Understanding Organizations

August, 1998

- Introduction
- Historical Overview
- The Technical Approach: Scientific Management and the Bureaucratic
  Organization
- Human Relations Movement: The Worker as Person
- Contingency Approaches: It All Depends
- The Political Approach: The Nonrationality of Power, Influence, and
  Decision Making
- The Cultural Approach: The Importance of Norms and Values
- Open Systems Theory: A Contemporary Perspective on Organizations
- Chaos Theory
- Forerunners of Open Systems Theory in the Social Sciences
- Open Systems Theory
- References

Introduction

There are many practical and conceptual approaches to the study and understanding of organizations. This paper presents a broad overview of the major approaches developed over the last century, including historical and contemporary ideas on the nature of organizations. The paper concludes with a review of open systems theory, the theoretical underpinning for much of this paper and the companion paper "Adaptive Models of Organization for Substance Abuse Treatment."

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Historical Overview

The Technical Approach: Scientific Management and the Bureaucratic Organization

Early approaches, influenced by the Industrial Revolution, treated organizations as machines. Technological improvements and division of labor demonstrated that workers could be more productive when work was broken down into basic tasks. For example, instead of cobblers crafting shoes by hand one at a time, an assembly line allowed unskilled laborers to hammer a nail into the same spot on the heel of every shoe to come down the assembly line. Work was no longer seen as an art or a trade; science, technology, and engineering could now be used to study and structure work. Frederick Winslow Taylor (1923) proposed exactly this in an approach he called scientific management.

According to Taylor (1923), the key to organizational effectiveness was to engineer it precisely, with the factors of production (e.g., labor, capital, raw materials) structured and assembled like a machine. This view held managers as engineers or inventors and workers as mechanical parts. Managers were expected to engineer the work to maximize effectiveness and efficiency. Jobs and tasks were designed to be highly specialized, repetitive, and easy to observe, and to require little or no skill. Because employees did not necessarily know anything about the overall job they were doing (unskilled laborers in a shoe factory may hammer nails without knowing anything about making shoes), supervisors were employed to enforce policies and detailed work standards. Supervisors were like mechanics, making sure that the machine’s parts acted as they were intended, measuring actual work against specific standards and taking corrective action when necessary.

In addition to designing the work, managers also needed to be able to assess applicants’ skills and match them to minimum task requirements. Industrial psychology helped provide these assessment tools so that the human parts of the machine could be assigned to their proper places. The fact that humans do not always act like machines, if it was recognized at all, was seen as a problem, and trying to get employees to behave as if they were machines became another task for the supervisor. The mechanistic design of jobs and tasks included managers and supervisors. Studies were conducted to determine the optimum span of control for a supervisor (usually six or seven supervisees) and how supervisors should allocate their time.

The goal of scientific management was to build the most efficient and productive organizational machine possible. Because every half-dozen or so workers needed a supervisor, more and more layers of managers and supervisors became necessary to manage increasingly large and complex organizations. In response to increased size and complexity, Max Weber (1947) developed the idea of the legal-rational bureaucratic organization—a way to mechanize control and coordination, not just production and operations. Weber suggested that the best way to manage a business or institution was to coordinate through a centralized, hierarchical, and highly departmentalized structure and to control employee behavior through clear, prescribed lines of authority and codified rules and responsibilities.

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Human Relations Movement: The Worker as Person

During a time-and-motion efficiency study at the Hawthorne facilities of the Western Electric Company, a group of researchers led by Elton Mayo (1933; Roethlisberger & Dickson, 1939) discovered an unusual phenomenon that cast doubt on the legal-rational mechanistic approach. As Mayo and his colleagues decreased light on an assembly line, they found that lower illumination levels actually improved productivity. Further decreases in lighting led to greater productivity. In fact, almost any change, whether it be brighter light or near-darkness, had a similar effect. Clearly, some nonmechanical factors were affecting the workers; increased stimulation and attention, not decreased lighting, was responsible for improved worker productivity.

