Awareness of the enormous concentrated power of large organizations has made them targets for many who want to control or use that power. Perrow (1972) pointedly argued that the critical question concerning bureaucracies was not whether or not they would disappear, to be replaced by some other organizational form, but rather, who would control and use the enormous power inherent in these large social organizations. Industrial organizations are not merely economic enti- ties that produce goods cheaply. They are places in which people work. They are polluters of the environment, sources of military and economic power, creators and distributors of wealth, and places in which the statuses of persons become defined through work.
As the impact of organizations on other social actors becomes more noticeable, there is evidence that we are moving from a concern With organizational efficiency to a concern with organizational effectiveness. Instead of asking how much is beine produced at what cost, the question increasingly is: What is being produced? The demands placed on organizations have become greater and more insistent. The legitimacy of social organizations, always problematic (Parsons, 1956), has become even more so. That different groups and organizations have different criteria for evaluating an organization, and consequently make different demands of it, makes the resolution of these conflicts not amenableto maximization or other simple computations. When there are conflicts about outputs and legitimacy, the conflicts are not resolved by producing the same output with lower cost.
There are empirical indications of the increasing interdependence of organizational action. For instance, the General Electric Company experienced a strike lasting 101 days during 1969-1970. This strike did not involve just General Electric and the unions. One of the factors enabling workers to withstand the personal financial impact of the strike was their ability to collect various forms of relief from the states and the federal government. The strikers collected an estimated $30 million of publicly financed aid from food stamps, welfare checks, and unemployment compensation (Wall Street Journal, July 14, 1971:1). To help link the strikers to these sources of support, the AFL-CIO developed a nationwide network of 180 full-time community service representatives and had the local United Fund” organizations pay their salaries. The United Funds agreed because the unions were important in their own annual fund drives. The same unions, because of their .importance in political campaigns, were able to thwart attempts in Congress to exclude strikers from relief eligibility. The only real opposition to the strike came from the states paying the bill. A long strike against General Motors cost the state of Michigan $25 million in added public assistance and $100 million in lost tax revenues. Thus, in current SQCiety, dispute hptiveen private interests can erupt into national con- flicts, and decisions made by centralized decision bodies far removed from the questions at hand can help to determine the final outcome.
The density and interconnectedness of interorganizational fields today derives from adaptations to past problems. In a world characterized by competition for scarce resources, the predominant adaptations were developments to achieve control over the availability of resources. Technologies were developed to produce foodstuffs to improve the yield, and then to distribute and store them efficiently to guard against periods of unfavorable weather. The developments that provided more control over production and availability themselves created new interdependencies. The efficiency of production deriving from the use of chemical fertilizers and herbicides and insecticides made the agricultural industry dependent on the chemical firms. Furthermore, as the fertilizers drain into the water supply, further dependencies are created with suppliers of drinking water and with those who fish the affected waterways. As these interdependencies become known, still other organizations are created to regulate and adjudicate the conflicts among the contesting interests.
In the current dense environment, efficiencies are no longer the solution to organizational problems, for the efficiencies have created interdependencies with other organizations, and these interdependencies are the problem. The dominant problems of the organization have become managing its exchanges and its relationships with the diverse interests affected by its actions. Because of the increasing interconnectedness of organizations, interorganizational effects axe mediated more by regulation and political negotiation than by impersonal market forces. The increasing density of relationships among diverse interests has led to less willingness to rely on unconstrained market forces. Negotiation, political strategies, the management of the organization’s institutional relationships—these have all become more important.
Source: Pfeffer Jeffrey, Salancik Gerald (2003), The External Control of Organizations: A Resource Dependence Perspective, Stanford Business Books; 1st edition