The field of organization theory has been influenced by social scientists using a systems perspective of human behaviour since the mid-1960s. Systems theories are also known as management sciences. This perspective is characterized by the use of quantitative tools and computer models to understand the complex relationships among organizational and contextual variables and in some ways has close ties with the scientific management approach of Frederick Winslow Taylor. However, social systems and management systems are also embraced within the systems approach.
Within systems theory, organizations are assumed to be rational institu-tions. People in positions of authority set goals and the key questions for them are how best to design and manage an organization so that it achieves its purpose. A system is an organized collection of parts interacting in certain ways to achieve certain goals. Any change in any part of the system will pro-duce different effects. Interconnected aspects of systems studied by analysts include the inputs, processes, outputs and feedback loops as well as the dynamic environment in which the system operates. Since the environment is constantly changing, the interactions within a system are inherently complex and the cause and effect relationships are difficult to trace.
A leading figure of systems theory, Norbert Weiner (1948) coined the phrase cybernetics to describe a multidisciplinary study of the structures and functions of control in animals and machines. The first comprehensive theoretical frame-works based on principles of organization of living systems appeared.
The first practical application of systems thinking in the 1950s and 1960s took place in the fields of engineering and management. Key thinkers include Daniel Katz and Robert Kahn (1966), who introduced the notion of organiza-tions as open systems, i.e. systems that include organizaorganiza-tions and their environ-ment. This is in contrast to the classical theorists who considered organizations as rational but closed systems. Since organizations were not thought to be subject to their external environment, it was considered appropriate to focus on functions such as planning and controlling. In contrast, Katz and Kahn propose that the system itself must adapt in order to survive and that managers must recognize that all organizational actions affect their environments.
From organizational economics comes the agency theory definition of managers and employees as ‘agents’ of owners (‘principals’) who must delegate some authority to agents. However, the assumption is made that
agents will not always act in the best interest of principals since they will put their own interest first. Incentives and hierarchy are used to ensure that the agent continues to operate in the interests of the principal. The theory of property rights is especially relevant with regard to intellectual property in these days of increased outsourcing and devolution of authority. Contracts are seen as a key means of securing compliance, with economists playing down the value of relying on ethical behaviour in what is seen to be a con-text of opportunism by individuals. The personal preferences of agents are restrained by systems of formal rules, policies, authority and norms of rational behaviour.
Complexity
In the 1960s and 1970s models of self-organizing systems, based on the concept of self-organization, started to appear. Drawing on theories emerg-ing from ecology, game theory, artificial intelligence, economics, social science and cognitive science, the study of complex adaptive systems was given impetus by the new mathematics of complexity. This was a key watershed because it offered a rigorous mathematics of pattern.
Examples of complex adaptive systems include the weather system, the Internet, businesses, the immune system, the human body etc. Their properties are that they are made up of many agents, each of which has its own internal structure. There are a variety of different agents interacting with one another and agents’ actions depend on the actions of other agents. They are simultaneously influencing and being influenced by their context – they are context-sensitive and context-creating.
Linear systems, whose effect is proportionate to the cause or input, can be analysed by a sum of their component parts. Their system dynamics are rela-tively simple and change is gradual and incremental. In non-linear systems, the effect or response is disproportionate to the cause or input (i.e. small change can have a large effect). The whole is not equal to the sum of the parts and the system dynamics generate very complicated behaviour, e.g. deterministic chaos. Change can be precipitous and revolutionary.
Agents receive and process information through feedback loops, making sense of the world as they act in it. Their sense-making is partly shared and partly unique. Agents are capable of changing the meaning they make of themselves and their world and so are capable of learning. Each agent is part of a local web of interaction, but all networks are intersecting, interconnected and nested one inside another. Agents can have multiple, even conflicting strategies which are capable of change and adaptation.
Applications of complexity science include creating superior short-term forecasting for financial markets and production and inventory scheduling.
Complexity thinking is also influential in organizational theory, stimulating rethinking about organizations, management, change, leadership and strategy.
It is also underpinning an inspirational/spiritual approach, with complexity
science being used as a source of inspiration for more empowered forms of leadership.
