The first link in the model of environmental effects on organizations is the effect of the environment on the distribution of power and control within the organization. Such an effect is posited in sociological analyses of organizations, most recently in the development of the strategic contingencies theory of intraorganizational power by Hickson and his colleagues (Hickson et al., 1971). Following Crozier (1964), Thompson (1967), and Perrow (1970), the strategic contingencies’ theory argues that the most critical organizational function or the source of the most important organizational uncertainty determines power within the organization. Those subunits most able to cope with the organization’s critical problems acquire power in the organization. Since many of the uncertainties and contingencies faced by organizations are a product of the environment, the environmental context partially determines the distribution of power within the organization. By power, we mean the ability of a subunit to influence organizational decisions in ways that produce outcomes favored by the subunit.
In its simplest form, the strategic contingencies’ theory implies that for instance, when an organization faces a number of lawsuits and legal difficulties, the legal department will gain power and influence over organizational decisions. The theoretically interesting aspects of the development and conferral of power include the extent to which influence extends beyond the immediate functions of the subunit and the extent to which influence is used in the interest of the subunit independent of the goals and interests of the organization as a whole or of others in the organization. Thus, the power of a legal department derived from its handling of the organization’s legal difficulties may. extend beyond the legal function and involve the department in decisions about product design, advertising, and production. Such extensions of influence would, of course, be accompanied by justifications showing the importance of the legal department in such matters. It should be evident that any claims to influence and their accompanying justifications take place in a social context populated by other claimants. How the claims become resolved determines the distribution of control within the organization.
While the processes by which power develops have not been delineated, Hickson and his associates presented a multiplicative model for predicting subunit (departmental) power within organizations. The first element in their model is the ability of the subunit to cope with the organizational uncertainties or contingencies. The authors noted that it was not uncertainty that created power for a subunit, but the ability of the subunit to cope with that uncertainty, to actually solve the problems facing the organization. The second com- ponent of power is the substitutability of the subunit’s capabilities. The subunit’s ability to handle contingencies must be relatively .unique. As Emerson (1962) and Blau (1964) have argued, if a needed resource or performance can be obtained from a large number of sources, the power of any single source is reduced. If the capability for coping with uncertainty were distributed widely throughout the organization, the power of any subunit would be small. The real meaning of Hickson’s second condition is that power does not organize around abundant resources.
The third predictor of subunit power is the pervasiveness or importance of the contingency and uncertainty to the organization. Hickson et al. (1971) suggested that pervasiveness could be measured by noting how connected a given subunit is with other subunits, or in other words, how many other units are affected by its activities. The concept of pervasiveness is similar to the concept of criticality we introduced in Chapter Three. The argument is that a subunit will acquire more power by coping with uncertainties which affect larger areas of organizational activity. This means that power does not organize around unimportant or uncritical resources. It is sometimes difficult to operationalize the concepts of pervasiveness or criticality because what is critical depends, in part, on existing organizational dependencies and arrangements, themselves affected by conditions of scarcity and power. Thus, the definition of what is critical is itself open to a social contest and becomes an important focus in the contest for control.
Critical uncertainties and contingencies can arise from within or from outside the organization. Crozier (1964), for instance, studied a French cigarette factory and found that the maintenance engineers held considerable power in the organization because they controlled the one remaining uncertainty the organization faced—the repair of the machinery. Perrow (1970) provided evidence of power accruing from the handling of external contingencies. In a sample of 12 manufacturing firms, Perrow found that the marketing department was almost invariably the most powerful subunit, which he interpreted by noting the critical role of marketing in an American economy of affluence and consumerism.
One critical concern facing most organizations is that of obtaining sufficient resources. Considering this, it seems reasonable that those who contribute most to maintaining organizational resources would develop power in the organization. Resource exchanges are more directly measurable than some other components of uncertainty or contingency. In a study of the power of academic departments within the University of Illinois, Salancik and Pfeifer (1974) found that departmental power was best predicted by the proportion of outside grant and contract money the department brought into the university, closely followed by the department’s national prestige and graduate program size. In a research-oriented university, the most critical resources are research funding and academic status. Both funding dollars and prestige are acquired from the organization’s environment. Decisions taken at the national level providing physical sciences with more research support (Lodahl and Gordon, 1973) thus affect the ability of physical science departments to acquire grant and contract funds. The ability to acquire funding externally, in turn, leads to their power within universities and hence to their ability to obtain larger shares of internal budget allocations (Pfeifer and Salancik, 1974). The importance of the environment is that it sets the conditions that pro-vide for the organizing of power within organizations.
