A Resource Dependence Perspective

To survive, organizations require resources. Typically, acquiring resources means the organization must interact with others who control those resources. In that sense, organizations depend on their environments. Because the organization does not control the resources it needs, resource acquisition may be problematic and uncertain. Others who control resources may be undependable, particularly when resources are scarce. Organizations transact with others for necessary resources, and control over resources provides others with power over the organization. Survival of the organization is partially explained by the ability to cope with environmental contingencies; negotiating exchanges to ensure the continuation of needed resources is the focus of much organizational action.

Organizations themselves are the interlocking of the behaviors of the various participants that comprise the organization. Activities and behaviors, not social actors, are organized into structures. Because social actors can have some activities included in different structures, inclusion in an organization is typically partial. In this context, orgam- zational boundaries can be defined by the organization’s control over the actions of participants relative to the control of other social entities over these same activities. Control is the ability to initiate or terminate actions at one s discretion. An organization’s control over activities is never absolute because there are always competing claims for the control of given activities. Attempts are made, however, to stabilize activities by institutionalizing exchanges into formal roles and using other control mechanisms. The set of interlocked activities controlled by the organization constitutes the organization.

The organization’s most important sources of control to achieve interlocked structures of behavior are the ability to empower individuals to act on its behalf and to regulate the use, access, and allocation of organizationally generated resources.

Organizations are coalitions of varying interests. Participants wni and frequently do, have incompatible preferences and goals. The question of whose interests are to prevail in organizational actions is crucial to determining those actions. Power is overlooked too frequently by attending to issues of effectiveness and efficiency. Effectiveness and organizational performance can be evaluated only by asking whose interests are being served.

Organizations, in addition to being coalitions of interests, are markets in which influence and control are transacted. When an organization is created, activities and outcome potential are created. Organizations, or the energy represented in organizations, are resources. It is in the interests of those who require resources to attempt to control and influence the organization. Participants attempt to exchange their own resources, their performances, for more control over the collective effort, and then, they use that control to initiate actions for their own interests. In organizations as in other social systems, power organizes around critical and scarce resources. To the extent participants furnish resources that are more critical and scarce, they obtain more control over the organization. Of course, the determination of what is critical and scarce is itself open to change and definition. Power is, therefore, determined by the definition of social reality created by participants as well as by their control over resources.

Participants differ in the extent to which the organization controls their activities. Some participants provide resources but are not tightly bound to the organization. These actors, which may be other organizations, groups, or individuals, constitute the social environment or context of the organization. To the extent that these actors control critical resources and certain other conditions are met, they are in a position to influence the actions of organizations. In this sense, we can speak of the social control of organizations. The conditions that facilitate this control of the organization include:

  1. The possession of some resource by the social actor
  2. The importance of the resource to the focal organization; its criticality for the organization’s activities and survival
  3. The inability of the focal organization to obtain the resource elsewhere
  4. The visibility of the behavior or activity being controlled
  5. The social actor’s discretion in the allocation, access, and use of the critical resource
  6. The focal organization’s discretion and capability to take the desired action
  7. The focal organization’s lack of control over resource critical to the social actor
  8. The ability of the social actor to make its preferences known to the focal organization

Each of these conditions can be altered by the parties to the relationship. The focal organization can attempt to avoid these conditions, and thereby enhance its discretion. The social actor seeking control over the organization can act to increase the conditions, and thereby increase its control over the organization. Organizations interacting with one another are involved in a dynamic sequence of actions and reactions leading to variations in control and discretion. Strategies of achieving control or discretion and sequences of interactions have rarely been examined.

The study of Israeli managers and their attitudes toward compliance with governmental demands, and the examination of the response of United States defense contractors to affirmative action pressures both support the idea that organizations are externally controlled. Organizational responses were predicted from the situation of resource interdependence confronting the various organizations.

Organizational environments, however, are not objective realities. Environments become known through a process of enactment in which perceptions, attention, and interpretation come to define the context for the organization. Enactments of dependencies, contingencies, and external demands are in part determined by organizational structures, information systems, and the distribution of power and control within organizations.