The Hawthorne studies demonstrated that the machine approach did not account for employees’ needs for autonomy and affiliation. A new school of thought dubbed human relations conceived of exactly these factors, along with delegation of authority, trust and openness, and concern for people, as critical for human and organizational effectiveness. The human relations school saw effective organizations as cooperative social systems, not machines or bureaucracies.

One boost for the human relations movement came in the quest for traits and characteristics of the ideal leader, in which proponents of scientific management were also interested, since the positions at the top of the hierarchy required substantially more skill than those at the bottom. Separate research efforts at Ohio State University (Halpin & Winer, 1957; Hemphill & Coons, 1957) the University of Michigan (see Likert, 1961), and Harvard University (Bales, 1950) simultaneously identified two similar dimensions of effective leadership. One dimension was related to conventional aspects of managing the task, such as delegation and supervision. The second dimension, however, was related to the people separate from the task.

Effective leaders need to do more than just figure out how to approach the task, delegate assignments, and monitor performance; they must also successfully attend to the socioemotional needs of the people performing the tasks. Moreover, the leadership function need not be performed via the authority vested in a formal position. Rather, leadership can be performed by any and all members of a group. In his summary of the Michigan studies, Rensis Likert (1961) elaborated this third dimension, participative leadership, proposing that leaders use the group itself as a way to manage subordinates, rather than supervising each separately. Other research began to show that teamwork, loyalty, and morale were all negatively affected by repetitive work, lack of autonomy, segregation of task sequence, and centralized decision making. Researchers and practitioners began to call for a more humane and democratic approach to management (Argyris, 1964; Likert, 1961, 1967).

The human relations movement also was interested in satisfaction and its relationship to motivation and performance. Frederick Herzberg (1966, 1968), for example, pointed out that job satisfaction has two components: motivating factors that actively satisfy and motivate employees, and hygiene factors that may upset and trouble employees. Once hygiene needs are minimally met, only motivators like achievement opportunities, control over resources and pace of work, autonomy, feedback and accountability, and personal growth and development will lead to increased motivation. Other proponents of human relations (McGregor, 1960) suggested that supervisors’ mere belief that their subordinates lacked drive and ability was detrimental to morale and motivation. Team building, group and interpersonal relations workshops, and sensitivity training flourished during the heyday of the human relations approach.

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Contingency Approaches: It All Depends

In many ways, scientific management and human relations approaches were diametrically opposed. Some, however, believed neither to be universally superior to the other. Contingency theories treated the effectiveness of either approach as dependent on the situation.

Contingency approaches were developed for management style and decision making at the individual and group levels, and for organizational strategy and structure at the organizational level. At the individual/group decision-making level, for example, Vroom and Yetton (1973) suggested that where subordinates’ acceptance of a decision is important for effective implementation, a participative decision-making style may be important, but if subordinates’ acceptance is not a factor, the decision can be made autocratically or consultatively, depending on the available information. Hersey and Blanchard (1984) made similarly contingent recommendations regarding an individual manager’s management style, also distinguishing between "telling" and "selling" forms of autocratic management (i.e., giving direct orders versus persuading and convincing), the optimal style depending on the nature of the task and the "readiness" of workers.

For an organization, the circumstance on which effectiveness depends is often the diverse and rapidly changing nature of the business environment. Burns and Stalker (1961) studied the management of 20 manufacturing plants in England and Scotland and found that in turbulent, uncertain environments, organizations were more "organic." They were flatter, less formal, and had more delegation of authority to lower levels in the organization. In stable environments, however, organizations were mechanistic—hierarchical, with well-defined lines of authority, and formal rather than informal roles and policies.

In a related line of research concerning technology, Joan Woodward (1965) found that mass production was much more suited to bureaucratic management than job shop manufacturing. In general, companies based on routine operations are optimally organized using a bureaucratic, mechanistic structure.

