< a name = "ASTLEY">W. GRAHAM ASTLEY
''The Two Ecologies: Population and Community -- Perspectives on Organizational Evolution''

This paper distinguishes between two ecological perspectives on organizational evolution: population ecology and community ecology. The perspectives adopt different levels of analysis and produce contrasting views of the characteristic mode and tempo of organizational evolution.

Population Ecology:

Population ecology focuses on how populations of organizations are transformed from within by the differential success of their constituent members. Change occurs through phyletic gradualism, the gradual one-by-one selection of population members within single lines of descent or lineages. By focusing on this type of change, population ecology fails to capture the evolutionary change associated either with the formation of entirely new populations or with the extinction of old ones. It cannot account for increases in the number or diversity of different population types.

Population ecology also emphasizes the production of homogeneity and stability within existing populations. For instance, intercommunication establishes a common reservoir of ideas that binds organizations together into a unified entity that persists over time. Organizations also have what DiMaggio and Powell call ''mimetic devices'' that encourage organizations within a population to mimic each other as a way of dealing with uncertainty. In addition, organizations run according to ''the principle of technological insularity'' (Sahal, 1981) which limits interindustry transmission of technical knowledge.

Despite this stability, change nonetheless occurs. Phyletic evolution transforms populations, but within the limits set by the overall propensity of those populations to adapt. It is governed by limiting parameters that entail an eventual exhaustion of evolutionary development within populations founded on a given technology (what Chandler calls ''technological limits to institutional change''). However, there has been a revolutionary change recently in the US involving the proliferation of new organizational forms through the differentiation of new population types that cannot be accounted for by population ecology.

Another problem with population ecology is the principle of isomorphism. A central assumption of this theory is that natural selection transforms populations by making them isomorphic with their environments. Stinchcombe (1965), however, shows that organizational populations do no closely track changes in their environments. they persist, instead, because of ''internal traditionalizing processes.'' In addition, selection through competition produces competitive saturation which reduces rather than increases competitive saturation which reduces rather than increases organizational variety and effectively slows down the rate of evolutionary change.

Community Ecology:

The common assumption of population and community ecology is that various forces work to produce an overall stability in population forms. The community approach goes further, however, in identifying the beginning and end points of such stability. It proposes a process of punctuated equilibrium. Discrete origins and extinctions ''punctuate'' extended periods of negligible change, or ''equilibrium,'' in population forms. Instead of replacing their ancestors through a steady process of transformation, new populations diverge to coexist alongside their ancestors until the latter are suddenly extinguished.

To an extent, change depends upon random elements. While phyletic evolution is subject to certain limiting constraints, the birth of new organizational species opens up new avenues of development in what is inherently an unpredictable pattern of evolution. change also depends on quantum speciation. The random element of change in which new species break off from old ones lies in the fortuitous set of conditions that promote the emergence of mutant forms. Quantum speciation occurs when certain factors suspend the forces that normally limit change and allow such mutant forms to hold and survive. It depends on mutation (technological innovation) and isolation from the source of innovation. Isolation will only accrue when there exists an ecological opportunity; that is, when competitive saturation of the new environment is at a level low enough to relax selection pressures.

There are several factors which determine how open an environment is and thus how receptive it is to change:
community closure: the extent to which populations within communities function mainly by exchanging resources with each other rather than directly with the environment
competition: the degree to which competition is saturated
symbiosis: the degree to which symbiotic interdependencies emerge between populations; high symbiosis leads to a closed environment
community stability: the growth of internal complexity accompanying system closure fosters a stabilization of communities, but also sets them up for eventual collapse

Conclusion:

Thus, the key difference between the two ecologies lies in their respective evaluations of the role that organizational variability plays in determining the course of evolution. Variation is an essential component of the population ecology model, but one that is always subjugated to forces of selection. The community ecology view, in contrast, points to variation as in important evolutionary force in its own right. The explanation of broad-scale, long-term evolution consequently requires the adoption of a community ecology approach in which populations themselves are basic units of change and communities are the relevant contexts of inquiry.

PETER BLAU
''A Formal Theory of Differentiation in Organizations''

This article is basically your basic Peter Blau ''Is bigger better'' piece.
Large size of an organization has opposite effects on its administrative component, on the one hand reducing it because of an economy of scale in supervision and on the other hand raising it indirectly because of the differentiation in large organizations. The administrative costs of differentiation have feedback effects, which reduce the savings in administrative overhead that large size effects, and also stems the influence of size on differentiation.

Blau makes two generalizations:
1) Increasing organizational size generates differentiation along various lines at decelerating rates.
2) Differentiation enlarges the administrative component in organizations to effect coordination.

The objective of the paper is to develop a deductive theory of the formal structure of work organizations. The differentiation of a formal organization into components in term of several dimensions - spatial, occupational, hierarchical, functional - constitutes the core of its structure. The empirical evidence upon which the findings of the paper are based are mostly derived from a study of U.S. government agencies (mostly employment agencies). Blau does refer to other evidence supportive of his conclusions and this basis believes much of the content of this article is relevant to a fairly wide variety of formal organizations.

Deductive Theory
In deductive theory, an empirical proposition concerning the relationship between two or more variables is explained by subsuming it under a more general proposition from which it can be logically derived. A systematic theory is a set of such logically interrelated propositions, all pertaining to connection between at least two variables, the least general of which (and only those) must be empirically demonstrable.

Blau believes that theorizing in the social sciences usually takes the form of the pattern model whereby something is explained when it is so related to a set of other elements that together they constitute a unified system. He, however, advocated the use of deductive theory, where the theorist's aim is to discover a few theoretical generalizations from which many different empirical propositions can be derived. By establishing a deductive system, a theorist may empower empirical findings, confirming low-level hypotheses indirectly to establish an abstract body of explanatory theory. Empirical evidence for any lower-level proposition strengthens confidence in all propositions.

Formal Structure
Blau takes social structure to mean that people differ in status and social affiliation, that they occupy different positions and ranks, and that they belong to different groups and subunits of various sorts. The fact that members of a collectivity are differentiated on the basis of several independent dimensions is the foundation of the social structure. This paper is concerned specifically with an organization's differentiation into components along various lines.
The division of labor typifies the improvement in performance attainable through subdivision of an organization. A dimension of differentiation is any criterion on the basis of which the members of an organization are formally divided into positions, as illustrated by the division of labor; or into ranks, notably managerial levels; or into subunits, such as local branches, headquarters divisions, or sections within branches or divisions.
A structural component is either a distinct official status or a subunit in the organization. Differentiation refers specifically to the number of structural components that are formally distinguished in terms of any one criterion. Now that all that is out of the way, let's get down to business...

The First Generalization
Increasing size generates structural differentiation in organizations along various dimensions at decelerating rates.

This generalization can be decomposed into three highest-level propositions:
1A) Large size promotes structural differentiation
1B) Large size promotes differentiation along several different lines
1C) The rate of differentiation declines with expanding size.
{also 1D) the subunits into which an organization is differentiated become internally differentiated in parallel manner.}

This generalization concerning size (operationalized as number of employees) is empirically supported using several different indicators of differentiation - such as the numbers of local branches, occupational positions, levels of hierarchy, functional divisions, or sections per division.

