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A Strategy
for Looking for Well Run Organizations
Organizations, in one form or another, have been around as long as people have existed. They form, grow, peak, and decline. They are an integral part of any society, and in western society we spend most of our adult lives as members of organizations. Yet, despite this experience with organizations, we really do not understand how organization work nor what makes them successful. I suspect that we have yet to develop the tools nor the mental models necessary to completely understand organizational behavior. However, we must make the attempt to understand organizations, using the tools at hand, so that organizations are tools for people, and not the other way around.
This paper is written in an attempt to gain some understanding or insight into what makes a successful organization. It develops a tool by integrating five major organizational metaphors, organizations as systems, cultures, structures, power and politics, and brains into a framework to identify key aspects of successful organizational behavior.
When is an Organization Working Well?
Define the Organization (Organizational Systems Theory)
Discover How the Organization Sees the World (Organizational Culture Theory)
Analyze the Structure of the Organization (Structure)
Identify How Things Get Done (Power and Politics)
Discern the Organization's Ability to Learn (Organization as a Brain)
When is an Organization Working Well?
In order to determine if something is not working well, one must be able to know how it works when it is working well. Without knowledge of a healthy organism, fine tuned machine, or sane psyche, it is impossible to determine when an organism, machine, or psyche is not running well. Therefore, before discussing what to look for in order to understand an organization, a concept of a well running organization is needed.
A review of the schools of organizational theory developed by Schafritz and Ott (Schafritz and Ott) shows that each school concentrates on one of two overriding objectives, either achieving an organizational purpose or goal or maintaining organizational survival. In well functioning organizations, both these priorities must be present. Organizations are formed to do something, therefore, if they are functioning well, they must know what their mission is and be working to achieve it. But obviously, organizations must also survive if they are to achieve their goal. In addition, organizations depend on their greater environment for inputs and markets that determine their survival. In other words, there is no question that organizations are open systems. Therefore, by combining these two overriding goals and a dose of systems theory, a well-run organization can be described as having the following attributes:
The ultimate goal of most organizations is a combination of achieving some identifiable mission and maintaining its own existence. This is becoming ever increasingly difficult as the economic, political, social, and physical environment becomes more turbulent.
This belief that the global environment in which all organizations exist is becoming faster, more complicated, and more frenzied is a key assumption in determining the importance of the criteria for looking at organizations. The organizations that will survive and flourish in the future will be organizations that are able to practice Marshak's Twelve F's for the Future - Faster, Flexible, Focused, Foresighted, Flatter, Fluid, Fundamentals, Follow-Through, Face Issues, Friendly, Forgiving, and Free (Marshak). These twelve F's describe survival traits organizations will need to develop to flourish.
This paper presents the following framework for attempting to understand organizational behavior and action:
This framework seeks to guide an organizational observer
through a variety of perceptions organizational theories provide
and to make explicit some of the connections between them.
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Define the Organization (Organizational Systems Theory)
In order to define the organization, we want to identify the organization's core technology, its domain, and its task environment (Thompson). An organization's technical core is where the production of the organizational output exists. In other words, the technical core is made up of the people and technology who perform the task for which the organization exists. One way to discover an organization's core technology is to ask which organizational activities can be done away with. Reduce the organization's activities one by one, and the last remaining activity will be the organization's core technology. All the other activities belong in the organization's domain, and support the core technology. An organization's domain consists of everything it claims to do externally and does do internally, from its technical core to other additional products and services. The organization's domain defines where and how the organization connects with and is dependent on the outside environment (diagram 1). All sectors of the greater environment that are relevant to the survival and goal attainment of the organization make up the task environment. Organizational domains are not inherent; the organization must establish and protect its domain by creating a domain consensus with its task environment.
In defining an organization, a key aspect to look for is the organization's definition of its domain and its ability to protect its domain. Is the organization able to develop and maintain a domain consensus with its task environment? If it is able to, the organization will continue to exist. In evaluating an organization, it is therefore important to identify key segments of the task environment, segments whose support is vital to the organization, and the nature of the current and potential relationship the organization has with those segments. These segments might include funding sources such as customers, banks, or funders; headquarters or parent organizations; government regulators; and suppliers of critical resources. Poor relations with segments of the task environment indicate that things are not working well within an organization. Indicators of poor relations to its task environment include poor sales, inability to get credit, or poor fund raising; political squabbling or cultural misunderstandings with headquarters; or other difficulties obtaining critical inputs. The bottom line is that an organization is in a much stronger position to function well when it can easily and surely obtain what it needs from its task environment.
