If organizational actions are responses to their environments, then the external perspective on organizational functioning argues strongly that organizational behavior is determined through the design of organizational environments. The focus for attempts to change organizations, it would appear, should be the context of the organizations. By changing the context, the behavior of the organizations can be changed. The profoundly important topic of designing organizational environments is almost completely neglected. The idea of changing organizations by changing their environments is scarcely found in the literature on organizational change.
Among the few social scientists who have not neglected environmental design as a way of affecting organizational behavior are economists. Their basic model presumes that persons seek their self- interest, and therfore, environments must be so structured that in seeking their own interests, individual actors also behave so as to increase social welfare. Such a realization of the importance of the design of context for determining behavior is in refreshing contrast to the fre- quently encountered prescriptions for training, T-groups, or other individually oriented internal change approaches advocated most frequently by organizational behavior authors.
The analogy we would like to make is between our perspective and social psychology. In the study of human behavior, originally time was spent attempting to predict and analyze such behavior using concepts that presumably were related to the internal state of the individual, such as personality, motivation, and attitudes. Growing evidence, however, indicated that persons, regardless of individual differences, would respond similarly to similar environmental conditions. This outcome suggested that behavior could be controlled by its context, through the use of appropriate reinforcers as in operant conditioning or through other physical and social designs. Similarly, the analysis of organizational behavior has focused on internal states of organizations, their climate, leadership, even structures. Yet, if organizations are affected by their social contexts, one might expect that one efficacious way to accomplish organizational change would be through the redesign of that context. This is the position we are advocating.
The appropriate design for organizational environments depends, of course, upon what activities and interests are to be served. Consider the problem of collusion among business firms. Price fixing cases have involved pharmaceutical companies, chemical firms, food processors, and many other industries and firms. Collusion, while a violation of the antitrust laws, is a dominant form of behavior. Even when there is not overt collusion, organizations may attempt to achieve the benefits of collusion—the creation of collective structures of behavior—through joint ventures, trade associations, mergers, director interlocks, and other devices. These interfirm structures may serve the interests of the various participants quite well. Indeed, if the interests were not served, the structures would probably not persist. However, economists have argued that the welfare of all participants and the efficient allocation of resources in an economic system is best served when competition prevails. If we accept the economists’ position, then what can be done to assure competition?
It is clear what can not be done. Legislating against collusion, attempting to legally restrict mergers or joint ventures, is probably not an effective solution. First, such laws must be obeyed to have any impact. Reid (1968) has noted that few mergers are ever prosecuted given the limited resources of the antitrust agencies. Price fixing conspiracies are only occasionally uncovered, and when found out, the companies are frequently permitted to plead no contest, which leaves the burden of proving ultimate guilt on those who would sue for treble damages. Second, laws typically attack one type of presumably anticompetitive practice at a time. This leaves the organization with the option of developing substitutes for the practice now proscribed. Pate (1969) noted that when the antimerger laws were strengthened, more joint ventures were formed. And, Pfeffer (1976) has argued that tightening up restrictions against joint ventures would probably just cause the organizations affected to develop alternative methods for accomplishing interfirm coordination. In many ways, passing a law is a symbolic act like firing a manager. It provides the feeling that something has been done but does not affect the source of the activity.
If behavior is affected by its context, then a more adequate strategy to change behavior would involve redesigning the context. In the present case, we have seen that the tendency for firms to attempt to develop interfirm organizations is most pronounced when concentration is intermediate, a result which helped explain mergers and joint ventures among competitors, director interlocks among competing firms, and the movement of executives. If the policy outcome desired is to diminish this activity, the most effective strategy would involve making the industry less concentrated by creating new competitors either by breaking up existing firms into smaller companies or by encouraging the founding of new enterprises in the same industry.
Or, consider another example. Employment agencies, both private and state services, have frequently assisted employing firms in pursuing discriminatory hiring policies by sending applicants of only one sex or race as requested. There have been some efforts to enforce nondiscrimination regulations by threatening to take away the agency’s license to operate and by actually investigating and fining the offending agencies. If the situation is examined carefully, however, the futility of such efforts can be seen. Employment agencies are numerous and the cost of entry into the business is relatively low. Because there are so many agencies and so many persons typically looking for work, what is scarce are job orders, the positions to be filled given to the agency by an employer. If the agency does not go along with the employer’s request, the employer can simply move the hiring to another of the many agencies available. In the case of the state employment services, legislatures evaluate them according to placements, so again the organizations compete for job orders. In this instance, the behavior is predicted by the context. The employers have power with respect to the agencies and can obtain the behaviors they desire. Applying enforcement against the agencies only puts them in an untenable position but does not resolve their problem. Enforcement directed against the employer organizations is much more likely to change the situation of discriminatory referrals.
We could provide numerous other examples, but the point should be clear. Behavior is a consequence of the context confronting the organization. The design and change of organizational behavior, therefore, can profitably be approached from the perspective of analyzing and designing the context to produce the desired activities. Of course, such a strategy of organizational change is more difficult than attempting to enforce the law against single organizations or preaching values and norms. On the other hand, it is more likely to be effective. If behavior is externally controlled, then the design of the external system of constraints and controls is the place to begin to determine organizational actions and structures.
Source: Pfeffer Jeffrey, Salancik Gerald (2003), The External Control of Organizations: A Resource Dependence Perspective, Stanford Business Books; 1st edition