Proposition 1.1 - as the size of organizations increases, its marginal influence on differentiation decreases.
This is equivalent to the economic principles of diminishing marginal physical productivity. A larger complement of employees in an organization makes its structure more differentiated, but as the number of employees and the differentiation of the structure increase, the marginal influence of a given increase in personnel on further differentiation declines. Increasing increments of size create in imbalance of inputs and the growing need for other inputs decreases productivity. There are at least two inputs on which the development of structural differentiation in organization depends: 1) a sufficient number of employees to fill the different positions, and 2) adequate administrative machinery to meet problems of coordination.

Proposition 1.2 - the larger an organization is, the larger the average size of its structural components of all kinds.
This double effect of organizational size (effecting both the organization as a whole and its components) has the paradoxical result that large offices and headquarters divisions constitute at the same time a more homogeneous and a more heterogeneous occupational environment for most employees than small ones. Ie. - large organizations have more people in a larger number of different kinds of positions than a smaller organization.

Proposition 1.3 - the proportionate size of the average (esp. minority - ie. administrative) component, as distinguished from its absolute size, decreases with increases in organizational size.
Most groups or categories of employees in big organizations are larger in absolute numbers but constitute a smaller proportion of the total personnel than in small organizations.

Proposition 1.4 - the larger the organization is, the wider the supervisory span of control.
Span of control of supervisors expands with increasing organizational size. Moreover, the size of the total organization has this independent effect even when controlling for size of local offices.

Proposition 1.5 - organizations exhibit an economy of scale in management - large-scale operations reduce the proportionate size of the administrative overhead.
This effect is seen when looking at administrative overhead of various kinds: managers, supervisors, staff and supportive personnel.

Proposition 1.6 - the economy of scale in administrative overhead itself declines with increasing organizational size.
Or in terms of probability: chance expectations are that the proportionate size of any particular personnel complement decreases at a decelerating rate as organizations become larger.

Differentiation lessens the difficulties the performance of particular duties entails by reducing the scope of the responsibilities assigned to an individual or unit, but it simultaneously enhances the complexity of the structure. This process of social fission, therefore, makes duties less complex at the expense of greater structural complexity. This greater complexity intensifies problems of communication and coordination, making new demands on the time of managers and supervisors at all levels. The assumption Blau makes in the foregoing is that the problems of coordination and communication in differentiated structures have feedback effects that create resistance to further differentiation, which is the reason why the marginal influence of size on differentiation declines with increasing size.

The Second Generalization
Structural differentiation in organizations enlarges the administrative component because the intensified problems of coordination and communication in differentiated structures demand administrative attention.

This effect applies both to horizontal differentiation into divisions or sections and vertical differentiation into levels. Both vertical and horizontal differentiation, with size held constant, are negatively related to the span of control of managers and supervisors on different levels in local offices and in headquarters divisions regardless of function.

Proposition 2.1 - the large size of an organization indirectly raises the ratio of administrative personnel through the structural differentiation it generates.
The savings in administrative overhead large-scale operations make possible are counteracted by the expansion in administrative overhead the structural complexity of large organizations necessitates.

Proposition 2.2 - the direct effects of large organizational size lowering the administrative ratio exceed its indirect effects raising it owing to the structural differentiation it generates.
The economies of scale exceed the costs of differentiation, so that large organizations - despite their greater structural complexity - require proportionately less administrative apparatus than small ones.

Proposition 2.3 - the differentiation of large organizations into subunits stems the decline in the economy of scale in management with increasing size, that is, the decline in the decrease in the proportion of managerial personnel with increasing size.
The differentiation of large organizations into many branches, while raising the proportion of managers needed, simultaneously restores the economy of scale in the managerial component. It recreates the decline in the proportion of managerial personnel with increasing size observed among very small organizational units. Therefore the rate of savings in management overhead with increasing size is higher among comparatively small than among comparatively large organizational units - perhaps because management overhead is bigger in smaller organizational units.

ALFRED CHANDLER
Strategy and Structure

This book is about corporations and how to successfully organize them. The sections we are assigned deal with four corporations and their individual strategies. The details are probably not too important, so this outline concentrates on a few main points for each organization.

1. DuPont - Creating the Autonomous Division
-The president of DuPont, Eugene DuPont, died. His son and two of his cousins took over the business.
-The three cousins obtained administrative control over their widespread holdings of plants, marketing facilities, and laboratories as well as trained personnel. (They had previously just held a financial stake in the other businesses, but soon called in their chips and also ran the businesses, all under the new consolidated DuPont.)
-DuPont then controlled the major share of the American explosives industry.
-The consolidation led to the creation of functional departments with headquarters in a central area, to set long-term goals.

The Strategy of Diversification:
-The loss of government orders before WWI and the huge expansion of government orders during WWI led the senior officers to implement a diversification strategy that would assure continued demand for their products after the war ended.
-They decided against finding new uses for the facilities and rather found new things to make which would employ their trained and highly skilled personnel.
-They moved from manufacturing mainly gunpowder to a wide range of chemical products.

New Structure for New Strategy
-The functional department and central office became overloaded with responsibility from the new product lines.
-Multiple central offices were created, one for each product line. A general office concentrated on the overall administration of all the product lines. Thus, divisions were created. (***This is the important result of strategy and structure for DuPont.)
-Thus DuPont's structure changed when its strategy changed. It went from a highly centralized to a departmentalized organization.

2) General Motors - Creating the General Office
The Durant Strategy: vertical integration and constant expansion
the Sloan Structure: similar to DuPont's structure.
Multidivisional 'decentralized; structure. Functional departments and central administrative offices. After the departure of its founder, the corporation acquired a general office to administer the divisions.
Note: DuPont and GM are similar because they had a systematic method of organization.

3) Standard Oil Company - Ad Hoc Reorganization
Structure and Strategy Before 1925:
-lack of concern for organizational problems
-commitment to committee management
-there were neither operating divisions not a general office
-leaders preferred action to analysis, thus focused on immediate problems rather than long-term planning
The Initial Reorganization
The Creation of the Multidivisional, 'Decentralized' Structure

4) Sears, Roebuck and Company - Decentralization, Planned and Unplanned
Changing Strategy and Structure
-Initial strategy and structure: catalog sales only
-the New Strategy: its own retail stores
-Structural strains created by the new structure
*Administration of new facilities
*Training of personnel for new facilities (catalog workers had no experience selling to people)
Abortive Decentralization:
-The structure was completely decentralized. Store managers and mail order managers had full authority; however, this did not work because there was no discipline.
Evolutionary Decentralization:
-the centralized retail organization
-decentralization of the retail organization
*direct retailing led to the new structure of district and territorial offices
-the growth of local regional administrative units
-the return to the territorial organization
-the final structure:
The problem of how to link the new retail administrative units with the older structure (mail-order business) was solved by setting up multi-function divisions at central offices, which were supervised by the general office in Chicago
The comptroller retained direct authority via the territorial comptroller