An organization practicing Marshak's Twelve F's will have a clear concept of its core technology; in well focused and integrated organizations almost every member of the organization at all levels will be able to explain the basic business the organization is in. In well-run organizations, the management will also have a clear concept of all key segments of the organization's task environment, and be aware how well the organization is dealing with each segment.
Thompson's approach to organizations concentrates on how environment and technology determine structure and behavior, but essentially ignores the system's energy flows and stocks. Organizations survive by generating inputs from their output. To complete our definition of an organization, we need to understand the organization's energy flows, or the relationship of outflows to inflows to outflows again. In for-profit organizations, the simple form of this relationship is straightforward; by selling goods or services the organization generates the energy (money) necessary to procure the inputs needed to continue the cycle (Katz and Kahn). This relationship helps define the technical core of the organization. However, as organizations grow, this cycle increases in complexity and can become obscured to the organization. As this relationship becomes obscured, the organization runs the risk of attempting to maximize energy flows through other sources without adjusting its core technology, domain, and task environment to account for what may be essentially a new business. The clearer this cycle is to the organization, the easier it is for the organization to focus on and protect its domain (diagram 2).
The following information can help one determine the energy flows the organization considers important:
This awareness of energy systems is extremely important in non-profit organizations and government agencies where connection of outputs to inputs is more tenuous. These organizations often face the situation where the clients for the organization's outputs are not the funders. Thus, improving the organization's product or services to meet the needs of its clients is less likely than for a for-profit firm to generate more energy in the form of income. Conversely, the mission of the non-profit organization is a source of energy for those working there. This places additional pressure on non-profit institutional management as it must often balance two competing needs, income versus product. This separation of energy inflows from output is a constant and often a serious problem for non-profit organizations (diagram 2).
In addition to the system's energy flows, it is also important to check the system's energy stores. Like organic systems, organizations function better when they can import more energy from the environment than they expend, and store the excess. The level of an organization's financial stability will influence its behavior and the behavior of the individuals within the organization. Organizations with strong financial bases have a variety of options for dealing with problems ranging from working to solve them from a position of strength to ignoring them completely. On the other hand, organizations dealing with serious financial problems find problems generated from other sources, such as structure, culture, politics, and the environment are exacerbated by the financial situation. In addition such organizations face the potential of the organization disintegrating as members adopt individual strategies designed to ensure their own survival.
Indicators of an organization's financial strength include:
In this section, we have defined the organization by combining
the concepts of technical core, domain, and task environment with
system energy flow and stock. With this information, we should be
able to identify the core business of the organization and many
of the external pressures on the business that will influence
both rational and non-rational behaviors of the organization and
the individuals within the organization.
Diagrams for Defining an Organization
Diagram 1
Example Structure for a Community Training Non-Profit
Diagram 2
For Profit Energy Flows
Non Profit Energy Flows
Discover How the Organization Sees the World (Organizational Culture Theory)
In order to understand an organization, we must be able to understand the fundamental assumption the organization and its sub components use to interpret their environment. An organization's fundamental assumptions of reality are the basis for its culture. The organization's culture and subcultures will determine and limit the organization's ability to read the environment, structure itself, and communicate within itself.
Organizational culture develops from the organization's history. As organizations grapple with problems they discover solutions, values, and beliefs that are consistently effective. Over time, the organization comes to take for granted the effectiveness of these solutions and integrates the beliefs that lead to the solutions into its unconscious, basic assumptions about reality (Schein).
Organizational culture can be broken into three aspects. The base of culture, which is the most difficult to discern because it is taken for granted, is made up of the organizations basic, fundamental assumptions of its relationship to the environment; the nature of reality, time, and space; and the nature of human activity and relationships. The next level, which is easier to observe but still often not consciously acknowledged, consists of the organization's values derived from its basic assumption. The third level, which is often left undeciphered but is visible to all, consists of artifacts such as technology, art, and actual behavior (Schein).
Culture is extremely important because individuals and organizations unconsciously use it as a filter for interpreting what they hear, see, and experience. Individuals and organizations both have a natural tendency to reject outright, or ignore, concepts, information, or experience that do not fit their basic assumptions about reality. General Motors demonstrated the power of basic assumptions to filter out important information. In the 60s, 70s, and 80s GM continued to behave according to basic assumptions that held that styling is more important than quality and that the American car market is isolated from the rest of the world. However, during this period that German and Japanese auto makers captured 38 percent of the U.S. market competing on the basis of quality and price unopposed by GM that did not recognize or react to the trends (Senge).
