives exerts lisell. The objective reality of organizations is felt, subjectively, pressing itself upon us. At {mes it can be an overwhelming presence, asthe fist day on a college campus oF ‘at a new job confinrs, Initial anxiety quickly passes, however, and itis rare Inyoduction 3 rations in his or her individual who hes sleepless nights worrying about the organizations in i -ssary an nse, we neognin 8 Smpe fa ile—oganlaos a aes a sr art lites eta oe ep a eee es aa ee coer a apnea an opto te onions onl est creas! Yo aan oop ; Yorba ay orem oma os, See er acke anny wigaed 2 ly wher ong yu tc dte yeme wmey ‘Weel ony rye acerinac ya etn [pt led ney ered weary pop sed bye 9 scat of nts von maroge Segumedty te SEES ae a ic rca ue hn OWE fae tae | at least twice, relying ee sete tiny yea oyu! ave moved ‘0 ey rent rncrng company fo wanspn your blongings fom dveling 10 del: cuit key, you, or someone you know, will be granted a Bore by sate ‘sa kts nw om a surah Nob nes spt of ta tha ue to wat oe tha emt of penne sgn carton oleate mag sn clones eva ’ De shay re en ethan wove pte OF Ue ono gaan ving eS Could his agapy shone of ope rave an omit by oz See ee nen coon tac curs gel maguire Seep arnt ween eal ta gpl, ua penal eed inn spare ic te at Nae ee ons ofmeeand momec pearing for a of organizational needs.4 Terodvetion organizations can be a ereative, there is no necessarily correct pos alive throughout the book, leaving to make the decison in their own berating, alienating, oF destructive force. As tion, iis my intention simply co keep the issue os ‘aie, quit ropes, to hss who have DEFINITION OF AN ORGANIZATION i a een Shea py en, Pe {concert inanatyc terms is generally x useful endeavor, i for no otkerreaes, an that it revealshidden asmptions abou what is studied. Het st nr pew Betiireld eee a odie boundary-maintaining, activity : ‘ME 4s & continuous process (Weick, 1969). ‘ take for granted our ability to identify Goardirectea Organizations ‘ae purposive systems (Parsons, of organizations behave as ifthe organization ‘asserting that organizations do have goals, observe appears, 1956). To an observer, members has a goal. This is not the same as bot only thar much of the sctivit sociable interaction (Aldrich, 1971b). S nme) ave male, ‘ect iteacon Ach, 171, Sue oxpanztns say ee aa cenraliton ol bt x iy of os leven amen ee iin We orninton Inorg oes! ps om arcing ee hoon oben ong “oil ols" cged besos ee actually going on in an organization. ieee reeeteeen iets Boundary-maintaining ‘The establishment of an “organization” between members and non-members. jn the organization, whereas others ‘Moder organizations typically defn implies that a distinction has been made some persons are admitted t0 participate ‘ate excluded (Weber, 1947, pp. 139-46), 'e members contractually, bat in an earlier Trareauction 3 age membership was often ascriptively based. Persons were organizational ‘members not on the basis of an employment contract ot voluntary affiliation, but tn the basis of ethnicity, kinship, or wealik (Coleman, 1970). ‘Maintaining a distinction between members and non-members involves estab- lishing an authority, either exervised collectively of delegated to a specific role, ‘empowered to admit some and exclude others. Under this definition, friendship ‘itcles or casual s8sociations would not be considered organizations, wheveas ‘most social clubs and fraternal associations would be. Our ability to uniquely define a particular organization ultimately rests on developing a reliable scheme for identifying members and, by implication, the complementary set of non- members, From an orgaaization’s perspective, the ability to conirol boundaties is citicl forthe maintenance of organizational autonomy. When the boundaries of 1 organization become blurred for an observer, itis probably a sign of a change inthe relative power of the organization vs-A-vis its population. The boundary maintaining process becomes visible on those occasions when it is severely tested, such as when blacks or Jews sought admission to exclusive fraternities, ‘country clubs, or elite law firms. Activity Systems Organizations postess a technology for accomplishing work, whether it's a technique for processing raw materials or people. “Activites” emphasizes that technology affects social relations in organizations by structuring transactions be- tween the roles that are the building blocks of an organization. An activity system thus consists of a bounded set of interdependent behaviors, with the nacure of the interdependencies contingent upon technology's form. Consider, for example, the interdependent activities involved in a dress-making frm: pattern maki ‘marking of the cloth, cutting the cloth, allocation of various picves to different ‘groups of seamstresses, sewing, putting the pieces together ina finished garment, ‘and, of course, supplying the materials and maintaining the tools and machines required, In large fiems, each activity may constitute a different rol, filed by a different person. “The division of labor between activites in an organization leads to role dif- ferentiation and specialization of function. In smaller organizations, role ifferentiation—people fulfilling different roles in the organization—may in volve simply a difference between a leader or manager and other members. Larger organizations are more highly diferentieted, and a great deal of research in organizational sociology concerns the lationship between organizational size and role differentiation (Blau, 1972; Child, 1973). “Theorizing about organizations as activity systems biases our thinking toward a concern for processes. By definition, many ofthese processes are goal-directed ‘and boundary-maintaining, and these characteristics, in tum, are central 10 the ‘open: of natural-system model of organizations that Thompson (1967) identified4 Invodvetion ‘There is no way to choose a valuc-free positon oa this issue. These contradic- ‘ory images motivate much of the literature on organizations, in both the schal- arly and popular press. Writers assect that the tension between individuals and organizations can be a creative, liberating, alienating, or destructive force. As there is no necessarily correct postion, itis my intention simply to keep the issue alive throughout the book, letving the choice, quite properly, to those who have {fo make the decision in their own “organizational caress.” DEFINITION OF AN ORGANIZATION People writing about organizations usualy take for granted cur ability to identity organizations, and indeed, theotiss and investigators appear untrouibled by ac- cepting a commonsensical conception of “organization.”” Nevertheless, defining « concept im analyife terms is generally a useful endeavor, if for no otter reason than that it reveals hidden assumptions about what is studied. A definition should highlight the social nature of organizations—they are ‘products of, and constraints upon, social relations. Thus, I propose the following Setintion: organications are goal-directed, boundary-maintaining, activity sys- tems. This definition has the advantage of logically implying other concepts that are significant for the study of organizational change, and it directs our atention ‘© organizing as @ continuous process (Weick, 1969). Goat-directed Organizations are purposivs systems (Parsons, 1956). To an observer, members of organizations behave as tbe organization has a goal. This is not the same as asserting that orgenizationsdo have goals, but only that much of the activity we observe appears directed toward some common purpose. This means that atleast some of the time we will chserve task-oriented behavior, as opposed to purely sociable interaction (Aldrien, 1971). Some organizations may have multiple or contradictory goals, but a unity of purpose is still evident among various groups ‘within the organization. Inferring organizational goals from pamicipanis’ be- haviors allows us to identify “operative goals” (Pertow, 1961) and avoids the nowy problem of reconciling “official goals,” espoused by leaders, with what's actually going on in an organization. Boundary-maintaining ‘The establishment of an “organization” implies that a distinction has been made between members and non-members—some persons are admitted to participate in the organization, whereas others aro excluded (Weber, 1947, pp. 139-46). ‘Modern organizations typically define members contractually, but in an earlier Iwtzodvction $ age membership was often ascriptively based. Persons were organizational members not on the basis of an employmient contractor voluatary affiation, but ‘on the basis of ethnicity, kinship, or