Contemporary organization theory has its roots in

IV.D Flexibility and Permeability of Organizational Boundaries

A core question in organization theory is how to identify or define an organization. Answers often include references to the boundaries of the organization as a means to delineate what is and what is not a part of the organization. Unfortunately, this approach is muddied by changes in the way organizations design their processes and interface with other organizations, such as suppliers or business partners, changes that are often enabled by information technology. Thus, a fundamental question is: How does information technology change organizational boundaries?

An initial consideration is what organizations choose to accomplish internally versus what they acquire from other organizations to accomplish their own purposes; decisions of this nature impact where the “line” is drawn between a focal organization and others. As in the previous centralization-decentralization discussion within organizations, there is a question about whether or not information technology always leads more activities to occur between organizations (so-called market relationships) or always leads more activities to occur within organizations (often referred to as hierarchy). Arguments for movement toward hierarchy suggest that information technology reduces transaction costs for managing internally, creating greater opportunity to manage and control organizational activities internally. Arguments for movement toward markets suggest that reduced transaction costs for communicating and contracting externally create opportunities for organizations to focus on their internal strengths and purchase noncore products and services from organizations who can provide them more cheaply and effectively. While recognizing that the impact is probably no more monolithic than it is in the case of centralization, it is clear that availability of information technology enables more choices in organizational design options, thereby creating more flexibility in the location of organizational boundaries.

Despite these increased options, few organizations are capable of gathering all of the resources and competencies needed to create a product or service that serves a particular need of end consumers. In most cases, the task of transforming inputs (e.g., automobile parts) into the desired output (e.g., an automobile) is broken into pieces or tasks that are produced or accomplished by different organizations. Interdependence among these organizations is a natural consequence of decomposing the overall task. Historically, individual organizations (or people) have acted independently to buffer themselves from their environments, including suppliers, distributors, and other business partners. In some cases, this has led to vertical integration, so that the focal organization has more direct oversight over the entire task. In other situations, organizations build inventories or flexible capacity to buffer themselves from fluctuations in the supply or demand of other organizations or subunits in a supply chain. Such responses to the interdependencies can lead to excess costs and inefficiencies for each organization and the organizations as a group.

The introduction of computer-mediated communication has made other options for handling the interdependencies more feasible. Faster communication between organizations (e.g., through electronic mail or electronic data interchange) permits faster reactions within and across organizations. As managers pursue lower costs, they use these opportunities to decrease unnecessary buffers like excess inventories. As managers work together across organizations, they often reorganize and synchronize their processes to further pursue efficiencies. Thus, use of computer-aided communication technologies reduces the costs of interdependencies and, consequently, enables tighter coupling of organizations and of subunits. The result is that more of the operational technologies or activities cut across organization boundaries than was the case when computer-aided communication technologies were not available. As such, an organization, defined as an interdependent set of actors working toward a common cause, is a much broader enterprise than an organization defined as a legal entity, blurring the line separating organizations.

A final concern is how an organization interfaces with its environment, specifically the permeability of its organizational boundaries. Information technology creates more points of contact and information exchange among people, regardless of their organizational affiliation. Rapid exchange of data among business partners (e.g., through electronic data interchange) allows organizations to act together more seamlessly. Other computer-aided communication technologies such as electronic mail permit more interaction among members of different organizations, in some cases bypassing formal liaison roles. Technologies such as the World Wide Web also change interfaces with end consumers. These technologies offer more channels and more direct channels to access the end consumer. For example, some manufacturers work outside of their traditional distribution channels and gain more information by interacting directly with their customers. Taken together, changes in organizational design and means of communication suggest that the availability of computer-aided communication technology leads organizations to exchange more information across their boundaries. Important practical implications of this fact have been discussed by Quinn, Anderson, and Finkelstein and by Pickering and King.