ALFRED CHANDLER
The Visible Hand: The Managerial Revolution in American Business

Part II: The Revolution in Transportation and Communication

Rail and telegraph companies were the first modern business enterprises in the US. They were the first to require a large number of full time managers to coordinate, control, and evaluate the activities of a number of widely scattered units. Thus, they provided the most relevant administrative models for enterprise in the production and distribution of goods and services when such enterprises began to build, on the basis of the new transportation and communication network, their own geographically extended, multi-unit business enterprises

CHAPTER 3: The RR's - the First Modern Business Enterprises, 1850s-60s

Railroads were the first modern business enterprises. They were the first to require a large number of salaried managers, to have a central office operated by middle managers and commanded by top managers who reported to a board of directors, and to build a large internal organizational structure with carefully defined lines of responsibility, authority, and communication. They were also the first in all of this because they had to govern a large number of men and offices scattered over wide geographical areas. They had to be highly organized in order to operate.
The RRs need for a constant flow of information pioneered modern business accounting. McCallum, Thompson, and Fink developed sophisticated financial, capital, and cost accounting procedures.

financial accounting: recording, compiling and auditing of the hundreds of financial transactions carried out daily on the RRs. Compile balance sheets and evaluate the companies' financial performance

capital accounting: analysis of the creation and development of the RRs capital assets

cost accounting: costs of operation and management. Particularly the costs of changing one ton per mine, which was the means by which managers judged/controlled the work of subordinates. Otherwise, revenues could not be easily allocated to separate divisions

By the 1880s, the above innovations (from the 1850s-60s) had become standard operating procedures on all large American RRs. Expansion forced managers to pay attention to administrative and informational procedures. The importance of the telegraph industry increased because it provided faster information for train administrators. the development of the telephone in the 1880s was also highly significant. As with RRs, telegraph and telephone companies required higher levels of organization, which eventually led to the formation of monopolies and oligopolies.
The rail innovations for the 1850s-60s increased the efficiency and productivity of transportation provided by the individual routes. Improved organization and accounting let to more intensive use of equipment, speedier delivery of goods by more effective, continuous control of all operations on RRs, and fuller exploitation of steadily improving technology (engines, rails, brakes, etc.)
As the rail network grew, through traffic passing from one line to the next was increasingly important to the profits of individual RR companies. After the Civil War, external relations (with other rail lines, and outside investors) were becoming as critical to the successful operation of new large RRs as were the development of internal organization and controls before the war.

CHAPTER 4: RR Cooperation and Competition, 1870s-80s

The central theme of American RRs in the 1860s-70s was cooperation. There was integration and standardization between firms for the purposes of efficient transport, as well as intra-firm cooperation. Cooperation was also necessary to control inter-firm competition, in the form of creating informal alliances.
Middle managers played a central role in all of this. Professional associations formed for the standardization of operating procedures, yet these associations were less successful in controlling competition. Top executives decided on strategies of alliances, but middle managers had to decide and maintain rates in order to keep customers. Because of lack of trust, rate agreements often collapsed between alliances.
The RR managers all realized that legalized cartels with formal legislative bodied to decide rates were the most efficient way to reduce competition, but the country's anti-monopoly political climate wouldn't allow it. Attempts at forming cartels failed anyway because of the relentless pressure of high constant costs. The need to meet these costs pressured each company to subvert cartel agreements by using excess capacity. Managers decided cartels were futile and began to use system building, connection important commercial centers across localities and territories.

CHAPTER 5: System Building 1880s-90s

The top managers of American RRs remained truncated. Top level evaluations as well as coordination f middle management and the units they administered became the task of the president. The allocation of capital and personnel continued to be divided between the president and the financiers on the board (such as banks and JP Morgan). Until well into the 20th century, capital allocations on these large RR systems continued to be carried out in an ad hoc way with managers 'proposing' and financiers 'disposing.'
One reason the RRs could afford such a truncated top management was that by the first years of the 20th century, they had achieved control over competition with the rounding out of these large systems and the development of a community of interest. Strategic planning no longer required close attention. The process of rate-making as being shared with the Interstate Commerce Commission.
As pricing and investment decisions became relatively routinized, RR administration became increasingly bureaucratized. The tasks of management concentrated almost wholly on the coordination of traffic and trains. Promotion in the management hierarchy became based more on seniority than talent. Most managers became functional specialists and few reached the top of their departments.

The basic structure of the large RR enterprise reflected the process of its growth:
1) technical needs of speed and high volume required the services of career managers who held only a small portion of their company's stock
2) investors in RRs (for construction) had no information to participate in management decisions, except those involving the allocation of funds
3) as the importance of through traffic increased and after cartels failed to control competition for traffic, managers were able to convince investors of the need to build self-sustaining systems

In nearly all cases, the career managers became responsible for the strategy of growth but in order to finance this growth they had to make alliances with specialized investment bankers who had access to large amounts of capital. In return for their support, these banks continues to have a say in managers' plans involving obtaining and allocating capital. RR systems thus became and remained the private business enterprises that most closely exemplified financial capital in the US. No other enterprises required such large sums of outside capital. Financiers outnumbered managers at board meetings.
Yet except in promoting communities of interest, bankers rarely defined strategic plans and were even less involved in operating matters. The American RR enterprise might more properly be considered a variation of managerial capital than an unalloyed expression of financial capital.

CHAPTER 6: Completing the Infrastructure

The organizational response to the new technologies in communication was comparable to that in transportation. Both came to be operated through modern business enterprises with career middle managers coordinating flows and top managers allocating resources. Top managers shared decisions concerning the raising and spending of capital with institutional investors. Utility companies came to be managed in the same way. They also expanded beyond their original localities into system building. For utility companies, administration required less complicated statistical and accounting procedures than RRs.
The RR was in every way the pioneer in modern business administration. They employed more workers and carried out a greater number and variety of operations. No other public enterprise came close to such complexity.
In Europe, on the other hand, the much larger military and governmental establishments were a source for the kind of administrative training that became so essential to the operation of modern industry, urban and technologically advanced economies. The government played a much larger role than it did in the US in financing, locating, and operating the transportation and communication infrastructure. In Europe, public enterprise helped lay the base for the coming of modern mass production and distribution. In the US it was private enterprise.

MICHAEL CROZIER
The Bureaucratic Phenomenon

The attached summary is helpful, but needs the following point added. Crozier argues that the particular form of French bureaucracy arises because of French culture; that is, culture affects organizational forms.

In a part of the book we don't read for the prelim, Crozier outlines what he calls the ''bureaucratic vicious cycle.'' It has four elements: the impersonality of the rules, the centralization of decisions, the statra isolation, and the development of parallel power relationships.

Then he goes on to lay out evidence that these factors in fact reflect the cultural environment of France, such as: the French seldom participate in positive group activities, they lack a collective spirit in that sense. The isolation of the different strata and their perennial fight for rank and status is linked to the isolation of the individual and the lack of a collective spirit; there are reflected in intra- and inter-organizational relations. The French avoid direct face-to-face authority relationships and open conflict; this is reflected in the impersonality of rules, and the centralization of decisions. The whole structure of authority is so devised that whatever authority cannot be eliminated is allocated so that is at a safe distance from the people who are affected. Impersonal rules and centralization make it possible to reconcile an absolutist conception of authority and the elimination of most direct dependence relationships (this resolves a fundamental French cultural tension).