Power, politics and organizational culture
In these schools of thought, organizations are viewed as complex systems of individuals and coalitions, each having its own interests and beliefs and needs. Coalitions typically emerge because organizations consist of small, interdependent units of different levels of importance though they can also consist of people who develop a shared interest even though they are not from the same unit. The ‘smokers group’ is an obvious example. However, power is also considered a structural phenomenon, according to Jeffrey Pfeffer (1981a), with the people whose units have responsibility for critical tasks having a major advantage in power relations.
The coalitions continuously compete with one another for scarce resources and conflict is an inherent part of organizational life. Since coalitions are gener-ally transitory, producing shifts in the balance of power, different sets of goals take priority. Often the conflict is over ‘turf’ issues and centres on the ‘rights’ of particular groups to exercise control over their territory and status. While organ-izational goals provide legitimacy for resource allocation decisions, these tend to emerge through manoeuvring among coalitions. The exercise of power is there-fore not seen as purely rational, i.e. focused on achieving organizational goals, causing theorists of the power school to consider assumptions of the systems and structural schools as incomplete.
Power is defined as ‘the ability to get things done the way one wants them done; it is the latent ability to influence people’ (Shafritz and Ott, 2001).
Power is seen as a relative phenomenon. One of the leading power theorists, John Kotter (1985), argues that there is an ever-increasing gap between the power one needs to do one’s job and the power that automatically comes with the job, i.e. that power and authority are not necessarily the same thing.
Power and politics flow in all directions – not just down the hierarchy.
Influence is the primary tool in dealing with competition and conflicts.
Other forms of power include:
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Control over scarce resources•
A central place in a powerful coalition•
Easy access to people who are perceived to be powerful•
Ability to ‘work the organizational rules’•
Credibility.French and Raven (1959) identify five sources of social power:
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Legitimate power•
Referent power•
Expert power•
Reward power•
The perception of coercive power.Considered from the perspective of the person who is on the receiving end of the use of power, these different forms of power have the ability to both attract and cause resistance. Reward power, for instance, is likely to attract the recipient and cause minimum resistance.
Unlike the systems and structural schools, these schools assume that many organizational behaviours are predetermined by patterns of basic assumptions that are held by members of the organization. These patterns of behaviour persist over time and are underpinned by norms, values and beliefs that repre-sent the organization’s culture. A strong organizational culture controls indi-vidual behaviour and may block an organization’s ability to adapt to changing market conditions.
Organizational symbolism is a key part of the organizational culture perspective. The organizational culture school uses qualitative research methods rather than the quantitative methods of the systems theorists to explore aspects of culture. These methods are considered more appropriate to examining the symbolism people use to reduce ambiguity and gain a sense of purpose in uncertain times. In this perspective, rational problem-solving and decision-making processes are undercut by ambiguity.
Most books written from the culture perspective have been produced in the past 20 years. Leading thinkers of this school include Bolman and Deal (1997), who describe the symbolic frame for looking at organizational cultures as exploring meaning, or the interpretation of what is happening in organiza-tions. Meanings are described by Berger and Luckmann (1966) as ‘socially constructed realities’, or perception reality. Meaning, i.e. perceived reality, is created by people in organizations through the organizational culture and is considered more important than what is actually happening.
In their seminal work In Search of Excellence (1982), Tom Peters and Robert Waterman Jr explored the cultures of ‘excellent’ corporations. They identified eight attributes of excellence which still influence management thinking, despite the relative failure of some of the companies studied to maintain their competitive position:
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A bias for action•
Close to the customer•
Autonomy and entrepreneurship•
Productivity through people•
Hands-on, value-driven•
Stick to the knitting•
Simple form, lean staff•
Simultaneous loose–tight properties, in which firm central direction and individual autonomy happily co-exist.Other key contributors to this perspective include Gareth Morgan with Images of Organization (1986) and Edgar Schein with Organizational Culture and Leadership (1985). Total quality management (TQM) has kept organizational culture in the forefront of management attention. Other key ideas arising from this perspective include the gendering of organizational
theory, how organizations, as opposed to individuals, learn, how individuals are acculturated and the links between organizational climate, culture and effectiveness.