Classical perspective

The first perspective that influenced organization theory was sociological in nature. This perspective placed an important emphasis on changing forms of organizations and the influence of industrialization on the work and workers (Hatch, 1997). Emile Durkheim, Max Weber, and Karl Marx were major contributors to the sociological perspective. Another contemporary yet very different perspective also made important strides within organization theory. This perspective concerned itself with the issues faced by the management—for example, efficiency, span of control, and planning. The exploration of these matters led to the emergence of the classical management theory. This included notions of scientific management, bureaucracy, and administrative functions, to name but a few. Scholars such as Frederick Winslow Taylor, Henri Fayol, Max Weber, and Chester Barnard made significant contributions to the classical management theory. Both classical management theory and sociological perspective shaped what is now described as the classical school (Hatch, 1997).

3.1 Rational Processes

Rational models (see Rational Choice and Organization Theory) assume that innovation proceeds along a strategic planning process involving information gathering, analysis and evaluation, and action. According to the rational perspective successful innovation is ‘the result of (a) careful planning of a superior product for an attractive market and (b) the execution of that plan by a competent and well-coordinated cross-functional team that operates with (c) the blessings of senior management’ (Brown and Eisenhardt 1995). Practitioner-oriented prescriptions sometimes list up to 16 steps in the strategically planned, rational product development process ranging from initial screening to detailed market studies, trial production, and ultimately market launch (Cooper 1993). Thus, it seems that the rational process is highly complex, especially if one were to consider turbulent or dynamic environments in the market assessments. Nonetheless, rational models can be found in many organizations and have inspired a large number of research projects. Summarizing research on successful and failed product innovations that had followed a rational plan Brown and Eisenhardt (1995) list product advantages, market attractiveness, and internal organization as the main factors for successful, rational product innovation.

Concept: ‘micropolitics’ is a specific perspective in organization theory. It focuses on ‘those activities taken within organizations to acquire, develop, and use power and other resources to obtain one's preferred outcomes in a situation in which there is uncertainty or dissent’ (Pfeffer 1981 p. 7) because it considers them as most important for the constitution and the workings of organizations. The micropolitical perspective of organizations is built on a specific image of organizations characterized by diverse goals and unclear areas of influence, a specific image of action and actors who typically pursue their own interests and try to protect or widen their room for maneuver, a special attention to organizational interaction interpreted as strategic and conflictual struggle about definition, structure, and resources of the organization. Research in the micropolitics of education: micropolitical studies focus on issues of steering and regulation of school work (e.g., leadership, participation, conflict over different lines of school development) and issues where organizational ‘routine games’ are disrupted (e.g., educational or organizational innovation, recruitment, and initial phases of work of new principals and new teachers). Research strategies include interview studies and, in particular, case studies which attempt to record and analyze the critical events in which organizational ‘rules and resources’ are negotiated by reference to observation, document analysis, and interview data from multiple perspectives. Criticism and areas for future development: in the last section of the article some arguments which indicate potential limitations and areas for future development are discussed, for example, the micropolitical approach has problems in conceptualizing organizational consensus, organizational stability, and politics other than such associated with treason, conspiracy, and accumulation of influence. It is argued than some of these conceptual problems may be overcome by reference to the work of Giddens (1992) and Crozier and Friedberg (1993).

Major Early Works

One of the first major results of the Carnegie School's work was a propositional inventory of organization theory, involving Herbert Simon, James March, and Harold Guetzkow; this led to the book Organizations. The book was intended to provide the inventory of knowledge of the (then almost nonexistent) field of organization theory, and also a more proactive role in defining the field. Results and insights from studies of organizations in political science, sociology, economics, and social psychology were summarized and codified. The book expanded and elaborated ideas on behavioral decision making, search, and aspiration levels, and elaborated the idea on the significance of organizations as social institutions in society. “The basic features of organization structure and function,” March and Simon wrote, “derive from the characteristics of rational human choice. Because of the limits of human intellective capacities in comparison with the complexities of the problems that individuals and organizations face, rational behavior calls for simplified models that capture the main features of a problem without capturing al its complexities.” March and Simon also wanted to unite empirical data-gathering research with rigorous theorizing in order to create a rigorous empirical theory that could organize and so give meaning to empirical facts with legitimate theory. Science, they believed, was the product of the organization of empirical facts into conceptual schemes, and the progress of science was based on the development of more sophisticated and elegant theoretical systems, but not necessarily the discovery of new facts.