Lawrence and Lorsch (1967) studied differentiation and integration. In large organizations, different departments within the same organization may face different technological and environmental characteristics. Thus, one department may be suited to bureaucratic management and another to a more informal, organic arrangement. Lawrence and Lorsch compared managerial practices in three industries: (a) standardized container-making (a stable environment), (b) food-processing (intermediate uncertainty and complexity), and (c) the plastics industry (highly turbulent). They found that container-making firms were largely stable and well suited to bureaucratic management. Food-processing and plastics, on the other hand, had some departments or divisions operating in relatively stable environments (e.g., production) and others in relatively uncertain environments (e.g., research and development). The key was to match the type of structure and management approach within the department to specific technological and environmental demands at the department level. Integrating mechanisms are then required to coordinate successfully the diverse and complex organizational relationships created by this sort of structural differentiation. At the intermediate level of uncertainty and complexity, food-processing firms were able to use formally prescribed mechanisms for integration (e.g., formal oversight committees, formalized cross-functional coordination, special monitoring and reporting relationships). Within the plastics industry, however, the degree of turbulence and differentiation was not suited to formal integration. Here, organizational coordination and decision making were lateral, informal, and spread out, rather than vertical, formal, and centralized. Thus, contingency approaches may be used to manage both the work and the management of the work.

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The Political Approach: The Nonrationality of Power, Influence, and Decision Making

Until the 1960s, the technical and human relations approaches were more or less favored by scholars and practitioners. The tension between them gave the arrangement a measure of stability—those who disliked one approach were likely to advocate the other. Most, however, were content with the contingency approach: Sometimes one is better; sometimes the other is better. Then the problems of power, politics, and decision making began to emerge as legitimate areas of research with important implications for how organizations really work. The political approach, in contrast to mechanistic and human relations approaches, focused on how the nonrational motives of individuals guide decision making and organizational behavior through complex interpersonal power dynamics and organizational politics.

James March and Herbert Simon challenged the assumption that organizations rationally strive toward explicit goals (Cyert & March, 1963; March & Simon, 1958; Simon, 1948, 1964). Explicit goals can never fully and accurately represent the full range of purposes held by an organization’s members, and the actions aimed at attaining goals are not based on discrete, sequential decisions. Even when decisions are rational, the goals they serve are not (Simon, 1964). Goals are simply desired states, and the states desired by various organization members are nonrational and tend to be diverse and conflicting.

The idea that humans are rational decision makers has been rejected because it ignores the limitations of humans as fallible information processors (Fischhoff, 1982; Nisbett & Ross, 1980; Tversky & Kahneman, 1974). Contrary to Weber’s assumptions about a legal-rational bureaucracy, humans do not make rational decisions; instead, they "satisfice," choosing the first acceptable alternative within the constraints of salient internal motives and external pressures (Braybrooke & Lindblom, 1963; Forrester, 1984; Lindblom, 1959; Simon, 1952). This view has been called "bounded rationality" because decisions may be rational within the bounds of desired outcomes and limited cognitive capacity. It also has been called "muddling through," since systemic improvement over time is achieved not by a planned sequence of rational choices that optimize functioning, but through a series of incremental, "satisficing" decisions.

While political scientists were studying power and political conflict as natural processes arising from conflicting, nonrational goals and limited human ability, social psychologists were finding that humans were, at least in certain conditions, remarkably susceptible to authority and group norms. Asch (1952), for example, found that when confederates in a "perception test" credibly reported that line A was longer than line B, over one-third of naïve subjects gave the same response, despite unambiguous sensory information to the contrary. That human judgment is not only limited, but also easily swayed, by seemingly benign interpersonal processes was not an endorsement of rational bureaucracy.