wealth (Coleman, 1970). Maintaining a distintion between members and non-members involves estab- lishing an authority, either exercised collectively or delegated to a specific role, ‘empowered 10 admit some and exclude others. Under this definition, friendship circles or casual associations would not be considered organizations, whereas most social clubs and fraternal associations would be. Our ability to uniquely define a particular organization ultimately rests on developing a reiable scheme for identifying members and, by implication, the complementary set of non: members. From an organization's perspective, the ability tocontrol boundaries is critical forthe maintenance of organizational autonomy. When the boundaries of an organization become blurred for an observer, it is probably a sign of a change lative power ofthe organization vis-i-vis its population. The boundary- process becomes visible on those occasions when it is severely tested, such as when blacks oF Jews sought admission to exclusive freterites, ‘country clubs, or elite law firms. Activity Systems Organizations possess a technology for accomplishing work, whether is a technique for processing raw materials or people. “Activities” emphasizes that technology atfects social relations in organizations by structuring transactions be- tween the roles that are the building blocks of an organization. An activity system thus consists ofa bounded set of interdependent behaviors, withthe nature of the interdependencies contingent upon technology's form. Consider, for example, the interdependent activities involved in a dressmaking firm: pattern making, ‘marking ofthe cloth, cutting the cloth, allocation of various pieces to different ‘groups of seumstresses, sewing, puting the pieces together ina finished garment, tnd, of course, supplying the materials and maintaining the tools und machines required. In large firms, each activity may constitue a different roe, filed by a different person. "The division of labor between activities in an organization Ieads to role dif- ferentiation and specialization of function. In smaller organizations, role differetiation—people fulfilling different roles in the organization—may in- volve simply a difference between a leader or manager and other members Larger organizations are more highly differentiated, and a great deat of research in organizational sociology concems the relationship between organizational size and role differentiation (Blau, 1972; Child, 1973) “Theorizing about organizations as activity systeus biases our thinking toward concern for processes. By definition, many of these processes are goal-directed fand boundary-maintining, and these characteristics, in turn, ate central to the ‘open: oF natural-aystem model of organizations that Thompson (1967) identified6 Inodaction as the emerging focus of organizational sociology. Focusing on processes also ‘makes salient the dialectical tension between members’ behaviors, which threaten to push an organization into uhimately contradictory ectvities, and leaders’ efforts at pulling members’ contsibutions together into a coordinated ‘whole. Organization theorists were traditionally more concerned with harnessing ‘members’ behaviors in the interests of fulfilling organizational goals than in con sidering the costs to individvals of organizations’ structural constants, ORGANIZATIONAL STRUCTURE: CENTRAL VARIABLES Defining organizations as goal-directed, boundary-tnsintaining, activity systems conveys an image of organizational processes, but we can still ruse the question fof what holds en organization together. 1 have said nothing about members’ mo- tives or 2 sense of common purpase—neither is a necessary element of a defini tion. Ife do not assume that all members enter organizations with similar mo. tives, or pursve a common personel goal, then what hinds the members together into a collective enterprise? Coordination and Authonty Coordinated sctvity gives organizations the appearance of being goal-directed, and such activity usually occurs at the command of dominant members, Begin ning with Max Weber's studies in the last decade of the nineteenth century, sociologists have sought th: grounds upon which dominance of some members over others is legitimated. Specifically, why do people follow the authoritative commands of organizational leaders and administrators? The exploration of this, question carried Weber into a more general examination of the struetural ar- rangemments in large-scale organizations that make coordinated action possible. ‘Weber approached the swdy of organizations through his study of power and authority relations in politcal structures and public bureaucracies. Power is defined as the possibility ef imposing one’s will upon the behavior of others: “The chance of a man of of a number of men to realize their own will a com- ‘munal action even against the resistance of others who are participating in the action” (Gerth and Mills, 1958, p. 180). In the short run, coordinated action based solely upon power felations between ruler and ruled may suffice, but un- ‘mediated dominance is an unstable base upon which o erecta long-lived argani- 1f political structures, public bureaucracies, and large-scale organizations are to survive, a means must be found to legitimize the exercise of power in the eyes of those who are being ruled. Weber identified cuthority as the means by which dominance was cloaked with legitimacy and the dominated accepted their fate. ‘An authority relationship is @ power relationship which rulers—those imposing. their will on others—believe they have a right to exercise power a portant, the riled consider it their duty to obey. An authority relationship con- {ins the element of reciprocity that is lacking in encontrolled power relation ships. ‘Clearly, organizations founded solely on the ability of rulers to dominate the ruled, without a reciprocal belief by the dominated thatthe relationship is legiti- ‘mate, face a constant problem ofthe erosion of thet power. Orgenizations with- out legitimacy must devote considerable resouices to social control. Authority relations, by contrast, make possible the exercise of domination over lerge nom ‘bers of people, as belief in the legitimacy of authority leads to an acceptance of control procedures. "As organizations grow and exceed the scope of ene person's ability to super- vise, domination ean no longer be exercised on a one-to-one basis. Large-scale organization requires an administrative apparatus to execute the commands and ‘ridge the gap between leaders and the fed, Indeed, the level at which a belief in the legitimacy of the eaderships’ authority is crucial isnot the lowest level of an ‘organization, but rather among the members of the administrative apparatus. Political structures, public bureaucracies, and most other orgenizations can sut- ‘high level of disaffection and alienation among the dominated, as Fong as ‘the administrative personnel remain convinced of their own legitimacy. Given the fundamental importance of authoritative relationships, the question Weber posed was what kinds of beliefs legitimize the exercise of power in the eyes of rulers and the ruled? On the basis of his historical investigations, he iden: tified three principles of legitimation of authority: charismatic, traditional, and Jegal. Each principle implies a different type of administrative structure, with dif- {ering limits on the exercise of power by rulers ot leaders, Charismatic authority, Charisma means literally a “gift of grace," “extraor- inary quality of a person, regardless of whether this quality is actual, alleged, or presuined” (Gerth and Mills, 1958, p. 295), Charismatic authority i legitimated by the belief the governed have in the exceptional qualities of thei leader, and charismatic leaders justify their authority by their exceptional deeds. Prophets, ‘warrior chieftains, heads of political factions and social movements, and reli- sous leaders exemplify this type of authority. ‘Because itis based upon a belief in seemingly magical powers and exceptional -vstues, such authority is limitless. The only constraint on the orders of chatismat- fe leaders is the personal capsbilitios oftheir followers. Followers or disciples ‘accept arbitrary dietates because they have faith" in their leaders. The adminis: trative structure under charismatic leaders is Joose and unstable, dependent upon the whims and desires ofthe leader. If the leader dies or is otherwise removed, the organization faces a crisis of succession tothe leadership post. If the organi- zation is to survive, stability must be introduced into the structure, in