RICHARD CYERT AND JAMES MARCH
A Behavioral Theory of the Firm

Chapter 3: Organizational Goals

Developing a theory that predicts and explains business decision-making behavior encounters two problems: 1.) individuals have goals, collectivities do not; and 2.) to define a theory of organizational decision making, we need something analogous at the organizational level to individual goals at the individual level. The problem is specifying organizational goals without postulating an ''organizational mind.''

Classical economists view organizational goals as either the goals of the entrepreneur or as a common consensual goals or organization participants. Both views attempt to define a joint preference ordering for the organization, but such orderings do not exist.

Instead, Cyert and March prefer to see organizations as coalitions which negotiate goals. Goal formation involve 3 processes:
The bargaining process by which the composition and general terms of the coalition are fixed
The internal organizational process of control by which objectives are stabilized and elaborated
The process of adjustment to experience by which coalition agreements are altered in response to environmental changes.

Goals are constantly being renegotiated due to differing demands of participants, changing foci of attention, and limited ability to attend to all problems simultaneously. This leads to a system in which goals are elaborated as a response to short-run pressures, little focus is put on long-term priorities. Because of this process of goal formation, conflict is never fully resolved in an organization. Organization make decisions with inconsistent goals due to : the decentralization of decision-making, the sequential attention to goals, and the adjustment of organization slack, which is the disparity between the resources available to the organization and the payments required to maintain the coalition.

The contemporary firm, which must make price, output and sales strategy decisions, has 5 major goals: production, inventory, sales, market share, and profit.

Chapter 5: Organizational Choice

Cyert and March's theory of choice differs from the neoclassical theory on three grounds:
Organizational decisions depend on information, estimates, and expectations that ordinarily differ appreciably from reality
Organizations consider only a limited number of decision alternatives
Organization vary with respect to the amount of resources they devote to organizational goals on the one hand and suborganization and individual goals on the other

The decision process involves nine steps:
forecast competitors' behavior
forecast demand
estimate costs
specify objectives
evaluate plan
re-examine costs
re-examine demand
re-examine objectives
select alternatives

This model, however is incomplete without standard operating procedures (SOP), a learned set of behavior rules. These rules are the focus of control within the firms; they re the result of a long-run adaptive process by which the firm learns; and they are the short-run focus for decision making within the organization. There are general and specific SOPs. The general procedures have three basic principles: avoid uncertainty, maintain the rules, and use simple rules. Specific procedures can be grouped into four major types; task performance rules, continuing records and reports, information-handling rules, and plans.

Choice and control within an organization depend on the elaboration of SOPs. These procedures affect individual goals within an organization, individual perceptions of the state of the environment, the range of alternatives considered by organization members in arriving at operating decisions, and the managerial decision rules used in organizations.

Thus, the basic theory or organization choice and control is based on he following assumptions:
Multiple, changing, acceptable-level goals
An approximate sequential consideration of alternatives
The organizational need to avoid uncertainty by following regular procedures and a policy of reacting to feedback rather than forecasting the environment
The organization uses SOPs and rules of thumb to make and implement choices. In the short-run, these procedures dominate the decisions made.

Chapter 6: A Summary of Basic Concepts in the Behavioral Theory of the Firm

The following theory specifies a framework for dealing with the modern ''representative firm'' - the large, multiproduct firm operating under uncertainty in an imperfect market. The process of decision-making in the modern firm can be analyzed in terms of the variables that affect organizational goals, expectations, and choice. In addition, there are four major relational concepts of this theory:

Quasi resolution of conflict: Since a coalition is comprised of members with different goals, firms require procedures for resolving conflict. Organizational goals work as a series of independent aspiration-level constraints imposed on the organization by the coalition. Local rationality allows individual subunits to deal with a limited set of problems and a limited set of goals. In addition, acceptable-level decision rules and the sequential attention to goals serve to reduce conflict.

Uncertainty avoidance: Firms avoid uncertainty through feedback-react decision procedures, whereby they deal with each problem only as it arises, and by negotiating through the environment.

Problemistic search: Just as with decision-making, the search for alternatives is stimulated by a problem and is direct toward finding a solution to that problem. It is assumed that the search is motivated, simple-minded, and biased.

Organizational learning: Organizations exhibit adaptive behavior over time. In particular, there is adaptation of goals, attention rules, and search rules.

PAUL DIMAGGIO AND WALTER POWELL
''The Iron Cage Revisited: Institutional Isomorphism and Collective Rationality in Organizational Fields''

the iron cage metaphor comes from Weber and refers to his contention that the spirit of rationalism - as exemplified by the Protestant capitalist ethic or the bureaucratic form - tends to become a structuring social force in its own right rather than remaining simply a tool by which society structures itself. Weber saw the competitive marketplace as the most important force encouraging bureaucratization, arguing that market pressures toward efficiency required the institution of bureaucratic structure because (Weber argued) this is the most precise and efficient administrative form.

DiMaggio and Powell argue that ''the causes of bureaucratization and rationalization have changed.... Structural change in organizations seems less ... driven by competition or the need for efficiency'' but rather, emerges ''out of the structuration of organizational fields.''

Rather than asking, as do Hannan and Freeman, why there are so many types of organizations (why there is so much heterogeneity of organizational forms), DiMaggio and Powell ask why there is so much ''homogeneity of organizational forms and practices?''

Organizational field: ''organizations that, in the aggregate, constitute a recognized area of institutional life: key suppliers, resource and product consumers, regulatory agencies, and other organizations that produce similar services or products.'' The main forces structuring organizational fields are competition, that state, or the professions. Early in their development, organizational forms frequently result from efforts toward efficiency but over time the forms become infused with legitimating value more than they directly increase efficiency.

The process of homogenization is most accurately described by the concept of isomorphism. DiMaggio and Powell identify three mechanisms through which institutional isomorphic changes occur:

(1) Coercive: ''results from formal and informal pressures exerted on organizations by other organizations upon which they are dependent and by cultural expectations in the society within which organizations function.'' (e.g. a government mandate to adopt certain pollution control technologies). ''Organizational structures increasingly come to reflect rules institutionalized by and within the state.''

(2) Mimetic: uncertainty (poorly understood technologies, ambiguous goals, uncertain environment) encourages imitation. ''Organizations tend to model themselves after similar organizations in their field that they perceive to be more legitimate or successful.''

(3) Normative: stems primarily from professionalization. Professionalization is understood as the process whereby ''members of an occupation ... define the conditions and methods of their work.''

''Each of the institutional isomorphic processes can be expected to proceed in the absence of evidence that it increases internal organizational efficiency. To the extent that organizational effectiveness is enhanced, the reason is often that organizations are rewarded for their similarity to other organizations in their fields. This similarity can make it easier for organizations to transact with other organizations, to attract career minded staff, to be acknowledged as legitimate and reputable, and to fit into administrative categories that define eligibility for public and private grants and contracts.'' Thus, as mentioned above, earlier in their development, organizational forms frequently result from efforts toward efficiency but over time the forms become infused with legitimating value more than they directly increase efficiency.