In his seminal research on compliance and obedience, Stanley Milgram (1965) found that even low levels of legitimate authority could powerfully influence human behavior. The results of Milgram’s experiments were damaging both to the bureaucratic school and to the human relations approach. His study did not support a cooperative social system model. Although it undermined the other two dominant approaches, the political approach seemed incomplete as a paradigm for how organizations function. Individuals are nonrational decision makers and are, under certain conditions, easily influenced by others. Unlike its predecessors, however, the political approach was narrow in scope and virtually silent on how to improve organizational functioning.

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The Cultural Approach: The Importance of Norms and Values

In addition to the technical, social, and political aspects of organizations, the cultural aspect is equally important. According to Noel Tichy’s TPC (technical-political-cultural) framework, an organization’s success depends on the alignment of these three aspects with the appropriate organizational strategy (Tichy, 1983), and cultural aspects are often the most enduring and difficult to change (Schneider, Brief, & Guzzo, 1996).

An organization’s culture consists of the underlying norms, values, beliefs, attitudes, and cognitive mind-sets that its members hold over time (c.f., Deal & Kennedy, 1982; Reichers & Schneider, 1990; Trice & Beyer, 1993). In some areas, values and beliefs will stem more from societal or individual factors, but organizations also have normative and cultural sides. Bradford and Harvey (1972), for instance, claim that organizational myths are a ubiquitous and powerful force in organizations. "In fact, any organization with more than a brief history has myths that do more to determine and control the behavior of its members than do all of the structural arrangements, work procedures, pep talks, counseling sessions and other managerial efforts designed to affect organization behavior" (p. 244).

Organizational culture generally is not talked about explicitly, although it may be manifest in, and perpetuated by, myths, language, customs, rituals, symbols, and stories passed on over time (for a thorough treatment of organizational culture, see Trice and Beyer [1993]). Deeply ingrained norms and beliefs are often unconscious, and the cultural currents underlying behavior within organizations are not likely to be perceived by the members themselves. For example, employees may act as if "the boss will punish you if you don’t know everything," regardless of specific evidence to support or refute their assumption (Bradford & Harvey, 1972). Nonrepresentative stories and rumors to support the predominant cultural view may be passed on over time, developing a mythic quality that lends further credibility (e.g., Allport & Postman, 1947). It may eventually become unclear whether people are meticulous at keeping records because they believe they need to be able answer all the boss’s questions, or whether people believe they need to answer all the boss’s questions because everyone is so busy keeping meticulous records.

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Open Systems Theory: A Contemporary Perspective on Organizations

Although the technical, human relations, political, and cultural approaches have generated a bewildering array of information, much of it has been of little use in practice. In part, this is because organizational studies are still in their infancy, but organizational scholars also have tended to oversimplify their subject matter. Organizations are complex, dynamic systems that cannot be understood as simply the sum of various parts. The concepts of open systems theory provide a useful perspective with which to view organizations. Thus, before a specific perspective on adaptation in organizations is discussed, the systems approach is reviewed briefly (c.f., Ackoff, 1981; Bohm, 1983; Capra, 1976, 1983; Ford, 1987; Gleick, 1987; Katz & Kahn, 1978; Miller, 1978; Shannon & Weaver, 1949; von Bertelanffy, 1950, 1968, 1975; Wheatley, 1992).

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Chaos Theory

In the 1960s, meteorologist-mathematician Edward Lorenz (see Gleick, 1987; Sparrow, 1982) discovered that a simple computer-simulated weather system produced complex, chaotic behavior. With only three variables and only three equations, albeit nonlinear equations, he was able to create what he called "deterministic nonperiodic flow." Roughly translated, Lorenz created a completely predetermined, nonrandom system (deterministic) whose pattern of behavior over time was unpredictable (nonperiodic).