a process labelled the “routinization of charisme.”” When the Reverend Martin Luthersection King, J., was assassinated in 1968, the lss of his charismatic leadership threw the Southern Cristian Leadership Conference into a turmoil, with opposing fac. tions supporting Ralph Abernathy and Jesse Jackson. The organization split, with Jackson breaking away to find Operation Breadbasket in Chicago. Charismatic leaders are important figures in the study of organizational change because oftheir sole in creating new organizations and disrupting estab- lished ones. "Charismatic domination means 2 rejection of all ties to any external ‘order in favor of the exclusive glorification ofthe genuine mentality ofthe proph- ct and hero. Hence, its attitude is revolutionary and transvalues everything; it ‘makes a sovereign break with all traditional or rational norms: I is writen, but T say unto you” (Gerth and Mills, 1958, p. 250) ‘Traditional authority. Legitimation of traditional authority stems from a be- lief in the inviolable nature of everyday routine and the unchanging past. People obey out of respect for the ruler's traditional status and the belief that tradition is the best guide to behavior. Obviously, leaders have a strong vested interest in promoting such beliefs, md infractions of the leader's commands are said to re- sult in magical or religioes evils, ‘The feudal lord or small town community leader, who command by virtue of their inherited statuses, exercise traditional authority, Orders and decisions of the {raditional leader are personal rather than based on formal rules or law, but are not as arbitrary as those of the charismatic leader, as they must fall within the limits fixed by custom. The administrative structure under traditional authority consists of patriarchal household or pstrimonial bureaucracy, made up of of- ficials who depend solely upon the leaders and whose interesis are linked to ‘them. Continuity in administration isnot as problematic as under charismatic au- thority, as officials have tadition and custom to guide them in daly decisions. Legal authority. The legitimation of legal authority isa belief in the law, not ina charismatically gifted person nor upon sacred tradition or obligations toward ‘traditional leader. People obey laws under legal authority not because they are issued by a charismatic cr traditional leader, but because they believe that the laws were enacted through proper procedure. “Submission under legel authority is based upon an impersonal bond tothe generally defined and funetianal ‘duty of office" (Gerth and Mills, 1958, p. 299). One's duty of office is fixed by ration: ally establisied norms, and is arrived at through commonly agreed upon princi ples of rationality, rather than through the visions of a charismati leader of repe- tition of traditional practices. Rulers or leaders have authority to issue orders hecause they were elevated to the positions by legal procedures, Authority is strictly limited 10 areas of com- petence defined by law, and ithe rules are followed, the administrative structure is highly stable. ‘The administrative stracture under legel authority is called a bureaucracy; itis Iimadvetion 9 structure characterized by a belief in rules and legal onder in the carrying out of “organizational tasks. Weber argued (hat legal-bureaueratic authority had become the dominant organizing principle in modern society, displacing the ad hoc, pa- triarchal, and patrimonial forms of organization, “The decisive reason for the ad ‘vance of bureauctatic organization has always been its purely technical superion~ ity over any other form of organization. The fully developed bureaveratic ‘mechanism compares with other organizations exactly a does the machine with the non-mechanical modes of production” (Gerth and Mills, 1958, p. 214). In ‘writing ofthe bureaucratization of modern society, he noted thet the bureaucratic form of administration had penetrated all institutions: the church, army, univer- sities, and, above all, the state. The spread of bureaucratization was spured by the general trond of the rationalization of social if. ‘Weber was particularly interested in the politica effects of the bureaveratiza- tion of administration, On the one hand, he noted bureaucrary’s impact in the leveling of social differences, while on the other hand he wrote of its tendency toward concentration of the means of administration in the hands of a few. His discussion of power in bureaucracies and of the power of bureaucracies in society is stil relevant today. The following warning will bas elevant in the 19803 as it ‘was in the earliest decade of this cemtury: ‘Once itis fully established, bureaucracy is among those social structures, which are the hardest to destroy. Bureaucracy is she means of carrying “community action" over into rationally ordered “societal action.” There- fore, as an instrument for “societalizing” relations of power, bureaucracy has been and is a power instrument ofthe first onler—for the one who con- trols the bureaucratic apparatus (Gerth and Mills, 1958, p. 228). Bureaucratic Structure ‘Weber not only analyzed the tendency of bureaucracies to accompany the incveas- ing rationalization of social fife, but also identifed the reasons for the technical superiority of bureaucracy ever previous forms of organization, Since most mod- ‘em organizations revemble the bureaucratic type portrayed by Weber, itis im- perative that we understand its features if we wish to understand the conditions under which organizational structures change. Weber presented the characteris- tics of bureaucracy as an idea! type—an analytically-constructed model, ex- tracted from systematic observations of many bureaucracies. He recognized that the characteristics might be present in particular bureaucratic structres in vary~ ing degrees, as is evidenced by his use of qualifying phrases suck as “more or Jess,” “normally,” and “usually.” ‘Social scientists studying organizations disaggregated Weber's portrait of an ideal-typieal bureaucracy int its component pats and used them 2s variables in10 Inroduesion ‘analyzing organizational structures (Hall, 1963). As they were adapted to the ‘demands of research, the variables became detached from their origital context. It's clear, for example, that Weber had in mind fairy large administrative struc: ‘ures: the church, the army, political parties in the United States, the state ap paratus of the Roman and Egyptian empires, or the social Democratic party in Germany. Nevertheless, the dimensions have been found useful when applied (9 smaller-scale organizations, and while some investigators may have neglected the association between these characteristics and organizational efficiency ‘GWeber’s concer), occasienally erities speak out to remind us of Weber's intent (eerow, 1972). ‘Seven characteristics enoy a special place inthe list of variables used in mod- em organizational research, as will be evident from the studies reviewed in this book. I will give the characteristics labels that match them with curtent concep- tions of organizational stru:ture, and will discuss the advantages accruing to of- ganizations felling toward the “bureaucratic” end of a dimension. Treated as vat- iables, rather than components or propenties of an ideal type, the siructural Ccharacteristies Weber iderified are perfectly general dimensioas that may be applied to any organizational structure. Recent research demonstrates that the dimensions may vary independently of one another—they are not perfectly corte- fated in any population of o-ganizations—and thus most social scientists prefer to theorize about specific variables, rather than “bureaucracy” as a form, Our image of bureaucracy isso song, however, that even social Scientists often slip into writing about “bureaveratie organizations," and I will periodically do the Specialization. The duties of each role ae clearly specified in bureaucratic or- ganizations, with each member operating in a fixed and offvial jurisdictional area, A highly rationalized division of labor limits each member to only a subset ‘of the organization's tasks, thus increasing organizational efficiency as members gain experience and learn to do their job well. Specialization also increases ef ficiency by reducing the chaos and uncertainty that would result if members were free fo take on any task in te organization, regardless of their training or experi- Formalization and standardization. As an organization becomes more bbureauertized, the extent to which the duties ofeach oleate formalized through rules end regulations expards. Weber observed that the management