DiMaggio and Powell see a contradiction in the organizational literature. On the one hand, many organizational case studies emphasize the limits of rationality while on the other hand, at the level of society, functionalist arguments stress the emergence of a rational and well integrated matrix of organizations effectively meeting the needs of society. DiMaggio and Powell suggest that the institutional approach they have outlined is able to reconcile these contradictions. The institutional approach enables us to understand how certain forms may emerge by processes which are as much symbolic and mythologized as they are rational. The point seems to be that even though organizations may be the products of bounded rationality (etc.) they tend to become integrated and comprehensible through the symbolic and material structuring processes of the organizational field wherein some of sort of functional integrity may be discerned. At the same time, it suggests that we question the role of elites in the process by first identifying the crucial ways in which some actors have disproportionate power in defining premises, norms, and standards.

NEIL FLIGSTEIN
''The Intraorganizational Power Struggle: Rise of Finance Personnel to Top Leadership in Large Corporations 1919-1979''

This article looks at resources available to business firms and the environment in which they operated to explain power shifts in their organizational structures. In the early 1900's, large firms were controlled by entrepreneurs or personnel who came up through manufacturing. In the middle decades, sales and marketing personnel controlled large firms. For the past 25 years, finance personnel have become increasingly dominant. These shifts resulted from changes in the strategy and structure of organizations, changes in anti-trust laws that promoted an increase in product-related and unrelated mergers in the post-war era, and the mimicking of firms in similar environments. Power holders in firms have shifted as firms have shifted organizationally. Certain groups in firms throughout the century have benefited more than others in response to changes in strategy and structure. This study also looks at how key actors gain power both as a result of events outside their organizations and by definition of their key problems within them,

A theoretical view of organizations

Organizations evolve in three institutional contexts:

1) the org. has a place in a set of strategies, structures, technologies, and physical limits that constrain and shape patterns of growth
2) the org. is embedded economically among other organizations by product lines, markets, or firm size. Actors mimic what they perceive as successful strategies and structures in their environment.
3) the state shapes possibilities for growth through direct and indirect actions including economic policy that affects the overall environment and legislative regulation of the industry.

Actors must make decisions in policy based on their bounded information about these environments. Because of subjective uncertainty, actors often choose to imitate others around them, This institutionalizes what is perceived as appropriate behavior.
There is also the question of causality. Sometimes actors in subunits are able to transform the org.'s strategies and structures. At other times those strategies and structures that are in place are used to maintain control. The process is dynamic and difficult to model.

The intraorganizational power struggle

There is a power struggle over claims from various actors over the goals and resources of the organization. Those who control are those who can use the resources available to force their view of appropriate organizational behavior. The two major resources in power struggles are the political and economic environment and the internal organization of the firm.

Environment

1) Political environment
The state is a resource in that actors can claim power on the basis of their interpretation of state actions and how the organization needs to respond in order to benefit from those actions. The state regulates organizations and organizations also control the state.

2) Economic environment
The economic environment is composed of the presence of competitors, suppliers, customers, etc. Their actions or the perception of their actions are a stimuli to change. .

3) Cultural definitions of appropriate organizational behavior
Examples: coercion, mimicry, exchange of personnel. Mimicry of other organizations can be a resource.

Internal organization resources

Strategy = the determination of the long term goals and objectives of an enterprise, and the adoption of courses of action and the allocation of resources necessary for carrying out these goals . The firm power struggle revolves around the organizational strategy and how that strategy is implemented. Those who are able to shape strategy will have power; the current strategy is one important source of power.
Structure = the actual design of the organization and it includes the actual lines of communication and authority between administrative offices as well as flows between them. Structure is important to firm structure because it provides actors with two important resources: information and authority. Actors who can control either will have more organizational power.
Shifts in resources affect firm power struggles.

The Case of Managerial Succession -- the rise of finance presidents in large firms

There has been both great stability and great change in the identities of the largest firms in the American economy, suggesting the importance of both selection and adaptation processes The early dominant pattern of manufacturing personnel and entrepreneurs heading the largest firms decreased steadily. Then manufacturing personnel dominated in 1929 and subsequently declined. Until 1959 then, sales and marketing personnel rose steadily as heads of large firms, but from 1949 to 1979, finance personnel increasingly came to control large firms and by 1979 formed the single largest group of firm presidents.
Innovative strategies and structures form the basis of changes in the environment and they are sometimes caused by shifts in actions of the state.

1900-19
Firms formed monopolies as their first attempt at success but failed b/c of the Sherman Anti-trust Act and competition due to insufficient human barriers to entry. Internally, business org.'s at the time, lacked operating efficiency. They should not have just paid attention to production, but also to sales and marketing. In order to maintain a market share, firms needed control over their staff. Entrepreneurs ruled autocratically.
The strategies of entrepreneurs were holding companies, where a large corporation organized as a set of companies, each operating autonomously. The central office was an accounting firm and merely evaluated financial power. They also used the ''functional form'' strategy, in order to control the production process from input to sales. They divided the corporation into departments that controlled the flow of materials sequentially in order to insure the adequate supply of materials from their origin to the ultimate users (manufacture).

1919-39
Entrepreneurs, lawyers (legal experts for the holding co.'s) and manufacturing personnel functional form) all controlled the firm. Firms used the multi-divisional form of organization in order to better coordinate disparate product lines. Firms that could not guarantee their existence by controlling one market could enter multiple markets. (Firms attempted to differentiate their products from their competitors, end price competition, and enter new markets to gain a market share across related products.)
As diversification spread, sales and marketing began to come to the fore and sales and marketing personnel began to rise to control.

1939-59
This era created the notion of the product cycle. A firm could create a new product. advertise it, and experience growth in sales and profits. A successful product would then ''mature in its market.'' The firm could then use its revenue to subsidize a new product and start the process over. firms also used multinational strategies of the product cycle.
These firms were mainly multi-divisional. Sales, marketing, and finance personnel had the most control.
The view that the multi-divisional firm should favor only finance personnel b/c they are empowered to evaluate and act on the divisions' requests for funds, and they do so entirely on financial criteria, is misguided. The actual impetus of the multi-divisional firm was the need to decentralize decision making when firms were producing multiple products. The notion of diversification and multinationalization all reflected the search for more markets and firms. Also, basic marketing strategies entail differentiating one's products from one's competitors. That the multidivisional form has turned into a financial device to evaluate the relative performance of divisions and allocate capital in accord with profitability is a phenomenon of the post 1950 period.

1959-present
The increasing rise of sales and marketing personnel was ended indirectly by state intervention. The internal power struggle in the firm became problematic because of anti-trust enforcement from the Justice Department. Thus, the new strategy became merging large firms which were unrelated in product lines. Product diversification increased dramatically after 1960.
Since the goal of a finance strategy is to maximize growth (and profits), the type of goods produces and sold becomes less important. Therefore a firm is likely to choose a wide variety of products that reflect markets growing at different rates. The result is ''acquisitive conglomerates'' of firms. The leaders are those with finance backgrounds. (Once firms started investing in products too dissimilar to consider related, the only criterion that could be used to evaluate product lines was financial.)

