External Perspective of Organizations: Basic Concepts for a Contextual Perspective

We have spent the first part of this chapter discussing the importance of a contextual perspective for understanding organizations and for making them more effective. In the remainder of this chapter, we will briefly describe a number of key concepts that develop this perspective. These concepts will assist in bringing coherence to the large body of work on organization and environment and will provide us with the tools for systematically understanding the, effect of environment on organizations and the effect of organizations on environments.

1. Organizational Effectiveness

The first concept is organizational effectiveness, discussed extensively in Chapter Two. The effectiveness of an organization is its ability to create acceptable outcomes and actions. It is important to avoid confusing organizational effectiveness with organizational efficiency, a confusion that is both widespread and more a real than a semantic problem. The difference between the two concepts is at the heart of the external versus internal perspective on organizations. Organizational effectiveness is an external standard of how well an organization is meeting the demands of the various groups and organizations that are concerned with its activities. When the automobile as a mode of transportation is questioned by consumers and governments, this is an issue of the organizationaLeffectiveness of automobile manufacturers. The most important aspect of this concept of organizational effectiveness is that the acceptability of the organization and its activities is ultimately judged by those outside the organization. As we shall see, this does, not imply that the organization is at the mercy of outsiders. The organization can and does manipulate, influence, and create acceptability for itself and its activities.

The effectiveness of an organization is a sociopolitical question. It may have a basis in economic considerations, as when an individual declines purchase of a product because it is priced too high. The concept is not restricted, however, to decisions that are economically motivated. Rather, it reflects both an assessment of the usefulness of what is being done and of the resources that are being consumed by the organization.

Organizational efficiency is an internal standard of performance. The question whether what is being done should be done is not posed, but only how well is it being done. Efficiency is measured by the ratio of resources utilized to output produced. Efficiency is relatively value free and independent of the particular criteria used to evaluate input and output. Because efficiency involves doing better what the organization is currently doing, external pressures on the organization are often defined internally as requests for greater efficiency. By not questioning the organization’s basic activities and operations, the structure of control and influence within the organization can more easily be maintained. Moreover, efficiency is a managerial problem which is perceived as being inherently more tractable.                                                                                  ‘

The difference between efficiency and effectiveness can be illustrated easily. In the late 1960s, Governor Ronald Reagan of California curtailed the amount of money going to the state university system. He was concerned that state university campuses, particularly Berkeley, were indoctrinating students in radical, left-wing ideas. In response to these political pressures and to forestall further budget cuts, the administrators attempted to demonstrate that they were educating students at an ever lower cost per student. Not surprisingly, this argument had little impact on the governor; indeed, it missed the point of his criticism. Producing revolutionaries at lower cost was not what the governor wanted; rather, he questioned whether the universities produced anything that justified giving them state funds.

2. Organizational Environment

The external basis for judging organizational effectiveness makes the concept of environment important. The concept of environment, however, is elusive. In one sense, the environment includes every event in the world which has any effect on the activities or outcomes of the organization. Primary schools are a part of other organizations’ environment. Thus, when primary schools fail to teach reading and grammar properly, some organizations may be affected more than others. An organization which does not require people to read as part of their task may be minimally affected. Other organizations may feel profound effects, as in the case of universities which found themselves spending more and more resources teaching basic reading, grammar, and mathematics skills. Even more affected were publishers, who found it necessary to rewrite many of their textbooks at a seventh- or eighth-grade reading level. The Association of American Publishers had to revise the pamphlet “How to Get the Most Out of Your Textbook because the college students for whom it was written could not understand it.

Although one can conceive of an organization’s environment as encompassing every event that affects it, doing so would not be useful for understanding how the organization responds. Every event con- fronting an organization does not necessarily affect it A baking company which has a large inventory of sugar will be less affected by changes in the price of sugar than one which must purchase supplies on the open market continually. Thus, one reason why elements of an environment may have little impact is that the organization is isolated or buffered from them. A second reason why organizations do not respond to every event in the environment is that they do not notice every event, nor are all occurrences important enough to require a response. The term “loosely coupled” has been used to denote the relationship between elements in a social system, such as those between organizations. The effects of organizations on one another are frequently filtered and imperfect (March and Olsen, 1975; Weick, 1976). Loose-coupling is an important safety device for organizational survival. If organizational actions were completely determined by every changing event, organizations would constantly confront potential disaster and need to monitor every change while continually modifying themselves. The fact that environmental impacts are felt only imperfectly provides the organization with some discretion, as well as the, capability to act across time horizons longer than the time it takes for an environment to change.

