organizational theory

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Organizational theory is the study of organizations -- seeking to understand their nature and behavior.

See environment for the interpretive perspective of the organization and its strategic management implications.

See organizational action for March's synopsis of the history of theories of why organizations act the way they do.

See evolutionary organization theory for Burgelman's strategy making and evolutionary organization theory.

The theory of organization is reflected in its structure. See organizational structure and organization types.

See managerial theory of the firm for an overview and historical perspective of dominant theories of business organizations and a significant departure from those theories.

See firm theory of for Coase's and Penrose's theory of the firm.

See firm theory of for Rumelt's empirical observations of firms, establishing the criteria of strategic interests related to a firm in its real, i.e. Schumpeterian, environment, vs. the neoclassical economic treatments of firms. See creative destruction.

See strategy theory criteria for Porter's criteria for a theory of why firm's choose and successfully implement strategy.

W. Richard Scott's Evolution of Understanding Organizations (Peters and Waterman, 1982, pp 89-103) --
Scott identified for stages of organization and management theories in the 1900s. These stages can be described in a 2X2 matrix, with one axis being organizations as Closed Systems or Open Systems and the other axis as Rational Actor or Social Actor.

  • Closed systems are characterized as mechanistic thinking and no regard for what is external to the organization.
  • Open systems are characterizes as Gestalt (holistic) thinking and the internal organizational dynamics shaped by external events.

  • Rational Actor assumes that clear purposes and objectives for organizations exist and that the determination of purpose is straightforward.
  • Social Actor assumes there is a messiness of determining purposes and determination of purposes is not straightforward or deductive.

The four evolutionary phases management theories and the prominent researchers associated with each are as follows:

  1. Phase One, 1900-1930 -- The ""actor"" is rational, able to make rational choices. The ""system"" is insulated from the outside world.
    • Weber - order by rule; bureaucracy is how to solve the problem of managing a large group of people. Identify a finite body of rules and techniques to learn and master. Define a breakdown of the work, maximum spans of control, and match authority and responsibility.
    • Taylor - time and motion studies, manage people as machines.
  2. Phase Two, 1930-1960 -- The ""actor"" is a complex social actor, a human with strengths, weaknesses, limitations, contradictions, and irrationalities. The ""system"" is insulated from the outside world.
    • Mayo - Hawthorne experiments, positive attention to people raises productivity, (industrial social psychology)
    • McGregor - Theory X, Theory Y. ""The assumptions of Theory Y do not deny the appropriateness of authority, but they do deny that it is appropriate for all purposes under all circumstances (human relations movement)
    • Barnard - comprehensive theory of cooperative behavior in formal organizations. CEO as shaper of values, formulating purpose, communicating, securing essential efforts. A conception of the whole.
    • Selznik - ""distinctive competence,"" ""organizational character,"" infusion of value to produce a distinct identity, social integration. CEO is a joiner of means and ends - setting the mission and creating the social organization capable of fulfilling that mission.
  3. Phase Three, 1960-1970 -- The ""actor"" is rational, able to make rational choices. The ""system"" buffeted by a fast-paced, ever-changing array of external forces.
    • Chandler, Lawrence, Lorsch -- Organizational structures of great companies are shaped by changing pressures in the marketplace.
  4. Phase Four, 1970- ? -- The ""actor"" is a complex social actor, a human with strengths, weaknesses, limitations, contradictions, and irrationalities. The ""system"" buffeted by a fast-paced, ever-changing array of external forces.
    • Weick, March -- Identified a plethora of new metaphors for organizations and decision making -- sailing, playfulness, foolishness, seesaws, space stations, garbage cans, marketplaces, savage tribes, satisficing, bounded rationality, uncertainty absorption, problem solving, innovation, exploration and exploitation.

Gareth Morgan's Images of Organization (Morgan, 2006) --
Morgan shows (a) how different metaphors give rise to different theories of organization and management, (b) how an understanding of the process can help us master the strengths and limitations of different viewpoints, and (c) how we can use this knowledge to become more effective leaders and managers. Morgan presents eight very different metaphorical perspectives on how organization -- drawing out their strengths, limitations, and implications for practice. His aim is to give practical demonstration of the power of metaphor and how it can be sued to generate deep understandings of the nature of organizations and organizational life. The metaphorical perspectives are --

  • organizations as machines
  • organizations as organisms
  • organizations as brains
  • organizations as cultures
  • organizations as political systems
  • organizations as psychic prisons
  • organization as flux and transformation

Stacey's causal frameworks --

Below find Stacey's causalities that can be at work in order for organization to occur. These causalities, whether implicit or explicit, under-lie all explanations for strategy and firm behavior, as well as explain firm potential.