Hypotheses

1) In terms of internal strategy and structure, manufacturing presidents will dominate firms with unitary or functional structures and firms that produce one main product line.

2) Over time the ability of manufacturing personnel to control large firms will decrease because of the spread of alternative strategies and structures that undermine narrow, problem oriented expertise.

3) In mulit-divisional firms, marketing and sales personnel will lead. Firms with product related strategies will be more likely to have sales personnel heading them. When this strategy is dominant, the presence of sales and marketing personnel as presidents of other firms affect the likelihood of a given firm having a sales and marketing president.

4) In terms of the external environment: firms in food, transport, machine making, and chemical industries which have multiple product lines will more likely be headed by a sales and marketing person. However, sales and marketing people will lose power relative to finance personnel following the implementation of the Celler Kefauver Act. Product-unrelated strategies and mergers will be used as strategies for growth.

5) When a culture promotes manufacturing presidents, they will be more likely to dominate. In a culture where financial strategies dominate the industry, finance presidents will be more likely to have power.

Analysis
In general, the results of the study conform to the hypotheses. In the periods in which presidents representing different subunits came to dominate, the factors that indexed the resources that could be drawn upon helped explain which subunit held power. Strategy and structure provided important resources for manufacturing, sales and marketing, and finance presidents. Product related strategies tended to favor sales and marketing presidents and product-unrelated strategies tended to favor finance presidents.
The behavior of other firms in an industry in choosing their president greatly affected the choice of a given firm and created an institutionalized view within industries of what kind of person should lead firms.
The role of the Celler-Kefauver Act in the shift of power to finance presidents has been evident.
There are no age, size, or growth effects that predict which subunits will have power. The behavior of large firms is more highly related to current conditions in the firms and their environments.

Discussion and Conclusions
The results support a non-functionalist interpretation of organizational power and change. At different historical moments under different structural conditions, actors were able to make claims on their organizations, on the basis of their interpretations of their organizational fields. Once new actors established themselves in one set of firms their counterparts in other firms were able to use that fact as a basis of gaining power.
These results imply that a dynamic conception of organizations rests on learning more about how actors in organizations view their worlds, how they vie for power in their organizations, and how they selectively absorb information.
Yet existing social structures also provide great stability. They represent already existing sources of power and aid in simplifying actors' worlds.
Strategy does seem to proceed structure. Sales and finance presidents played some role in the shift to the multi-divisional form. Do subunits come to power because of shifts in strategies by competitors or as a result of their already having seized power and their shaping strategy to help organizational problems? Both could be in effect; this article discusses the former.
The finance leaders have won out for now -- as a result of power struggles which resulted in the domination of a certain strategy and subunit in these large firms.

MICHAEL HANNAN AND JOHN FREEMAN
''The Population Ecology of Organizations''

H and F propose a population ecology of organizations as an alternative to the dominant adaptation perspective. This approach heavily stresses the effects of environment on organizational structure. They see the study of organizations as a preeminently ecological process. And, while most ecological models stress selections, most organizational literature stresses adaptation. The population ecology of organizations is thus a natural solution.

Adaptation perspectives say that subunits of the organization, usually managers or dominant coalitions, scan the relevant environment for opportunities or threats, formulate strategic responses, and adjust the organization accordingly. In these perspectives, while the environment is important, the organization essentially acts on the environment. H and F claim that this model assumes too much about the hierarchy and effectiveness of organizations. It also neglects obvious limitations on an organization's ability to adapt. Ability to adapt is constrained primarily by what H and F term 'structural inertia.'

Structural inertia is an organizational tendency to maintain its internal structure regardless of other factors or concerns. The stronger the pressures of structural inertia, the lower the organization's adaptive flexibility and the more likely that the logic of the environmental selection is appropriate. Inertial pressures arise from both internal structural arrangements and environmental constraints. Some constraints are:

Internal: 1. internal structure (investments in plant, equipment, specialized personnel) 2. limited information , 3. internal political equilibrium, 4.standard operating procedure and standard allocation of tasks - these are often difficult to change and may come at a high cost. External: 1. legal/fiscal barriers, 2. limited information from outside, 3. external legitimacy concerns, 4. collective rationality (what helps one may hurt others... general system equilibrium).

All of these factors mean that rational, strategic action is limited and the adaptation school is of limited use. It must be supplemented with a selection orientation.

Two broad issues are of concern to population ecology. First, the units of analysis must be a population of organizations. (Chris was right) Second, H and F seek to extend Hawley's population ecology work by using explicit competition models to specify the process producing isomorphism between organizational structure and environmental demands, and by using niche theory to extend the problem to dynamic environments.

To oversimplify, one should always keep in mind that ecological analysis of organizations is conducted at five levels: (1) members, (2) subunits, (3) individual organizations, (4) populations of organizations, and (5) communities of (populations of ) organizations. H and F are primarily concerned with levels 4 and 5.

Important to an organization is its form, which is a blueprint for organizational action, for transforming inputs into outputs. Intermediate in this process is thruput. Blueprints usually can be inferred be examining formal organizational structure, activity patterns within the org, and the normative order as defined by both members and relevant sectors of the environment. Given a systems definition, a population of organizations consists of all the organizations within a particular boundary that have a common form.

H and F admit that a pure ecological model is not completely applicable to the field of organizations. Particularly troubling are the ideas about evolution and growth of individual organisms. We must look more closely at the processes of selection re. organizations. Organizations are limited in terms of mobility, and measures of fitness need to account for this, especially for those situations in which mobility across forms is unlikely. In addition, unlike biologic organisms, individual organizations have the potential to expand almost without limit. These features of organizations have repercussions for organizational population ecology. If it is true that organizational form changes with size, selection mechanisms may indeed operate with regard to size distribution.

H and F want to answer the question: Why are there so many kinds of organizations? Key to this questions is the principle of isomorphism. According to Hawley, the diversity of organizational forms is isomorphic to the diversity of environments. In each distinguishable environmental configuration one finds, in equilibrium, only that organizational form optimally adapted to the demands of the environment. Each unit experiences constraints which force it to resemble other units under the same constraints. The principle of isomorphism must be supplemented by a criterion of selection and a competition theory. Must also be adapted for the situation of changing environments, and the fact that organizations often face multiple environments which impose somewhat inconsistent demands.

Isomorphism can result either because non optimal forms are selected out of a community of organizations or because organizational decision makers learn optimal responses and adjust organizational behavior accordingly. The latter is of course limited by H and F's concerns about structural constraints and individual ability to affect change on an organization. From a population ecology perspective, it is the environments which optimizes through selection. No discussion of selection is complete without an accompanying talk about competition. Competition may be direct or indirect, but as long as the resources which sustain organizations are finite and populations have unlimited capacity to expend, competition must ensue. Competition is determined by two primary ecological considerations: the capacity of the environment to support organizational forms (assume finite, fixed resources), and the rate at which the populations grow or decline when the environmental support changes.