An organization's basic assumptions regarding human behavior and motivation will exert a strong influence on the style it chooses to structure itself. If an organization's culture believes that people are self motivating, respond to responsibility, and capable of producing without much supervision, the organization will tend to choose technology and structure that takes advantage of those traits. On the other hand, if the culture assumes that people need control, direction, and constant supervision, an organization will tend to choose technology and structures which reflect that believe.
Culture is also an important factor for inter-organizational integration and communication. Organizational subcultures develop within organization based on the divisions or units of the organization. The history, task, and external connections of the unit and the background, training, and profession of the individuals in the unit will influence the subculture. Important aspects of these subcultures include basic assumptions about rules and regulations, time, goal definition, and the relative importance of task and relationships (Lawrence and Lorsch). If members of organization are not aware of the different basic assumptions operating in units throughout the organization, the potential for cross-cultural problems and miscommunication between units increases. These problems, if left unrecognized, can create great difficulties integrating the components of an organization. Within an organization with a high need for integration either vertically or horizontally, cross cultural skills (often referred to as interpersonal skills) become more important as the need to communicate between individuals and departments with differing cultures increases.
Because the basis of culture are assumptions of the world which are taken for granted and seldom consciously articulated, the are difficult to identify. However, they can be inferred from a variety of sources such as the organization's history, operating metaphors, organizational myths and legends, and observation of behavior and artifacts.
At one level, an organization is functioning well if its basic
assumptions allows it to read accurately its environment, meet
the needs of its employees by adopting an appropriate technology
and structure, and communicate internally with little
cross-cultural interference. However, this is a static model
which and assumes a relatively static environment. A more
appropriate goal for an effective organizational is to create a
culture that recognizes its own existence and encourages and
values the continual questioning of the basic assumptions the
organization is operating under. Such a culture should enable an
organization to recognize changes in the environment that
invalidate its current basic assumptions and allow the
organization and individuals to consciously develop new ones. In
addition, such a culture would encourage departments and
individuals to make explicit their basic assumptions,
facilitating integration and communication within the
organization.
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Analyze the Structure of the Organization (Structure)
An organization's structure is many things and serves many purposes. It details the organizations plan for coordinating all the work the organization must do (Gulick); it delineates the official version of information and control flows throughout the organization (Galbraith, Fayol); It exchanges information, services, and goods with the task environment (Thompson); it plays an important role in defining power and power relationships (Thompson, Kantor) and political interests in the organization; and it is a creation and creator of organizational culture.
A well functioning structure makes the most of the organizations' resources by dealing with the task environment as effectively and efficiently as possible at the same time letting the organization perform its business as efficiently as possible. In other words, a good structure lets the technical core concentrate on the organization's technology, the institutional component manage the organization's domain and task environment, and management translate and moderate the cultural differences between the two. To achieve this, the structure must provide for appropriate information flows within the organization, appropriate information flows across the organization's boundary, and provide the appropriate structure (in terms of support, time and space) for employees to do their jobs.
Some indicators of structures that work well include:
The above paragraphs make up a value laden definition of good structure. There is no one best structure. At the structural level there are always tradeoffs to the choice of structure. A functional structure may maximize technical excellence but may face coordination problems between functions. On the other hand, organizing along product or geographic lines may improve cross functional coordination, but at the expense of reducing technical excellence. Similar conflicts may arise as the organization tries to organize itself to meet conflicting demands of its task environment and attempts to minimize coordination costs, for example organic structures are more responsive to the environment, but may be less technically and economically efficient.
While the environment may dictate broad limits to the type of
organization which if violated will result in the failure of the
organization, within those limits the organization can make
choices based on its culture, politics, and other decision making
processes. Therefore, what is important is that an organization
be conscious of the trade offs inherent in its choice of
structure, and is consciously aware of the mixture of rational,
cultural, and political criteria used to choose that structure.
With this knowledge, well-run organizations are likely to be more
aware of the connection between structure and environment and
more readily recognize changes in the environment that may effect
the organization's structure.
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Identify How Things Get Done (Power and Politics)
Despite theoreticians' attempts to ascribe complete rationality to organizational behavior, anyone who has worked in an organization knows that power and politics integrally involved in organizational decisions and behavior. This is because, within the realm or rationality needed for organizational survival, there is plenty of room for choice. There is room to choose the organization's domain; to determine which segments of the task environment are most important; to choose the organization's technology; to influence its structure; and the choice of how to use scarce resources. Human employees simple do not have the information nor ability to compute every permutation in order to make totally rational decisions on these issues (Pfeffer). Underneath these larger questions there is always issues of individual career goals, need for power, need for recognition, need for family time, and so on (Morgan). All of these issues provide an arena where decisions and actions potentially can results from the application of power and the practice of politics.