Assessments which are inconsistent with the actual potency and demands of various participants may be made by organizations. The cognitive and perceptual processes of individuals and the design of most information systems focus attention on familiar historical events,, most frequently events that have occurred within the organization. Coupled with a tendency to attribute organizational outcomes to the actions of individuals within the organization, these characteristics of information processing tend to lead most organizations to look within their own domains for the definition and solution of problems. In addition, the contest for control within the organization intervenes to affect the enactment of organizational environments. Since coping with critical contingencies is an important determinant of influence, subunits will seek to enact environments to favor their position. Adjustments to environmental demands follow when visible problems erode the position of those in the dominant coalition. Such adjustments are slowed by the ability of those in power to institutionalize their control over the organization. When the organization’s conceptions and responses to environmental constraints become too inappropriate, resource acquisition becomes increasingly difficult. We suggested in Chapter Four a systematic procedure for assessing organizational environments and for evaluating the potential consequences of various organizational activities.

The fact of competing demands, even if correctly  perceived, makes the management of organizations difficult. It is clearly easier to satisfy a single criterion, or a mutually compatible set of criteria, than to attempt to meet the conflicting demands of a variety of participants. Compliance to demands is not a satisfactory answer, since compliance with some demands must mean noncompliance with others. Organizations require some discretion to adjust to contingencies as they develop. If behaviors are already completely controlled, future adjustments are more difficult. For this reason, organizations attempt to avoid influence and constraint by restricting the flow of information about them and their activities, denying the legitimacy of demands made upon them, diversifying their dependencies, and manipulating information to increase their own legitimacy.

At the same time organizations seek to avoid being controlled, they seek stability and certainty in their own resource exchanges. Indeed, it is usually in the interests of all participants to stabilize organizational resource exchanges and ensure the organization’s survival. The organization, thus, confronts a dilemma. On the one hand, future adaptation requires the ability to change and the discretion to modify actions. On the other hand, the requirements for certainty and stability necessitate the development of interorganizational structures of coordinated behaviors—interorganizational organizations. The price for inclusion in any collective structure is the loss of discretion and control over one’s activities. Ironically, to gain some control over the activities of another organization, the focal organization must surrender some of its own autonomy.

Organizations seek to avoid dependencies and external control and, at the same time, to shape their own contexts and retain their autonomy for independent action. The dilemma between the maintenance of discretion and the reduction of uncertainty leads to the performance of contradictory activities. The dilemma of autonomy versus certainty has been noted by Thompson and McEwen (1958) and is an important characteristic of organizational actions taken with respect to the environment. The demands for certainty and the quest for discretion and autonomy lead to the various actions we have described- merger, joint ventures, cooptation, growth, political involvement, the restriction on the distribution of information. All these activities can be understood from the same resource dependence framework.

To say that context afiects organizational actions is to say little. The question is how context affects organizations, and the answer requires specifying some process for environmental effects. One model linking organizational environments with organizational actions suggests that environmental contingencies affect the distribution of power and control in the organization. In turn, power affects succession to leadership positions in the organization, and organizational leaders— the members of the dominant coalition—shape organizational actions and structures. This model suggests that executive succession both reflects environmental contingencies and helps the organization manage its interdependence with other social actors.

We have attempted to illustrate how a large number of phenomena can be understood within the resource dependence perspective. The empirical studies reviewed clearly only begins to investigate the various themes and ideas developed within this perspective. Many implications of our model of external control remain unexamined—the use of secrecy to avoid influence and reduce conflict, the limitation of discretion to avoid external control, the attempt to define for elements in the environment Lbeir demands and satisfaction, are only a few examples. It is clear that the environment, the context of the organization, is more important than many writers have implied by restricting their attention to the effects of uncertainty on decentralized decision making.

Source: Pfeffer Jeffrey, Salancik Gerald (2003), The External Control of Organizations: A Resource Dependence Perspective, Stanford Business Books; 1st edition

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