of modern coxganizations is based on writen documents and files, which is the highest de agree of forlization. Forualization of duties reduces uncertainty that would otherwise confont membes fed with variability in customers, raw material, relations with other members, or simply the problem of how to allocate their Invrodvetion 11 time. Most organizations dealing with large constituencies develop standardized procedures that members follow when dealing with clients, such as presenting them with standard forms to be completed or recording a eredit eard transaction in exactly the seme manner for every sale. Rules are the basis of self protection for organizational members, as they re Goce intemal confict Perrow, 1972). Departments and their members occupy & ‘specific role inthe organizational division of labor, and formalization of duties Timits the demands others can make on persons ina particular role. A response to ‘difficult or unusual request is typically “that's not my job.” Decentralization. In a bureaveratie organization, the esponsibility for making, routine operating decisions is delegated to the various units and departments, rather than remaining in the hands of the chief administrator. Although itis paradoxical given the common stereotype of bureaucracies as highly centralized tnd monoctatic, delegation of authority is actually a requisite for efficient opera- tions in a bureaucracy, Centralization of authority is limited to important policy decisions and planning, andl top administrators deal only with exceptional and ‘uausual cases that subordinates cannot handle. This ype of structure frees the top administrator or leader for making long-range decisions, and can be contrasted With decision making under eharismatic or traditional authority, wherein leaders tue involved in almost all decisions. Efficient bureaucracies centralize the autbority to make non-routine decisions, hile routine decisions are made by lower-level staff. The hallmark of a highly bburesveratized organization lies in the ability of ckrks, foremen, lower-level supervisors, and ordinary members to handle most ofthe everyday tasks of the organization without involving their immediate supervisors. Successful decen: tralization allows the organization to reap the maximum benefits from specializa- tion and formalization, as it minimizes communication costs ané the drain on searoe managerial or leadership time, Hierarehy. A highly bureaucratic organization is characterized by an official hierarchy of authority that establishes ‘‘a firmly ordered system of super- and subordination in which there isa supervision of the lower offices by the higher ‘ones! (Gerth and Mills, 1958, p. 197). The hierarchy is both a structure of omination and a channel through which decisions can be appealed from lower ranks to higher ranks. An organization and its clients benefit from an officially recognized hierarchy of authority, as it makes deeision makers visible and thus accountable for thei actions. ach roe is subject to discipline from a role above it in the hierarchy, bat such authority extends only to the formal duties of the role. The private life of an employee is fre from the organization’s authority. Again, contrast this situation12 Inzoducion with the fate of « membe: under charismatic or traditional authority, where the ‘organization potentially has access to a members entire life-space. Limited rewards to officeholders. The “means of administration" —the re- sources of the organizatin—are attached to the offce, not the officeholder. ‘Weber noted that office halding isa“ vocation,” not to be exploited for side ben fils such as extorting money from clients or appropriating organizational re sources. A member implicitly accepts an obligation ¢ faithfully perform the ties of office, but guins no personal rights to the office. Weber noted that in the Middle Ages the practice of “office farming” was quite common: Persons were induced to occupy positins in the state bureaveracy with the promise of being able to arrange their own methods of tax collection and the opportunity to pat state-owned fand to personal use, In modem organizations, while it is no longer legitimate, white-collar employees stock up on envelopes, pencils, use the tele phone for personal calls, and pad their expense accounts. Opportunities for biue-collar workers are more limited, but employees of firms with equipment re pair shops may fiod ways to reduce the cost of auto maintenance or appliance "upkeep. Buresucratic structure is designed to redace such exploitation of the of- ganization Universalistic performance standards. Hiring and promotion in a highly bureaucratic organization are ideally based on competence and universalistic standards. Competence may be measured by one’s educational qualifications, previous training, standardized tests, or performance in office, but whatever the criterion, it is applied on anon-personalistic basis, Efficiency is achieved because ‘employees are chosen for their ability and technical knowledge, ratber than on technically irelevant criteria such as race, sex, of Kinship ties. As battles over ‘equal opportunity hiring and promotion of blacks and women inthe United States attest, particularistic standards are still a characteristic of many otherwise bbureaucratcally structured organizations, Career advancement opportunities. Bureaucratically structured organiza- tions ideally provide their members with the prospect of career advancement, and increasing authority and come within the organization. Mobility through the ranks is based on universlistic criteria and is a way of motivating persons 10 perform well continually. Efficiency is increased because members are offered & strong inducement todo ther jobs well and they adopt a long-erm perspective on ‘membership in the organization. Net all modem organizations ot occupations ‘offer the possibility of a career, and some economists argue thatthe business sec- tor is split into two parts—one with an internat labor market and the other with- ‘out (Deeringer and Piore, 1971). An organization with an intemal labor market ‘offers emplayees the opportunity to guin organization-specifc skills, which give them access to jobs with aigher pay er more responsibilty. Organizations with- Iawodvetion 13 fut internat labor markets, such as stall, family-owned retail and service estab- Tishments, represent « career dead-end for their employees. ‘Summary of bureaucratic structural characteristics. If we ignore the vari- able nature of the seven characteristics and concentrate only on the “bureauers- tic” extreme of each dimension, we can grasp the fundamental feature of Durcaucratic efficiency: bureaucracy tries to eliminate or control all extra ‘orgenizational inflvences on the behavior of its members, Bureaucratic charac- teristics are designed to close off the organization from unwanted influences, insofar as this is possible, These structural features are chosen on the basis of ‘ational criteria, and another way to remember the ceniral feature of the bureau cratizing process is to think of it as the exercise of control on the basis of the rational use of information OPENING UP THE BUREAUCRATIC MODEL, OF ORGANIZATIONS [As a model for managing organizations, bureaucracy is unassailable. Given the proper set of conditions, leaders and administrators could do no better than to follow the recommendations implicit in Weber's descrition of bureaucracy; itis «technically superior instrurnent for accomplishing complex tasks. As Perrow (1972) and others have noted, many criticisms of bureaucracy are misplaced, as ‘Weber did not argue that bureaucratic structure constituied a universal organizing principle. His chief concer was with the administrtion of nation-mates. and other large-scale undertakings, such as armies and poliical pastes. Weber could not have foreseen the uses fo which his model would be put by sociologists and others studying industrial organizations, voluntary associations, end othes forms ‘of organization, ‘Weber's work was not widely available in the English language and in the United States until the late 1940s, but social scientists interested in the manage- iment of organizations (in the decades following World War I) were developing conception of intemal organizational structure very similar to his. Borrowing ‘many of their concepts from military terminology, management scientists wrote of the necessity for unity inthe chain of command, achieving an optimum ratio of subordinates per supervisor, and improving lines of communication. The central {question for these theorists was how to design an ellicient organizational