The notion of competition brings out another key feature of organizational population ecology, the niche. Populations are said to occupy the same niche to the extent that they depend on identical environmental resources. The niche consists of all those combinations of resources levels at which the population can survive and reproduce itself. If two populations of orgs occupy the same niche while differing in some organizational characteristic, that population with the less fit environmental characteristic will be eliminated. The addition or deletion of constraints to an environment set the boundaries for the degree of diversity which will be tolerated. Competition theory also suggests that organizations of very different size in the same area of activity will tend to exhibit different forms. This means that organizations will tend to compete most intensely with organizations of similar size. As an offshoot, the rise of large orgs may actually help out small orgs by eliminating many middle-sized orgs in a field.

The principle of isomorphism is very appropriate for stable environments, but what about changing environments? A changing environments poses a significant threat to an organization which is optimally fit for a specific resource environment. The concept of the niche is especially important in this context, because each population occupies a distinct niche. Those who occupy a broad niche will tend to have a more generalist structure, while those in a narrow niche will tend to have a more concentrated, specialist form. In essence, the distinction between specialism and generalism refers to whether a population of organizations flourishes because it maximizes its exploitation of the environment and accepts the risk of having that environment change (specialism) or because it accepts a lower level of exploitation in return for greater security (generalism). Specialist organization tend to invest all of their resources in optimization of fit to the environment. Generalist organizations devote a significant amount of resources to excess capacity or slack, or they rely on a wider variety of resources, so as to maintain flexibility. Generalism is a more costly short-term form, but the inertial pressures are much less for generalist organizations then for specialist organizations. Thus, specialist forms are more aptly suited to stable environment and generalist forms are more geared to changing environments. No organizational form does particularly well in both states of the environment.

The model needs to be empirically tested. Studies of small organizations would be especially helpful, though they are scarce.

JAMES MARCH AND HERBERT SIMON
Organizations (1958)

Chapter 1: Organizational Behavior

Organizations have not been given much attention in the social sciences but they are important to study because people spend so much time I them and because they represents a major part of the environment which greatly influences people. The distinctive characteristic of the influence of organizations as opposed to other elements of society is its specificity. Organizational communications are specific with respect to the channels they follow and their content. In addition, organizational roles tend to be highly elaborated, relatively stable, and explicitly defined.

The work done thus far on organizations presents two problems: 1.) the construction of a common language, and 2.) empirical support of the hypotheses created up to this point.

Propositions about organizations, statements about human behavior, can be grouped into three broad classes:
Propositions assuming that organization members are primarily passive instruments
Propositions assuming that members bring to their organizations attitudes, values, and goals; that they have to be motivated or induces to participate in the system
Propositions assuming that organization members are decision makers and problem solvers

Some Psychological Postulates:

The human organism can be regarded as a complex information-processing system. The behavior of an organism through a short interval of time can be accounted for by: 1.) its internal state at the beginning of the interval, and 2.) its environment at the beginning of the interval. the internal state of the organism is implicitly a function of its whole previous history. The content of this memory can be divided into: 1.) values or goals, 2.) relations between actions and outcomes, and 3.) alternatives, possible courses of action. The human organism, then, is a choosing, decision-making, problem-solving organism that can only do one or a few things at a time, and that cant attend to only a small part of the information recorded in its memory and presented by the environment.

Chapter 3; Motivational Constraints: Intraorganizational Decisions

Traditional organizational theory treats the human organism as a simple machine. It sees the environment as a well-defined system of stimuli. Each such stimulus evokes ''appropriate'' responses from the individual. Hence, in any organization there is a repertoire of response programs. However, March and Simon argue that his view of an organization as a simple mechanism produces outcomes unanticipated by the classical theory. Stimuli do not always produce anticipated responses and these unanticipated consequences restrict the adaptiveness of the organization to the goals of the top of the administrative hierarchy.

Theories of Bureaucracy

Weber:
Weber had four major interests in the study of organizations:
To identify the characteristics of bureaucracy
To describe its growth and the reasons for growth
To isolate the concomitant social changes
To discover the consequences of bureaucratic organization for the achievement of bureaucratic goals

Since Weber perceives bureaucracy as an adaptive device for using specialized skills and he is not exceptionally attentive to the character of the human organism, he is part of the traditional organizational theory.

The following authors, however, pay attention to the ''unanticipated'' responses of organization members and the dysfunctional consequences of bureaucratic organization.

Merton:
Merton is concerned with dysfunctional organizational learning: organization members generalize a response from situations where the response is appropriate to similar situations where it results in consequences unanticipated and undesired by the organization. The organizational hierarchy's demand for control increases the emphasis on the reliability of behavior. This results in an increase in the rigidity of behavior which, unintentionally, increases the amount of difficulty with clients. In essence, Merton's' model emphasizes rules as a response to the demand for control.

Selznick:
Selznick is also interested in how control brings about unanticipated consequences. Demand for control leads to an increasing delegation of authority. this results in departmentalization and an increase in the bifurcation of interests, which in turn increases conflict among organizational subunits. There is little internalization of organizational goals by participants.

Gouldner:
Gouldner shows how a control technique designed to maintain the equilibrium of a subsystem disturbs the equilibrium of a larger system with subsequent feedback on the subsystem. Demand for control leads to the use of general and impersonal rules. These rules decrease the visibility of power relations which can affect the level of interpersonal tension and the difference between organizational goals and achievement.

Satisfaction and Productivity:

The traditional organizational model to productivity recognized only those constraints on performance that had obvious machine analogues. More recent scholars, however, have focused on morale, satisfaction, and cohesiveness. Employees make two types of decisions: the first is the decision to participate in an organization, and the second is the decision to produce or refuse to produce at the rate demanded by the organizational hierarchy. A general model is proposed:

the lower the satisfaction of the organism, the more search for alternative programs will be undertaken
the more search, the higher the expected value of reward
the higher the expected value of reward, the higher the satisfaction
the higher the expected value of reward, the higher the level of aspiration of the organism
the higher the level of aspiration, the lower the satisfaction

When an employee is dissatisfied, she has 3 alternatives of action:
to leave the organization
to stay in the organization and produce
to stay in the organization and not produce
Motivation to produce stems from a present or anticipated state of discontent and a perception of a direct connection between individual production and a new state of satisfaction.

Motivation to Produce:
An individual may be influence by:
changing the values associated with given states of affairs
changing the perceived consequences of an alternative of action
changing the set of states of affairs that are evoked
Thus, the motivation to produce is a function of the character of the evoked set of alternatives, the perceived consequences of evoked alternatives, and the individual goals in terms of which alternatives are evaluated. Each of these aspects is partly under the control of the organization, but partly also determined by extraorganizational factors.

Chapter 6: Cognitive Limits on Rationality

In this chapter, March and Simon are concerned with the qualities of an organization member as a rational man. The reject the ''economic man'' as outlined by rational choice theorists because of the numerous flaws of this theory, most importantly, the lack of perfect information. Instead, they define rationality in terms of the ''administrative man.'' This theory of rational choice is based on 2 premises: 1.) choice is always exercised with respect to a limited, approximate, simplified ''model'' of the real situation (the ''definition of the situation''), and 2.) the elements of the definition of the situation are not ''given'' but are themselves outcomes of psychological and sociological processes. The characteristics of ''administrative man'' are: optimizing is replaced by satisficing - the requirement that satisfactory levels of the criterion variables be attained
alternatives of action and consequences of action are discovered sequentially through search processes
repertories of action programs are developed by organizations and individuals and these serve as the alternatives of choice in recurrent situations
each specific action program deals with a restricted range of consequences
each action program is capable of being executed in semi-independence of others - they are only loosely coupled together

Action is goal-oriented and adaptive. But because of its approximating and fragmented character, only a few elements of the system are adaptive at any one time; the remainder are ''givens.''