The Ford Foundation also supported a larger project on behavioral theories of organizations; this was carried out by Richard Cyert and James March (along with their students, including Julian Feldman, Edward Feigenbaum, William Starbuck, and Oliver Williamson). The project originated in the works of Cyert and March to develop improved models of oligoplogy pricing by using organization theory. The research on the behavioral theory of the firm aimed at investigating how the characteristics of business firms, as organizations, affect important business decisions. Integrating theories of organizations with existing (mostly economic) theories of the firm, they developed an empirical theory rather than a normative one, and focused on classical problems in economics (such as pricing, resource allocation, and capital investment) to deal with the processes for making decisions in organizations.

The behavioral theory of the firm is built around a political conception of organizational goals, a bounded rationality conception of expectations, an adaptive conception of rules and aspirations, and a set of ideas about how the interactions among these factors affect decisions in a firm. Whereas goals in neoclassical theory are pictured as given alternatives, each with a set of consequences attached, goals within behavioral theory are pictured as reflecting the demands of a political coalition, changing as the composition of that coalition changes. Said Cyert and March: “Since the existence of unresolved conflict is a conspicuous feature of organizations, it is exceedingly difficult to construct a useful positive theory of organizational decision-making if we insist on internal goal consistency. As a result, recent theories of organizational objectives describe goals as the result of a continuous bargaining–learning process. Such a process will not necessarily produce consistent goals.” Thus, the theory treats the demands of shareholders, managers, workers, customers, suppliers, and creditors as components of the operational goals of a firm. In the behavioral view, agents have only limited rationality, meaning that behavior in organizations is intendedly rational, neither emotive nor aimless. Because firms are seen as heterogeneous, boundedly rational entities that have to search for relevant information, expectations in the behavioral theory are portrayed as the result of making inferences from available information, involving both the process by which information is made available and the processes of drawing inferences. Because information is costly, it is generated by search activity. The intensity of search depends on the performance of the organization relative to aspirations and the amount of organizational slack. The direction of search is affected by the location (in the organization) or search activity and the definition of the problem stimulating the activity. Thus, the search activity of the organization furthers both the generation of new alternative strategies, and facilitates the anticipation of uncertain futures.

Decision making in the behavioral theory is seen as taking place in response to a problem, through the use of standard operating procedures and other routines, and also through search for an alternative that is acceptable from the point of view of current aspiration levels for evoked goals. Choice is affected, therefore, by the definition of a problem, by existing rules (which reflect past learning by the organization), by the order in which alternatives are considered (which reflects the location of decision making in the organization and past experience), and by anything that affects aspirations and attention. Within this framework, four concepts were developed. The first is the quasi-resolution of conflict, the idea that firms function with considerable latent conflict of interests but do not necessarily resolve that conflict explicitly. The second is uncertainty avoidance. Although firms try to anticipate an unpredictable future insofar as they can, they also try to restructure their worlds in order to minimize their dependence on anticipation of the highly uncertain future. The third concept is problemistic search, the idea that search within a firm is stimulated primarily by problems and directed to solving those problems. The fourth concept is organizational learning. The theory assumes that firms learn from their own experiences and the experiences of others.