structure —a question that was also at the center of Weber's work. For purposes of analysis and prescription, the environments of organizations were taken as given, or else outside forces acting on organizations were assumed to be predictable. Theoriss assumed that goals were known, technology was ‘well-understood, and resources were available co suppert the organization. These assumptions are very much the same as those-Weber made in developing his14 Inwoduetion ideal-typial model of bureaucracy. The underlying premise ofthese models was that organizational suucure is designed through deliberate choice, and that hoices reflect anon ambiguous goal (Thompson, 1967). For management sien tists, industrial economisi, and eters, this was both a model of organization and 2 soughtalter goal ‘A concem for maximizing efficiency (given the assumption of stable zoel, technology, and funding) leads to the ereation of organizational models very mach like Weber's conception of bureaucracy. Thus the various management- ‘oriented models began to blend together with Weber's model inthe btrstore on ‘organizations inthe 1950s, As Thoopson (1967) notes, such models ar oriented chiefly to managing orpanizations, rather than undesstanding them. People often fal o consider under what conditions the bureaucratic model could most appro: priacly be applied and what conditions limit ts usefulness when they Tollow such models. For example, th destructive effects of rationalization’s consequences for wage-workers were overlooked, and some theorists have argued thatthe “e- sgridation of labor” is direct result of applying rational-sciewlifc methods of analysis to the jobs people have ia all organizations (Braverman, 1974), “The factors laken agen by these rater closed models of organizations ae most easily discemed when they are rclted tothe definition of an organization resented exrtier: 2 goabairected, boundary-maintaining, activity system. The hureaueratic model, strictly applied, takes goals, boundaries, and activity sys tems as non-problematic for an organization’ structure. Under these conditions, there are no barriers to adopting the seven characteristic features of bureaucracy, and administrators and leaders can direct their attention to maximizing efficiency. ‘The pure bureaueraie mosel never totaly dominated the sociological lite- ture; Selznick (1949), Bendix (1956), Thompson (1960), and others meintaned a concern for organizations environments in thei writings. L believe thatthe non- cumulative nature of mich of this work, as contrasted with research focused more narrowly on intaonganzationalstvetre, was due tothe lack ofan all-en~ combassing theoretical perspective. The bureaucratic model was well-developed, parsimonious, and cas) to apply in case studies of single organizations Nevertheless, what Thompson (1967 calls an open- or natura-system model was kept alive, and it ukimtely citrated enough attention to become a specialty are within organizational sociology. A few case examples, based upor the goals- boundaries-actvity system definition of an organization, will indicate the favor of the more open orientation. Organizations in Relation to Environments Gosls may be imposed on an organization by the environment. The bureaucratic model presumes that organizational goals are known and are an un- ambiguous guide to action. An example taken from a study by Mania and Pet- row (1965), however, highlights a situation in which organizational objectives Introdvetion 15 follow from pressures imposed on an organization by outside elements, Jn the carly 1960s, a Youth Commission was created in Ann Arbor, Michigan, with the official goal of “appraising conditions and infivences affecting youth, evaluating, ‘existing services, and recommending measures to promote the best interests of children and youth in the city."” The tecbnology of the new organization was only ‘vaguely spelled out, and an opening was left for the possiblity of an action role forthe group. ‘During its fist year the Commission played a wait-and-see role, listening to suggestions from various community groups but resisting pressures for & more ative role. A benign report was issued that assured other agencies and groups thatthe Youth Commission was not going to be a threat to their roles and interests in Ann Arbor. At the beginning of ts second year the Commission elected 2 new ‘chairperson who had no organizational role directly involving youth, and thus could act asa free agent. This isnot o say that he planned an aggressive role for the Commission, but only that he had no vested intrest init playing a pessive role. 'A major change occurred in the Corumission’s environment during its second year—other organizations began to view the Youth Commission as a vehicle for the realization of their own ends, First, the Ann Arbor city eouneil considered ‘entcting an anti-brawling ordinance, but before taking action, the council asked the Youth Commission to study the situation and make recommendations. Given the nature of the request, this was tantamount to asking the Commission t be- ‘come a part of the legislative process, a step on the road to assuming a more ‘active role. Second, the United Fund asked the Commission to co-sponsor a seminar, which was very well received by the local media, generating a great ‘deal of favorable publicity forthe Commission. ‘Third, the Probate Court asked the Youth Commission to “look into" a project offering protective services for juveniles, such as protection from parental abuse. [A judge from the Probate Court arranged a meeting between the Commission and ‘representative ofa state-wide project, and told the assembled group that he felt the Commission ought to sponsor x program to aid trubted youth. Subsequently, a meeting was held with the heads of agencies dealing with youth, and an ungves: tioned assumption of the meeting was that the Commission would sponsor a study and take the lead in disseminating its results. By the beginning of its third year, the “no-action” policy was thoroughly ‘compromised, even though Youth Commission members didn't opealy acknow~ ledge it. The Commission was taking the lead in youth protective services and "was considering adding « staff person to coordinate the work of all the involved [aroups. Although this shift in goals was made possible by the election of a more receptive Commission chairperson, the actual posh toward an action role came from outside the organization's boundaries Organizations’ goals can be generated by external forces, such as other groups seeking to use the orgenizatioa to further their own ends, as occurred inthe case16 Introduccion of the Youth Commisssien. Other examples include the use of the Democratic Party by the AFL-CIO to press for minimum wage legislation, and the use of the American Medical Association and its journal by the ethical drugs indusiry 0 advertise its products (Hissch, 19756), The bureaucratic model must be modified to recognize organizational goal-seting asa result of interaction between organi- zations and their environments (Thompson and McEwen, 1958), Organizational boundaries are not fixed. Organizational boundaries — efined in terms of memtesship—may vary, depending upon internal needs and the degree of threat posed by an organization's environment. Organizational sirategy in times of interorganizationol conflict may be thought of as a choice between two options: constricting or expanding organizatioyal boundaries. ‘Member participation, under normal ciccumstances, is important because organi ational maintenance depends upon members sustaining the activity system. ‘Members constitute critial resources in a conflict, asthe more active the partici pation, the greater the chances of success in the conflict. Strategy may take the form of constricting the boundaries ofthe organization by strengthening the re quirements of participaticn, with each member asked to do more ia conforming (o organizational rules ard ideology. Raising performance standards means, ia many cases, expelling weaker members from the organization ‘The Black Panther Pary, a militant black organization that began in Oakland, California, in the early 1960s exemplifies the boundary constriction strategy. At Ainues, thousands claimed to be members of the organization, but when the group became subject to severe police sid FBI harassment inthe late 1960s, the leader- ship claimed less than a thousand members. Ideological standards were raised, ‘nd they became the source of violent conflict within the Black Panthers. ‘The ‘organization split into waring factions, with the opponents trading charges of ‘ideological impurity