Organizational structure consist simply of those aspects of the pattern of behavior in the organization that are relatively stable and change only slowly. Organizations will have structure insofar as there are boundaries of rationality - insofar as there are elements of the situation that must be or are in fact taken as givens, and that do no enter into rational calculations as potential strategic factors.

This chapter has dealt mainly with short-term structure. The ''boundaries of rationality'' have consisted primarily of the properties of human beings as organisms capable of evoking and executing relatively well-defined programs but able to handle programs only of limited complexity. The next chapter looks at long-run considerations, especially the processes in organizations that bring programs into existence and modify them.

Chapter 7: Planning and Innovation in Organizations

This chapter is concerned with how the cognitive limits on rationality affect the processes or organizational change and program development. Individuals and organizations give preferred treatment to alternatives that represent continuation of present programs over those that represent change. this is because the individual or organization does not search for or consider alternative to the present course of action unless that course is ''unsatisfactory'' in some way. The amount of search decreases as satisfaction increases.

The Planning Model:

The main requirement of the organizational program is to satisfy certain criteria that are subjected to gradual change over time. When one or more criteria are not being met, an action program will be initiated to remedy this condition. A change in the program of an organization involves not just a choice process, but requires also a process of initiation through which new program possibilities are generated and their consequences examined. Action programs are related to each other primarily through the demands they make on the scarce organizational resources available for initiating or carrying on action.

The innovative processes that are essential in initiating new programs in organizations are closely related to the psychological processes of ''problem-solving.'' The type of problem-solving used in a given situation depends on both the characteristics of the problem and on the past experience of the problem solver.

Planning has evoked a lot of discussion in the organizational world, particularly in two respects: 1.) the ''plan vs. no plan'' debate as the desirable scope of central planning in a modern industrial economy; and 2.) discussing of the relative merits of centralization and decentralization in large industrial concerns.

JAMES MARCH AND JOHAN OLSEN
Organizational Choice Under Ambiguity

Introduction
Organizational choice often involves a curious paradox where what is mundane to experience often becomes unexplained variance in the theories and what is standard in the interpretation of organizations often becomes irrelevant to experience (i.e., a disjunction between the theory and reality of organizations).

M and O seek to explore some possibilities that make ordinary experiences in organizations more explicable. They place an emphasis on decisions and examine problems with the standard conception of the choice cycle in orgs and its ability to accommodate (or not) elements of ambiguity.

Choice situations: may provide an occasions for problem-solving and conflict resolution, the aggregation of individual and group preferences and power into collective choices. But in reality the process of decision does not appear to be much concerned with making a decision.

Choice process: Provides an occasions for:
- executing standard operating procedures, and fulfilling role-expectations, duties, or commitments
- defining virtue and truth
- distributing glory/blame for what has happened in the org
- expressing and discovering self-interest and group interest for socialization and recruiting
- having a good time and enjoying the pleasures connected to taking part in a choice situation

Ambiguity opaqueness all orgs face in decision making; four major kinds:
intention: inconsistent and ill-defined objectives
understanding: lack of clarity in causal world of org (e.g., technologies and environment) hard to see the connections between organization actions and their consequences
history: the past - though important - can be difficult to interpret, since it may be reinterpreted or twisted
organization: pattern of participation in the org is uncertain and changing due to the varying amounts of attention that individuals provide to different decisions

Limitations in the Complete Cycle of Choice
The conception of choice assumes a closed cycle of connections;
cognitions and preferences held by individuals affect their behavior
behavior (including participation) of individuals affects organizaitonal choices
organizaitonal choices affect environmental acts (responses)
environmental acts affect individual cognitions and preferences

Individual Beliefs and Individual Action
Most organization theory is purposive, where decision making activity stems from self-interest and is generally attractive as long as the resources being allocated are significant. M and O suggest that rather than steady activity levels, people move in and out of choice situations, resulting in considerable variation among individuals, over time and with respect to the degree and form of attention to decision problems.

In a theory that recognized time as a scarce resource, there will be some hierarchy of beliefs and preferences and some choice situations in terms of attractiveness (i.e., energy is allocated to those situations with the highest expected return); such a view, however, ignores the importance of organizational roles, duties, and standard operating procedures in determining behavior and underestimates the ambiguity of self-interest.

M and O: need theory that acknowledges possibility of attitudes/beliefs without behavioral implications, behavior without basis in individual preferences, and interplay between behavior and the definition of self-interest.

Individual Action and Organizaitonal Choice
Org'l choices usually viewed as derivative of individual action, where a decision process transforms the behavior of individuals into ''organizational action'' M and O: sometimes a loose connection between org'l action and both individual action and decision-making processes; formal decision-making process is sometimes directly connected to the maintenance or change of the org as a social unit, as well as to the accomplishment of collective decisions and substantive results.
M and O: need a theory of org choice that considers the connection between individual and org'l actions as sometimes variable; org action may be determined/contained by external forces (environment) and internal process may be highly time-dependent

Organizational Choice and Environmental Response
typical cycle of choice sees environmental actions as response to choices/actions of the organization. M and O: need less org-centered theory of the environment, where actions and events in environment may sometimes have little to do with what the org does; rather, environmental acts often have to be understood in terms of relationships among events, actors, and structures in the environment; propose a modes response between environmental response and organization decision.

Environmental Response and Individual Beliefs:
Classical theory: two alternative versions of link between environment events/actions and individual cognition:
org decision makers have perfect information about alternatives and consequences; full knowledge of cycle before individual action, so no learning takes place in the system
events are observed, person changes his/her belief based on experience, improves behavior on basis of feedback: rational adaptation
M and O: need modification to introduce ideas about the construction of beliefs in org'l setting

Reality, Intention, and Necessity
Series of possible confusions in our ordinary ideas about org'l events:
assume that what appeared to happen did happen - perceptual ambiguity with organization
assume that what happened was intended to happen - loose fit between individual intentional and org. action as a result of rules, patterns of duty and obligation, and influential exogenous factors
assume that what happened has to happen - chance variation, should look at alternative outcomes which could have occurred.

Conclusion:
M and O: assume that individuals in orgs find themselves in a more complex, less stable, and less understood world than that of standard theories of organizational choice - i.e., a world in which they have only modest control; assume that organizational participants will try to understand what is going on and activate themselves and their resources to solve problems and influence the world as desired.

Three clusters of interrelated theoretical ideas concerning the theory of organizations:
need modified theory of organization choice sensitive to contextual, temporal, and structural (i.e., stability) elements.
need theory of organizational attention that treats allocation of attention as problematic due to structural limits on decision activity, e.g., time, elements of rational choice, and obligation
need theory of learning under conditions of organizaitonal ambiguity