A system governed by simple laws can exhibit extremely complex behavior. There were no random fluctuations in the Lorenz simulation, just three simple equations to completely and utterly govern the behavior of the system; but because the equations were nonlinear, the resulting behavior of the system was totally unpredictable. Even knowing the starting value of the three variables and the three simple equations that govern their behavior over time, the only way to determine the value of the three variables on iteration 2 million of the simulation would be to crank through 2 million iterations of all three equations. Thus, the simplest model of the phenomenon was the phenomenon itself (which, since it is no simpler, is not a model at all). No matter how far out in time, Lorenz’s system never falls into a precisely predictable pattern; it will never loop back on itself in repetitive cycles, and there will never be a shortcut.

There is a pattern to dynamic complexity that can be studied and understood. Lorenz’s most interesting discovery was that although the simulated weather system did follow a special sort of pattern, it never exactly repeated itself. If calculated to enough decimal places, a line plotted in three-dimensional space (corresponding to the three variables in the system) would never cross the same point twice. Lorenz discovered that apparently simple rules can create complex, unpredictable behavior. Even more amazing was that, despite unpredictability and chaos, there was an underlying pattern to the complexity.

A small change can have a big impact. During his experiments, Lorenz also noticed that slight changes in a starting value for any one of the three variables can cause the entire system to careen off in totally different directions. This phenomenon, called sensitive dependence on initial conditions, is what led Lorenz in 1979 to ask his famous question, "Does the flap of a butterfly’s wings in Brazil set off a tornado in Texas?" The answer is, of course, no—at least not in a linear way. A thousand butterflies could not directly create a tornado even one foot away, much less halfway around the world. But could a butterfly flapping its wings today in one part of the world have an impact on the weather in some other part of the world several months or even years later? According Lorenz’s notion of sensitive dependence, it could.

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Forerunners of Open Systems Theory in the Social Sciences

Lewin (1935, 1938, 1951) conceived of individual and group behavior as the reciprocal interaction of personality and environment. In developing field theory, Lewin proposed that every individual exists in a psychological field representing his or her perception of the environment, and that goals and aspirations lead certain elements of the field to attract or repulse people from various behavioral tendencies. Borrowing from physics, Lewin used terms like force and valance to describe the nature of psychological fields. Complex fields and multiple aspirations of varying strength produce an intricate network of positive and negative valences that push and pull people toward various behavioral potentialities. When considering a given potential behavior, we can think of those forces that are pushing or pulling the person toward the behavior in question as driving forces, and those in the opposite direction as restraining forces. Although the various driving and restraining forces may achieve an approximate balance, the system is in constant flux. As new forces arise or existing forces change in intensity, other forces within the system also change, often in ways that maintain the current nature and behavior of the system. Thus, the equilibrium point is best thought of as quasi-stationary.

Applying these concepts to social and organizational change, Lewin noted that it is better to reduce restraining forces than to increase driving forces. Increasing a driving force may initiate a backlash of counterbalancing forces. More important, increasing the driving forces increases tension in the system, making additional change more and more difficult.

Allport (1954, 1962, 1967) thought of organizations as social event structures. Social structure, according to Allport, consists of cyclical patterns of human interaction, which can be observed through the repeating cycles of behavioral events that drive organizational functioning.

People are members of an organization to the extent that their roles create cycles of behavior with members. Belonging to an organization is based on one person interacting cyclically with another person. Put simply, the behavioral patterns are the organization.

Allport’s approach has two major implications for the study of organizations. First, social systems have no anatomical structure separate from patterns of behavioral events. Thus, reorganization efforts are not tinkering with some mechanical, tangible structure, but with an intricate system of interwoven behaviors, and the individuals who enact those behaviors may be attached to the current pattern and resist attempts at changing them.

Second, the usual approach to understanding phenomena may be unsuitable for organizational research. The traditional scientific approach involves determining the impact of single variables on specific other variables to understand causal relationships. To examine the ongoing structure of interacting events, however, we must take a different view of causation. As Allport notes, causation in social organizations is neither historical nor linear; rather, it is "continuous, time independent, and reciprocally cyclical."