and opportunism. A similar confit befell the Students for @ Democratic Society (SDS), a predominantly male, leftist-oriented group that be- ‘came increasingly politicized through the 1960s. The conflict culminated in a split in the late 1960s tat sent the most militem faction underground—the “Weather Underground.” Surviving factions accepted only the ideologically ‘committed, and the danger of police discovery kept mast working subgroups of ‘he organization quite small Strategy may also take the form of expanding organizational boundaries 19 include as members persons from competing organizations or from the poten- tially troublesome environment. This strategy poses problems for an organization because taking on new, unsocialized members means more work for current members. Expansion is easiest in organizations without a highly specifi: belief system or stringent participation requirements, and in organizations with slack resources to distribute to new members, “The mos. well-known example of boundary expansion in the organizational sociology literature is Selznick’s (1949) study of co-optation of business and 2g: Inicodction 17 sicultural interests in the Tennessee Valley Authority (TVA) case. Faced with po- tentially crippling hostility from powerful elements ins environment, the TVA expanded its boundaries to take them in. The Democratic Party in the United States is remarkable in its ability to absor’ divergent interests and dissident roups under the same organizational umbrella, When potential opposition _roups arose, such as the coalition that supported Eugene McCarthy's unsuocess- ful atterpe atthe Democratic presidential nomination in 1968, the party simply expanded to take in all but the most committed opponents. (Organizational boundaries are not firmly fixed and may vary, depending on lbe situation an organization faces. Expansion and contraction are two extremes ‘of a range of boundary-maintaining strategies open o leaders and administrators. Moreover, often organizations have no discretion in the matter—either bound- aries change ot survival becomes problematic. A revised model of organizational structure must take this into account. Activity systems are not equally adapted (o all environments, Managerial theories of organization structure usually make che choice of an activity system on-problematic, assuming that administrators will choose the activity system and technology that is most suited to the organization's environment. In this example, the focus will be on the technological aspect of activity systems, ‘Whether technology is based on people- or material-processing, lite attention is paid to the prospect of changing conditions that could make it non-effective, or, ‘worse still fatally unfit forthe environment an organization operates in. Emery and Trist (1965) provided an example of a food canning company in England after World War Il that failed to modify its technology to keep pace with the times and consequently suffered a severe financial decline. ‘The ACME Vegetable Company produced a canned vegetable that accounted for about 65 percent of the vegetables sold in its market, with this proportion auite stable before and during the war. Top administrators, Believing their envi- ronment was stable, convinced the parent company to invest millions of dollars in building a new sutomated factory. Since the new technology only aitsined highest efficiency when run at a high volume, it constituted a builtin rigidity in the operations of ACME. ACME’s eavironment, however, was not stable, Four developments occurred ‘while the new factory was being built. First, after World War TI, the removal of, controls on sales of metal products made cheap metal cans easy to obt ‘resumption of international trade sparked a lerge market in imparted fr frit trade was seasonal and to take up ther slack capacity, the small companies sought an offseason activity, They discovered the availability of large quantities of vegctables from the United States due to aside effec of the development of quick-frozen foods. Vegetable crops that were unsuitable for freezing but that ‘were suitable for canning became available at cheep prices. These developments had the effect of substantially increasing competition in ACME"s market.18 tnaroduetion Second, the increasing affluence of post-war English society meant that a large number of people could afford quick-frozen, as opposed to canned, vegeta- bles. Frozen-food companies began o exode ACME’s once-domninant position in the market. Third, increasing affluence meant that people had access to a wider variety of vegetables than just the line produced by ACME. Fourth, asin the United States, malor changes were taking place in the English food-retailing in dustry. Food retaing became incteasingly concentrated in the hands of super- imackets and large grocery chains. One of the marketing strategies of these or- ganizations was lower prices; they wanted to sell cheaper “house” brands, rather than relying upon well-known, independent producers’ brands. Supermarkets and chains placed bulk orders with the smaller canning firms and, within a few yeats retailers’ own brands captuzed almost $0 percent of the market. ACME's autorrated factory coulda’t be adapted tothe new situation until new products could be developed with a sales volume lazge enough to justify high volume production. Developing new products required resesrch and develop- ‘ment and large scale market research, but ACME had structured itself on the assumption that these strategies would not be needed, The company could aot afford to make the necessary adjustments to the changed environments and consequently had to be reorganized, after massive internal distuptions and confit. A particular technology is effective only insofar as it is appropriate to the envi ronment an organvatioa faces, as this example demonstrates, No matter how in rermally efficient the technology-activity system, the loss of external relevance dooms an organization to inferior status unles it has other sources of power over its environment. The American steel industry has lagged behind its foreign com petitors under a stield of oligopolistic pricing and common values regarding & Teluciance to diversify or innovate. Rapid growth in the availability of cheaper eel from Wester Europe and Japan in the 1970s has caused massive employ: ‘ment loss and corporate reorganizations in many steel companies. Most orgeniza- tions have only a limited degree of freedom from environtneatal forces, and a model of organizational change must treat technology, at well as goals and boundaries, as subject to environmental constrains SOURCES OF C1ANGE In choosing (o stucy organizational change, we face the question of how to of- ganize our inquity. How are we to decide where to look forthe sources of change in organizational forms and functions? Which academic disciplines ean we draw upon? A reasonable answer would be that we make use of whatever concepts and Perspectives are relevant to the specific instance of change we examine. How= ever, a8 the examples in the preceding section show, itis useful to have an idea of, the range of possible answers to the question of “how do we account for change?” i | | 9 Introduction Leadership Socisl-psychology and administrative science emphasize the role of key viduals as leaders and innovators in organizational change. Entrepreneurial theory in economics atrbutes the creation of firms to farsighted action by viduals willing to take risks in uncertain economic environments. As Perrow (1970, p. 2) aoted, administrators and others assert that, afterall, “organizations ae people” and therefore the study of organizations is eaily the study of persons who happen to oceupy organizational roles, No one can deny that organizations axe sustained by social relations and that interpersonal interaction is the lifeblood of organizational routine; bu such a view is incomplete. ‘Viewing organizational change solely asthe product of key decisions by lead- ers or members fails to take into account the signifeant constraints that confront “poople™ as they go about their everyday duties. Even entrepreneurs whose names we associate with spectacular successes in American corporate history ap. pear slightly less heroic when we examine the inconsistent records they com: piled. Henry Ford founded his enormously profiuble automobile company in 1903 (as a minority shareholder) only after being associated with two previous corporate failures. William Durant, founder of General Motors in 1908, did so poorly that by 1911 he was replaced as head of the company by outside financial interests. He