Perhaps one of the most important influences on an organizations response to its environment is the organization itself. Organizational environments are not given realities; they are created through a process of attention and interpretation. Organizations have information systems for gathering, screening, selecting, and retaming information. By the existence of a department or a position, the organization will attend to some aspects of its environment rather than others. Organizations establish subunits to screen out information and protect the internal operations from external influences. Organizational perception and knowledge of the environment is also affected because individuals who attend to the information occupy certain positions in the organization and tend to define the information as a function of their position. If the complaint department is located in the sales divi- sion, the flow of information may be interpreted as problems with the marketing and promotion of the product. If it is located in the public relations department, the complaints may be seen as a problem in corporate image. If the function were located in the production department, the complaints might be interpreted as problems of quality control or product design. Since there is no way of knowing about the environment except bv interpreting ambiguous events, it is important to understand how organizations come to construct perceptions of reality.                                                                          ‘ ‘

Organizational information systems offer insight to those seeking to analyze and diagnose organizations. Information which is not collected or available is not likely to be used in decision making, and information which is heavily represented in the organizations record keeping is likely to emphatically shape decisions. Some organizations, such as Sears, collect information on a regular basis about worker opinions and morale, while others do not. It is inevitable that those organizations not collecting such information will make decisions that do not take those factors into account. Information systems both determine- what will be considered in organizational choice and also provide information about what the organization considers important. The increasing collection of student evaluations of courses and instructors in universities reflects the growing power of students with respect to these organizations and the organizational response of attending more to them. While some would argue that this is a perfect illustration of information that is not used, such is probably not the case. While no definitive studies have been done, it seems clear that the availability of such quantified, concrete information will inevitably intrude to affect the decision-maldng process and outcomes. Information, regardless of its actual validity, comes to take on an importance and meaning just because of its collection and availability.

The kind of information an organization has about its envừon- ment will also vary with its connections to the environment. Organizational members serve on boards of dnectors, commissions, and are members of clubs and various other organizations. By sending representatives to governmental hearings or investigatory panels, organizations learn about policies that may affect then operations. Research personnel in industry maintain regular contacts with university research projects that may result in knowledge vital to then interests. In one instance, the director of research for the Petroleum Chemicals Research Division of the Ethyl Corporation, a major producer of lead additives for gasoline, made a personal visit to a university research group one month after it had received a large grant to study the impact of lead in the environment (Salancik and Lamont, 1974). Ethyl had learned of the project from contacts in the government. As the project’s major objective was to determine the impact of lead on the environment so that policies regarding the manufacture, sale, and distribution of lead might be assessed, the project was of obvious concern to Ethyl.

How an organization learns about its environment, how it attends to the environment, and how it selects and processes information to give meaning to its environment are all important aspects of how the context of an organization affects its actions.                                                                          —

3. Constraints

A thừd concept important for understanding organization-environment relationships is constraint. Actions can be said to be constrained whenever one response to a given situation is more probable than any other response to the situation, regardless of the actor responding. That is, constraint is present whenever responses to a situation are not random. A person driving down a city street will tend to drive between 25 and 35 miles per hour. The same person on a state or federal highway will tend to drive between 50 and 65 miles per hour. Whatever the reason, thé fact that behavior—of drivers, for example—is not random or, in other words, is somewhat predictable suggests that something is constraining behavior in these situations.

Constraints on behavior are often considered to be undesirable, restricting creativity and adaptation. However, in most cases action is not possible without constraints, which can facilitate the choice and decision process. Consider an undergraduate student attempting to decide on a course of study for a given semester. At a large university, there may be hundreds of courses, and if there were no constraint, literally millions of possible program combinations could be con- structed. Deciding among these millions of programs would, of course, be difficult and time consuming, if not impossible. Fortunately, program choices are constrained. First, there may be a limit on the number of courses a student is allowed to take, and then, there is the constraint of not being able to be in two places at the same time. A third constraint is that some courses are defined as being appropriate for certain categories of student, such as graduate courses or freshman courses, while others have necessary prerequisites that limit their being chosen. Further constraints are added by general university requirements, and then, requirernents particular to the student’s own department and chosen degree” program. Thus, out of millions of possible programs of study, only a few options will be feasible, permitted by all the various constraints. Instead of facing a difficult informationprocessing task, the student need choose only among a very limited set of alternatives.

Behavior is almost inevitably constrained—by physical realities, by social influence, by information and cognitive capacity, as well as by personal preferences. And, in many cases, constraints can be manipulated to promote certain behaviors. In the study of human behavior, when an experimenter designs an experimental situation, he presupposes that he has imposed enough constraints on the situation so that most individuals will behave as he predicts. In a similar fashion, the behavior of larger social units, such as groups and formal organiza- tions, is generally constrained by the interests of others—governments, consumers, unions, competitors, etc.

The concept of constraint explains why individuals account for rel- atively little variance in the performance and activities of organiza- tionaTsystems. Every individual operates under constraint. Even leaders are not free from it. In a recent study of leadership behavior in an insurance company, it was found that the extent to which supervisors were able to do as their workers wanted was inversely related to the extent to which the supervisors were constrained by other departments ( Salancik et al., 1975 ). Supervisors forced to coordinate and meet the demands of other departments had to behave in ways necessary to meet those demands; they did not have the opportunity to satisfy the desires of their subordinates. The point is that behaviors are frequently constrained by situational contingencies and the individual’s effect is relatively small.

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

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