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Open Systems Theory

Building on the work of Allport, Daniel Katz and Robert Kahn (1978) proposed the use of general systems theory to conceptually integrate our knowledge of organizations. They identify the following as basic characteristics of all open systems:

• Importation of energy. Open systems import some form of energy into the system. Just as a living organism (a biological system) thrives on food and oxygen, the human personality (a psychological system) is dependent on a steady flow of environmental stimulation. The deprivation of inputs into any system will hamper system functioning, and prolonged deprivation eventually will result in death.
• Throughput and output. Open systems transform available energy into something else. Throughput is simply some transformation or reorganization of the inputs. While some of the energy imported is consumed by the system to sustain itself, there are also outputs from the system.
• Systems as cycles of events. Input, throughput, and output activities occur in a cycle. The process of consuming energy and exporting outputs sustains the system itself, allowing it to import more energy. Similarly, as Allport conceived, human behavior has structure only to the extent that behavioral events repeat themselves (although, as Lorenz found, events may never repeat themselves precisely the same way).
• Negative entropy. The system must essentially import more energy from the environment than it expends so that energy can be stored. In this way, the system is able to fight the forces of entropy.
• Informational inputs and negative feedback. Inputs do not consist entirely of energy; information also must be imported. Through coding and selective attention, particular aspects of the environment, and the self in relation to the environment, are fed back into the system to help adjust functioning and adapt to changing circumstances.
• The steady state. Energy is imported and stored, and entropy is halted, so that the system might maintain some constant level of functioning—this is the steady state. "The basic principle is preservation of the character of the system" (Katz & Kahn, 1978, p. 27).
• Growth tendency and differentiation. Katz and Kahn qualify the striving of systems toward a steady state with this caveat: Systems have an inherent tendency to grow in size and complexity. By importing more energy than necessary (in order to hold back entropy), the system often stores excess energy and becomes larger or uses it in more elaborate system-maintaining processes. Thus, we eat before we are hungry and store excess energy as fat. Open systems also move in the direction of differentiation and elaboration so that general, simple subsystems become specialized and more complex.
• Integration and coordination. Differentiation must be controlled and coordinated. Without integrative processes, qualitative changes in the complexity of a subsystem would likely change the nature and character of the whole system. Through integration, differentiated subsystems maintain their relationship to the system as a whole.
• Equipotentiality and equifinality. Stated simply, equipotentiality is the idea that two systems in very different states can change such that they later arrive at an identical future state. Deterministic logical positivism asserts that perfect understanding of a system, its environment, and the laws governing them leads to perfect understanding not only of the present, but also of past and future states. A relativistic open systems approach, on the other hand, presumes that through different potential paths, two systems in different states can later achieve exactly the same end state. Thus, "a system can reach the same final state from differing initial conditions and by a variety of paths" (Katz & Kahn, p. 30). Katz and Kahn also point out that equifinality can be reduced through elaboration of regulatory mechanisms. In other words, complex control systems, by enacting and manifesting a particular potentiality, may reduce or eliminate the probability of other potentialities. Infants’ brains, for instance, in the process of creating neural pathways, simultaneously realize one set of probabilities while eliminating others.
• Openness and boundaries. Although organizations are open systems, they also intend to preserve the steady state. This implies that the system is only partially open; it must have boundaries. Although system boundaries may be fuzzy, a system without boundaries cannot exist.

Katz and Kahn’s (1978) application of open systems theory to organizations points out several practical misconceptions that arise from closed-system thinking, but it also serves as a starting point for understanding the critical relationship variables and patterns that drive organizational effectiveness. In the companion paper, "Adaptive Models of Organization for Substance Abuse Treatment," Part I builds on open systems theory and presents a conceptual framework that facilitates a better understanding of how organizations change, adapt, and learn over time. Part II uses that conceptual framework to review and integrate two artificially distinct streams of literature on (a) transformational organizational change and (b) organizational learning. Finally, Part III applies the general concepts developed in Parts I and II and applies them specifically to substance abuse treatment organizations.

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