This view of the firm was important to modern developments such as evolutionary theory and transaction cost economics, which both bear intellectual debts to the ideas in the behavioral theory of the firm. For example, the ideas of bounded rationality and conflict of interest are now standard in the transaction cost theory of especially Oliver Williamson, and the view of the firm as a system of rules that adapt to its changing environment is important in the evolutionary theory put forward by Richard Nelson and Sidney Winter. The transactions cost approach is widely accepted as a framework for understanding economic organization. This perspective sees markets and hierarchies as alternative mechanisms for organizing transactions. In order to economize on transaction costs, production is frequently required to be organized in firms. Transaction cost economics builds on the assumptions of bounded rationality and opportunism. In the evolutionary view, the firm is seen as a profit-seeking entity, the primary activities of which are to build (through organizational learning processes) and exploit valuable knowledge assets. Firms in this view also come with “routines” or “competencies,” which are recurrent patterns of action that may change through search and learning. Routines will seldom be “optimal” and will differ among agents, and behaviors cannot be deduced from simply observing the environmental signals (such as prices) to which agents are exposed. This variety drives the evolutionary process because firms articulate rent-seeking strategies on the basis of their routines and competencies, and competition in the product market constitutes an important part of the selection environment of confronting firms.

Another modern development within behavioral economics comes from the work of Daniel Kahneman and Amos Tversky. Drawing heavily on experimental psychology, they showed how rational choice theory cannot be applied to the real world and they investigated the influence of a number of human factors. One such factor is heuristics. Heuristics “reduce the complex tasks of assessing probabilities and predicting values to simpler judgmental operations.” Thus, heuristics economize the limited cognitive resources of decision makers, which allows decisions to be made, but introduces errors and biases. Kahneman and Tversky's work on heuristics led them to a model of choice called prospect theory. One of the key assumptions in this model is that people's probability judgments are not attached to events but to the descriptions of events. When choices are irreversible and outcomes are time lagged, uncertainty will prevail. No objective facts will figure in the forecasts of decision makers, merely their perception of such facts. Decision making thus depends on the framing of the problem, which shapes perceptions and thus influences choices.

2.2 Dynamics of Religious Organizations

The emerging concern with the organizational dynamics of religion in the 1950s was partly a reflection of the growing salience of ‘organization theory’ in the burgeoning social sciences, and partly a function of Christian theological interests in ‘ministry’ as a modern profession and in churches as complex organizations responding to rapid social change (Harrison 1959, Winter 1968, Beckford 1975). Yet the impact of these analyses of religious organizations on the development of organizational theories in general was modest. This state of affairs began to change slightly in the mid-1970s when notions such as ‘organizational climate’ and ‘organizational culture’ directed attention towards the significance of cultural factors which had always loomed large in analyses of religious organizations but which were emerging as important influences in virtually all kinds of organization. Investigations of communes gave a further impetus to research into the force of strong commitments and normative beliefs among organizational participants. Subsequent discoveries about the importance of rituals, retreats, flexibility, and networking in many organizations have only enhanced the interest that religious organizations now have for some organizational analysts (DiMaggio 1998). This minor rapprochement between the study of formal organizations and the study of religious organizations received a further boost in the 1980s when so-called New Age and quasireligious business began to attract attention for their practice of combining profit seeking with ethical business practices and of contributing towards the ‘spiritual development’ of their staff and clients. And fresh insights into the tensions between the ‘religious’ and ‘agency’ structure of US denominations (Chaves 1993) offer the prospect of explaining comparable tensions between the normative and functional bases for coordination and compliance in other organizations as well.

Two inter-related aspects of religious organizations stand out as the central foci for past and present research: authority and leadership. This does not mean that issues of organizational effectiveness, efficiency, and complexity are irrelevant in the case of religious organizations. It simply means that organizations purveying allegedly timeless truths and the highest normative commitments tend to be relatively more preoccupied than nonreligious organizations with establishing, reproducing, and defending their teachings and practices against corruption, subversion, or apathy.

What is the concept of organizational theory?

What is organization theory example?

What is the evolution of organization theory?

What is emerging of organization theory?