then created another auto company—Chevrolet—and through its success returned to head General Motors again in 1916, Such examples are even ‘more common in the small business community, as the very high failure rate of small firms reflects the constant shuffing of workers into and out of self- employment. ‘After reviewing the debate between theorists over whether leaders can make a large difference in organizations, Hall (1977) suggested two ways of resolving the issue. Fist, “leadership” depends on the degree of congruence between situation and the characteristics of the leader. This position leaves room for indi- vidual initiative, but also directs our attention tothe context within which “lead- ership” is exercised. Second, the higher « leader's position and the more cen- lualized the decision-making structure, the larger the impact he or she can make. This proposition is eminently plausible, but it must be qualified by the first proposition—high rmk opens up the possibility of making an impact, but the contingeacy of matching "eadership” to the context still holds. Lieberson and O'Connor's (1972) study of 167 large corporations found only Timid effects of leadership changes on company performance, net of industry and company ef fects, Generalizing from their findings is risky, however, given definitional de~ pendence between their three performance variables and the lack of organi- zation-specific control variables. ‘Assessing the contribution that leaders make to organizational change is quite difficult in societies that place great value on “leadership,” and altribute success ‘or failure to individual rather than social structural characteristics. Organizational20 tewtoducton frilures are generally followed by a search forthe individual responsible, and the annual turnover of managers in professional sports reflects, in part, this rital scapegoating (Gamsen and Scotch, 1968). The basis of structure selection, ex: perienced as “success” by # given organization, may be imperfectly understood by organizational members. Without knowledge about the experience of other organizations, especially those experiencing “failure,” it is difficult for the ‘members of a single organization t© accurately account for the source of theit suecess. It is equally dffieult, ofcourse, for members to understand the causes of failure. Under conditons of uncertain and ambiguous information, members fal ‘back on cultural and oxganizational stereotypes for an explanation of success and failure, and “eaersbip” is a popular choice, Other Organizations Economies and human ecology emphasize the ole of other organlations in sup plying (or withing resources in the inrerganizainal ison of lab, A Wil be noted trougtou this book, organizations in indus sotetes coma 2nd allcste the bate of societal resources through the prdeton of good and Services andthe payment of wages and salaries, Dileenaton td speci tion within the organs! population lessen the posbty of ay Hg famizaton achieving selscienc, ths requiing most organizations ee Ino wansactions wi oters to obtin resources that cant be generated tt nally (Levine ad Whe, 1961), Organizational dfletcntaton and opociaaten Of freon ae icy to lead t inetorganiatonal dependencies whenever Se] organization manage to acquire monopoly contol over impor esau and tte abe to defend the potion. By manipulating lnrorganietonaldependen Cis, dominant organizations have & aj impact onthe Behavior of etc tization inte poplton ‘The orginal population i highly strated, and so the potential npc of dominant orgenizatos is widespread, For example in 1972, appetitaey percent f al bins organizations nthe United Sates acount for Over 76 Percent afl busiest receipts. Among activ corporat a 1972, O.10 percent Contoled 6 percent of al eorprae assets Whether intended oro, acon by the very largest ganizations teveborau thoughout te entre Yop tion—eting wage sales, product quali stindards, suppyag top lve tells for Predict ealats or iotrering th incon ae of Toei cots, ‘Any prticul rgnization may be enmeshed in ws of dominant nd sub erdint lations with dozens of thr exgniatns, but te fl elect of ce pennies willbe el ony hen dominant organitons make dtuand sa ordinate orgacation. The manipulation of aur 1 8 cern stqy 0 casi orgaatioal mince, ss vet ine ration, inrosking den tes, dsrminnory ping, exsusve dealing arangemens, and ite formation Inerodustion 21 of cartels. These strategies are most readily used by the largest and most stable ‘organizations. Their resources provide a base that cushions them against occa- sonal strategic failures, as well as making possible expensive maneuvers that smaller organizations would never dare attempt. Political science and public administration furnish insights into political and legislative demands for and constraints on organizational change. The past sv: eral decades are replete with examples of organizational change mandated by legislative or regulatory ction: pollution and gasoline mailoage standards for new automobiles that led t0 changes in automotive design; occupational safety and ‘ealth standards that mandated changes on the ehop floor to eliminate risks to ‘workers; capital exporting restrictions in the early 1970s that afleced corporate foreign investment; and federal subsidies for graduste education that first boosted and then deflated enrollment in graduate social science programs, thus affecting the size and operating procedures of soctal science departments. Legislative and regulatory action has also ad the opposite effect—that of inhibiting or prohibit ing organization change. The conservative procedures fer allocating new truck- ing and airline routs, initiated by the Interstate Commerce Commission and the ‘Aeronautics Board, have been @ major barvir to theentry of new firms into there industries. Social and Cultural Forces ‘An examination of the historical record by sociologists, his thcopologsts, and others points up the community and societal context within ‘hich organizational change occurs. Social movements, changes in societal val tes, cross-societa diffusion of innovations, and the incorporation of peripheral areas into the world capitalist sytem (Wallerstein, 1974, have had major im- acts on the proetion of new types of organizations and the transformation of old ones In ll industilizing societies, entrepreneurs have had to ight to win accep: tance for the new pattem of economic activity made necessary hy industria tion @endin, 1956). The creation of new organizational forms as been limized until industrialists could win over or neutralize a politically dominant aristocracy snd the newly recruited work frce. Te position ofthe sate has been crucial in these conftontations, From the very beginning, industrializaton in Russia was both stimulated and controlled by the state. In contast, the rising entrepreneurial class of England had a great deal of autonomy from the sate, relative to Russian industrialists, and they were lft free 10 develop new evesprises. Chinese soc: ety presents an interesting third ease, as thee indutialzation never really got underway until the late 1940s when the Chinese commurists took contol. Bxen though Chinese authorities prior to the 1940s had recognized the importance of industrialization, they were in no positon o promote it. Industialization, when it did occur, took place in the port cities, where foceign intervention and influcnce were strongest.22 nrodkstion “There are many examples of organizational innovations that have transferred readily from one society 10 another: workers’ councils, job design by industrial engineers, and the use of electronic computers in payroll and accounting depart- rents. We must also tecognize, however, that innovations have failed when in- troduced into societies with non-supportive cultural and institutional traditions. ‘The MeDonald’s fast food corporation, after extensive preparation, introduced several outlets in England and achieved instant success. Establishing outlets in Japan in 1971 was more difficult, as Japanese consumers were not easily per- suaded to switch from their traditional dit of fish toa meal of beef and bread. In spite of this, MeDonal''s ranked seventh in sales umong food service enterprises in Japan by 1977, with 105 walk-in outlets opened in six years, and with the prospect of becoming number twa by 1978. In contrast to McDonald's fairly ‘rapid growth in Japan, its attempt to penetrate the French market was impeded by traditional French eatng habits, and by 1977 only two suceessful outlets were ‘open in Paris (Of the three possitle sources of change (leadership, other organizations, and social and