Stacey (2000, pp 14 - ) has defined five causal frameworks providing insights into various management approaches. See teleology for Stacey's view on causality as it relates to organizations. The reason for making these teleological distinctions is to enable one to obtain some insight into the fundamental differences between different ways of understanding change in organizations.

Aspects of causality differentiate between types --
The causal framework addresses the following aspects of causality...

  • The nature of or kind of movement into the future that is being assumed -- movement toward a future that is...
  • The reason or cause for the movement into the future -- movement for the sake of, in order to...
  • The process of the movement into the future -- the cause of movement...
  • The source of meaning...
  • The kind of self-organization implied (i.e. learning, knowledge creation, production of novelty)
  • The nature and origin of variation...
  • The origin of freedom and the nature of constraints...

Five causal (teleological) frameworks --
secular Natural Law Teleology (Newtonian Physics) and efficient cause (timeless rules of an ""if - then"" kind) in which movement is perfectly regular and predictable and the parts add up to the whole. This teleology survives in modern times as an unreflected assumption about the nature of reality and as an assumption of the existence of optimal states. Everything that is possible is already given and there is no change under the sun.

In regards to change, there is no concept of self-organization or emergence, thus there is not transformative change, only change as a movement to perfect. Change comes from an external agent.

In regards to time, time has no dimension as hidden order is revealed or discovered in realizing or sustaining an optimal state.

This teleology comes from Newtonian mechanics used to explain the universe as a mechanism being applied to organizations.

Rationalist Cause -- the objective observer-designer
in which movement is toward a goal autonomously chosen by humans as an expression of universal ethical principles. Freedom means that the final form is unknown. Unpredictable, truly novel change is thus possible and stability is sustained by ethical universals. In other words, identity, or organization, evolves in essentially unknowable ways. Here the unknowable whole is achieved through choice, or design of the parts.

In regards to change, there is no particular implications for self-organization and change is the consequence of human choice. Though this allows for freedom to choose, how choices result in novelty are not explained.

In regards to time, cause is human motivation that lies in the future.

This teleology comes from Kant's view of humans and human actions, where humans have freedom within universal ethics.

Formative Cause -- the organization as a system, to be designed and managed. Kantian dualism as the basis of systems thinking -- rationalist plus formative cause. Philosophical basis for systems science.
in which movement is to a final form, a pre-given state already contained within the formative process that produces it. This means that change takes the form of continuity of identity, with only context-dependent variations in its manifestation. In this framework there is no explanation of true novelty. Self-organization here is repetition, with variations in manifestations of identity but no transformation in that identity. In other words, identity is developing in knowable ways.

The theory of causality here is one of functional, formative processes, formative cause, producing movement to an already given final state contained, as it were, within that process and so subordinated to it as Formative Teleology. Organization is continuity of form with small variations, all enfolded so that genuine novelty is not possible.

In regards to time, a mature or final form is unfolded form an enfolded from a whole already enfolded in the nature, principles, or rules of interaction. This is a macro process of iteration, that is, formative cause that lies in the past enfolded form and/or unfolded future.

In regards to change, there is a form of self-organization towards a mature state of the system that reproduces forms without any significant transformation.

This teleology is Kant's view of organisms and organizations. It is a functional teleology, with the organization's continuity of form with small variations.

Transformative Cause -- the cause inferred in a branch of complexity science.
in which movement toward and unknown form; that is, to a form that is in the process of being formed, to a form that is itself evolving. Truly novel change is possible and self-organization is a paradoxical process of repetition and potential transformation. It is emergence of identity in a transformative, self-organizing process and paradoxical experience of identity in transformation. Here teleology is not contained in the process since the teleological is being formed. In other words, identity, or organization, is evolving in unknowable ways, being created as it goes along. Here, the parts form and are formed by a whole that is under perpetual construction.

In iteration, the continuity of identity is always open to change. Self-organization is then a process of interaction characterized in an essential way by paradox and the emergence of the truly unknowable. What is being so organized is identity. It is a process that produces novelty, the creatively new that has never existed before.

In regards to change, a form of paradoxical self-organization is implied, characterized by both continuity and potentially radical transformation.

In regards to time, variation arises in micro diversity of interaction, transformative cause arises in the present, as does choice and intention.

This teleology is Hegel's view that applies to both human action and nature. It is a paradox of stability and change.

Adaptionist Teleology -- from neo-Darwinian science and a branch of complexity science, evolutionary science
Formative cause is an accident, chance variation followed by competitive selection operating as a search mechanism to find a stable strategy or fitness peak.

In regards to change, this teleology implies a chance-based competitive search for optimality with a weak form of self-organization confined to the selection process. Change is movement to a stable state of adaptation to the environment.

In regards to time, formative cause lies in the future selected adapted state.

This teleology is from the works of Darwin as supplemented by Mendel, Mead, et al.