It is possible to define four types of power -- power over, power against, power with, and power from within. In this culture, when we attach politics with power, we tend to deal with the first two types of power, power over and power against. Pfeffer, in his discussion of power and decision making, states that a definition of power is problematic but, as a rule, includes the concept of the one's ability to overcome the resistance of another to bring about one's desired outcome (Pfeffer). Generally, political coalitions are formed to gain power over or against another coalition.
Power over or against is created by individuals or organizations by controlling scarce resources on which other individuals or coalitions are dependent. Control of crucial organizational contingencies, such as discretion, supplies, information, and support provide power over and against within an organization (Thompson, Kanter). Organizational politics are the activities taken to acquire this power and the use of this power to obtain one's preferred outcome in situations of uncertainty or lack of consensus about choices (Pfeffer).
While this type of politics may at times be effective in making decisions that move an organization toward achieving its mission or enabling it to respond more effectively to its environment, this type of politics generally inhibits an organization's capacity to function well. If political power is the decision making paradigm of an organization, it reduces the capacity of that organization to focus, integrate, freely share information, move quickly, empower its employees, and develop a common vision. This is due to the fact that the paradigm is built on a negative, canceling out view of power (either power over or against) and can not achieve the positive dynamism possible using the positive views of power, power with and from within.
Pfeffer presents a good series of indicators that can identify when an organization is operating under a political power paradigm:
Things are running well with respect to power when an organization adopts a positive paradigm of power attempting to develop power with and within its employees. Powerlessness can occur in any position in an organization when an individual is cut off from access to discretion, supplies, information, and support (Kantor). When an individual finds himself in such a powerless position, his instincts are to hoard his power and to exercise as much negative power as he can. This leads to behavior that indicates that the individual is not capable of a handling power, inducing his superiors to reduce his power further by withdrawing discretion, support, or other sources of power. The result is to further reduce the dynamism and power of the organization as a whole. Kantor suggests a counterintuitive solution to this problem, increase the power of the individual by providing him with the responsibility, discretion, supplies, information, and support he needs to do his job. This solution has two advantages. First it provides an organizational environment for the individual that more closely meets his development needs as a person (Argyris). Second, it reduces the workload of his supervisor who, having shared his power, is now able to concentrate on other tasks and therefore further develop his power. This is a good example of developing power with, as apposed to acquiring power over and against.
Power is a double edge sword. It is necessary in organizations
if the organization is to function at all. Handled positively,
the creation of power can create dynamic, successful,
organizations that thrive in turbulent environments. Handled
negatively, power can easily prevent the organization from
reaching its potential, and in extreme cases, blow it apart.
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Discern the Organization's Ability to Learn (Organization as a Brain)
Organizations today are operating in an environment unlike any in the past. The rate and uncertainty of change in economic, technological, political, geographical, and social conditions is faster and greater than in any other time in history. Therefore, management and organizational lessons learned in the past are becoming less and less relevant today. To survive in this new, turbulent environment, organizations must learn to become organizations which are continuously learning to meet new challenges. It is no longer possible to develop structures and systems and expect them to be effective year after year with only slight tinkering and refining.
The key requirement for moving toward a learning organization is for the individual, and therefore the organization, to develop the ability to recognize, share, question, and evaluate the basic assumptions, or mental models, under which the individual and organization operate. Two consequences of this skill benefit the organization achieve goals of completing tasks and responding to the environment. The first consequence is to move from building consensus around courses of action to building consensus around shared mental models. The power, productivity, and integration of groups working under a shared mental model is exponentially greater than groups working around other forms of organization. The second consequence of this skill is to remove the filters, or limits, an organizational culture places on the organization's ability to recognize, interpret, and learn from its environment. If General Motors had been consciously aware that it was operating as if the assumption that the American auto market was isolated from the rest of the world was true, data showing the growth in market share of Japanese and German auto makers may have been recognized as a competitive threat much earlier than it was.
This is an example of a failure in double loop learning (Argyris). For years General Motors had measured its achievements against the achievements of Ford, Chrysler, and American Motors. However, it failed to check to see if its measure (the achievements of the other American auto firms) was the most appropriate measure to use given the reality of the organizations changing competitive environment. The adoption of double loop learning or systems thinking (Senge) is a critical component of a learning organization.
The move toward the concept of a learning organization is revolutionary for it requires organizations and individuals to let go of the basic assumptions of power and control within organizations and adopt a world view that embraces learning and self organization (Morgan). Becoming a learning organization requires the following:
Careful attention to organizational culture in order to nurture a supportive environment
Transformation of the role of manager from controller to visionary, designer, researcher, facilitator, and steward
The adaptation of new forms of thinking such as double looped learning; new sets of personal and interpersonal skills
Potentially, the adaptation of radically new forms of
structure and organization.