cultural forces), two direct our attention to forces ouside an organiza- tion. Both the second and third possibilities give less weight to leadership and ‘more to external constraint. This book will focus on demonstrating the value of ‘an organization-environment perspective SUMMARY | A truly open model ef organizational change does not take the environment a5 given, and doesnot assume a completely known or controllable internal structure (Thompson, 1967). A sictappliction ofthe bureaueratic model feast a foeus | on efficiency, while the theoretial focus of a more open model ison effective- hess, survival, and adaptation fo changing environments. This model shi tention to varibles not dict controlled by memibers of organizations. as. cessed inthe three examples presented above | The concept of effciency has mainly am internal relevance (to maximize inter= nal contol and communication), whereas te concep of effectiveness refers to an organization's ability o exploit its eavironment in the acquisition of scarce re sources (Yuchtman ard Seashore, 1967). How do members and leaders cope with the uncertainty produced by envioamenta elements and forees beyond deircon- | twol? Insieed of weating the various characteristics of organizational structure | (hierarchy, specialization, and so forth) as resulting from delierate and informed | choice by members, amore open moda teats stuctue as pataly a response to | organizations’ adsptations to their environments. Organizations are shaped, | pushed, and pulled in directions uniateaded and unforeseen by members. The ‘mode presented inthe next chapter does wot deny the importance of Fader’ end members’ choices in shoping organizational structures and processes. It points, Invroduction 23 instead, to a more balanced viewpoint: how, under what conditions, in which specific ways, are enviroaments, as opposed to individuals the driving force un derlying organizational change? Contrat Themes of the Book ‘After presenting the population ecology model of organizational change in Chap- ters 2 through 5, the remaining chapters deal with various issues of organiza- tional change and stability. The following four are armong the mote important issues covered. Differential survival and suecess (Chapters 5, 6). Why do organizations with similar objectives or products and comparable services difercather drastically in terms of their survival and success? When organizations start out with similar chances for success, which aspects of their environments andl managements 2c- count for such differences in outcome? About half of all small businesses fail ‘within two years oftheir ereation, and probably less thas one in five ever achieve anything resembling “success” (Mayer and Goldstein, 1961). AL the other ex- treme, the very largest corporations rarely, if ever, “fail” (inthe sense of going ‘out of business). Instead, if they disappear itis by takeover by or merger with ‘nother firm. Of the 100 largest publicty held manufactaring corporations in the United Kingdom in 1948, 36 had disuppeared by 1968, but 27 ofthese “deaths” ‘were due to mergers and the ther 9 to government takeover (Whittington, 1972). ‘The divergent paths followed by Sears, Roebuck and Company and by Montgomery Wards during the 1940s resulted in substamial success for Sears and troubles for Wards (Chandler, 1962). Whereas Sears changed its internal struc: ture to match what was happening in its eavironment-by establishing direct- selling stores in the suburbs, regionalizing its administrative stracture, and creat- ing «hierarchy of store sizes to match market conditions— Wards continued wit is ill-fated strategy of catalog stores ia the central business district urban areas and litle differentiation in tore size by matket area. ‘The creation of organizations (Chapters 7, 12, 13). Under whet coneitions do organizations come ino being? Examination of the historical record reveals 8 rather curious phenomenon: while certain types of organizations have a relatively constant birth rate over a fairy long time span, €.g. grocery stores, others have been created in greal spurts of activity, followed by or interspersed with, almost rho new starts at all. Most men’s social fraternities in the United States were yanded in three waves; 1840-1850, 1865-1870, and 1900-1920 (Stincheombe, 1965). During the fist period most were founded at nothern colleges, during the second period in the South (ater spreading to northern colleges), and inthe third period they were founded st 2 variety of locations by groups excluded from the otiginal social fatemities, e.g. Jews, Catholics, and black24 Invoduetion ‘Many of the largest and most important United States government agencics were created in a burst of activity during the 1930s, evidently as a response to the crisis of the Great Depression (Grafton, 1975). The Securities and Exchange ‘Commission, the Federal Communications Commission, and the Federal Hous: ing Authority were crested in 1934, and the National Labor Relations Board, the Social Security Administration, and the Rural Electrification Administration ‘were created in 1935, Goal succession and organizational transformation (Chapters 8, 9). Why do organi lly change their structure and processes and become something that was completely unforeseen at the time oftheir creation’? ‘This question differs frem that of creation in that it refers to an organization ua- dergoing a transformation from one organizational form to anotber, c.g. from a social movement to # sociable organization (Aldrich, 19712). The Women’s Christian Temperance Union (WCTU) began with the objective of wiping out Alcohol as a social probem among the working class. Miidle- and upper-middle class women were recruited to improve the general welfare of the working class, and the movement reached its zenith withthe enactment of Prolibition. The re- peal of Prohibition and other changes inthe social environment led tothe organi: zation’s transformation into a social club for the lower-middle class, limited to ‘occasionally expressing its “moral indignation” agains the drinking habits of the middle class Gusfield, 1955). ‘Similarly, the Young Men's Christian Association was transformed from a religiousy-oriented social movement o a youth service organization after being transplanted from London tothe United States (Zatd, 1970), Inthe past decade, a number of American oll companies have made the transition from being “in the oil business” to “being in the energy business” through their acquisition of coal ‘ning firms and their expansion into atomic and other energy souces. For exam- ple, through 1975 Exxen had spent about $100 million on nuclear esearch, ‘Managing the environment (Chapters 9 through 13). What tactics and sirategies do organizations choose, oF have forced upon them, to cope with po- tentally problematic aspects of their environments? How are disruptive or un- ‘wanted influences dealt with? One problem many organizations face is how to socialize members into the organizational culture, particularly when new mem- ‘bers bring with them Salues and behavior that conflict with standard operating. procedures. Rookie police officers enter their écpartments highly-motivated, idealistic, and commited to the organization. Idealism is quickly lost, and re cruits lear that zealousness in the performance of their duties only causes trou- ble. Motivation decreases as a recruit leams the ropes, and “the model adjust- iment of the novice paolmen of the occupational culture is best epitomized by the ‘lay low, hang loote and don't expect too much advice frequently heard” (Maanen, 1975, p. 225). Invoduetion 25 Businesses and local governments responded to the increased strength of labor sions with the creation of special industrial or employee relations units, just as they responded to the consumer movement of the 1970s with the creation of eon- sumer relations snits. Mergers, joint ventures, and the creation of speciat ‘boundary-spanning roles are examples ofthe types of adaptations to problematic environments that are reviewed later ‘A common theme running tarough the four issues jut outlined is that orga zational change is a consequence of organizations interacting with their environ ‘ments, Sometimes organizations merely react to environmental conditions, whereas in otber instences members are active in chalicnging the environment ‘and petheps even reshaping it. Regardless of whether the initiative lies within an ‘organization or outside of it, the major conuibution of organizational sociology inthe 1970s was to explicitly add the environment concept to studies of organiza- tional stability and change.