This process of discovering personal and organizational basic assumptions and mental models must be supported by the internal environment of an organization. The environment and culture must provide safety for self exposure, safety for honest failure, and free flow of information. The organization's perception and use of power must focus on positive powers, power with and power from within. The organization also must support and encourage individuals to develop interpersonal skills such as self perception, active listening, feedback, working as a team, and trust building, in other words, power from within.
The ramifications or this process on organizational structure are potentially great. At an extreme, this process results in scrapping traditional bureaucratic structures designed to facilitate control, and replaces them with holistic structures such as interdependent work teams in which each member embodies all of the teams' skills (Morgan). To a lesser extreme, the organizational structure must encourage free flows of information vertically and horizontally, networking across division, functional, and hierarchical boundaries, and the redefinition of the role of hierarchical superiors from a controller to a designer, researcher, and facilitator.
Organizations that are implementing this process successfully will demonstrate most of the attributes described and also by:
The potential of this new paradigm is great. Both Senge and Morgan provide examples where applications of key concepts of the learning organization have reaped great benefits for organizations. Hurst, in Of Boxes, Bubbles, and Effective Management, describes his positive experience applying many of these concepts. This new paradigm assumes that organizations can unleash and tap into the power of people. This assumption mirrors a fundamental belief of mine that values individual growth, development, and empowerment.
This new paradigm is not yet complete nor fully tested. Parts
of it may be only fads. It will certainly be difficult to
implement at first as it requires many difficult changes of
individuals and organizations. However, if the paradigm and its
associated process develop and prove effective for creating
vibrant and successful organizations in the current environment,
its long term adoption will be assured.
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In one sense, the environment determines if an organization is running well or not. In a stable environment, many of points I have made are less important than in a turbulent environment. Much of my analysis is based on assumptions which value individual growth and empowerment. If the environment does not demand the exercise of adaptability or imagination, the valuing human potential is not essential to an organization. However, a basic assumption of my framework is that there will be fewer and fewer organizations which face assured stable environments. Below is a summary of the attributes organizations will need to develop in order to survive and thrive in increasingly turbulent environments:
1. Movement toward achieving its mission or purpose.
A. Shared power and development of power from within
B. Shared basic assumptions and visions
2. The ability to recognize, read, and understand all relevant sectors of its environment.
3. The ability to respond and adopt to changes in its environment in order to survive.
4. The ability to create an internal environment which encourages and allows its members to be able to meet the first three goals.
Argyris, C. Reasoning, Learning, and Action. San Francisco: Josey-Bass, 1982
Fayol, Henry. "General Principles of Management" in Classics of Organizational Theory, Pacific Grove, California: Brooks Cole Publishing Company, 1987
Galbraith, Jay. "Information Processing Model" in Classics of Organizational Theory, Pacific Grove, California: Brooks Cole Publishing Company, 1987
Gulick, Luther. "Notes on the Theory of Organizations" in Classics of Organizational Theory, Pacific Grove, California: Brooks Cole Publishing Company, 1987
Hurst, David K. "Of Boxes, Bubbles, and Effective Management." Harvard Economic Review.May-June, 1984. pp. 78-88.
Kantor, Rosabeth M. "Power Failure in Management Circuits" in Classics of Organizational Theory, Pacific Grove, California: Brooks Cole Publishing Company, 1987
Katz, Daniel and Kahn, R.L. "Organizations as Systems Concepts" in Classics of Organizational Theory, Pacific Grove, California: Brooks Cole Publishing Company, 1987
Lawrence, P.R. and Lorsch, J.W. "Organization-Environment Interface" in Classics of Organizational Theory, Pacific Grove, California: Brooks Cole Publishing Company, 1987
Marshak, Robert. Class Lecture. American University, 1992.
Morgan, Gareth. Images of Organizations, Newbury Park: Sage Publications. 1986
Pfeffer, Jeffrey. "Understanding the Role of Power in Decision Making" in Classics of Organizational Theory, Pacific Grove, California: Brooks Cole Publishing Company, 1987
Schein, Edgar. "Defining Organizational Culture" in Classics of Organizational Theory, Pacific Grove, California: Brooks Cole Publishing Company, 1987
Senge, Peter. The Fifth Discipline: The Art and Practice of the Learning Organization, New York: Doubleday/Currency. 1990
Shafritz, J.M. and Ott, J.S., Classics of Organizational Theory, Pacific Grove, California: Brooks Cole Publishing Company, 1987
Thompson, James D. Organizations in Action. New York:
McGraw Hill, 1967.
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