Individual influence with an organizational subunit has been found to be determined in an analogous fashion. In a study of individual faculty influence within a single department, Salancik, Calder, Rowland, Leblebici) and Conway (1975) found that the national scholarly reputations of faculty members was the primary determinant, :y; What is interesting about this case is that reputation, while mediated externally, is itself unmeasured but is assumed from more visible sun rogate measures of activity, such as publication or attendance at meetings. In the same paper, an analysis of an insurance company showed that the influence of subunit managers was related not only to hierarchical position but also to the direct involvement of the subunit in maintaining the organization’s revenues. Thus, underwriting manf agers were most influential, claims managers next most influential, and managers of functions unrelated to revenues, such as mailroom and payroll managers, were least influential.
The previously cited studies, while empirically and methodologically sophisticated, are all essentially case studies of single organizations or subunits. Pfeffer and Leong (1977) provide more direct evidence for the power-dependence model by analyzing resource alloca- tions to member agencies in 66 United Funds across the United States. Pfeffer and Leong found that allocations to member agencies within the fund were a function of the members’ power, determined by their dependence on the fund and the fund’s dependence on them. For each type of dependence, the meditating agent was the environmental context. Agencies were less dependent on the fund to the extent that they could obtain outside support for their operations. The fund, on the other hand, was more dependent on particular agencies to the extent that those agencies brought legitimacy and visibility through their participation. Again, the ability to obtain resources appears to be an important determinant of subunit (agency) power within a social structure.
In another study, Salancik, Pfeffer, and Kelley (in press) examined the distribution and correlates of influence in 17 organizations deciding to purchase offset printing equipment. The decision to purchase equipment presented different kinds of problems to the organization as a function of the organizational context. From the basic idea of strategic contingencies theory, it was expected that the influence of individuals in making the decision would depend on the nature of problematic uncertainty crewed by the decision context. An equipment purchase can represent either of three decision contexts: a new purchase, a replacement purchase, or an additional purchase. In the case of a new purchase, in which the firm buys the equipment for the first time, information about the product was relatively more uncertain. The prediction was that those with most contact with outside information sources or most involved in acquiring and communicating information would be most influential in the decision to purchase. For replacing equipment, evaluation of competing machinery’was thought to be most critical uncertainty. The organization had expertise with printing equipment, so information acquisition was not likely to be important. But experience and knowledge of the equipment should be important capabilities for making comparisons between the old and the new and thus should be sources of influence in the decision. For firms which were adding another piece of equipment, the determination of a need for more equipment was thought to be the most problematic uncertainty faced by the organization, and it was expected that individuals who did determine need would have the most influence in making the purchase. The analysis of variations in correlates of influence in the organizations confirmed these expectations. The bases of influence varied systematically across the 17 organizations as a function of the decision being concerned with a new, replacement, or additional purchase. Despite the small sample, the fact that the base of influence varied with the nature of the critical uncertainty provides: support for the strategic contingencies theory.
1. Indeterminacy in the Contingency-Vower Relationship
The studies described above show consistent support for the first causal link in our model, the connection between environmental com tingencies and internal power distributions. The link, however, may not be perfectly determined for several reasons. First, the environment does not come knocking on the organization’s door announcing its: critical contingencies. Rather, organizational participants must enact, and interpret their environment and its effects on the organization. Since contingencies determine power and there are benefits to having control within the organization, one can be certain that enactments are not apolitical interpretations of events. As Thompson ( 1967 ) perceptively noted, it is not in the interest of those in power to call attention to changes in contingencies when such changes would diminish their own influence. Not only is it not in their interests, but the very struc- ture of the organization’s information system may prevent changes becoming known. Since information systems are themselves set up on the basis of past contingencies, as described in Chapter Four, change may be inaccurately perceived if perceived at all.
The fact that perception of environmental contingencies is an active process engaged in by organizational members does not mean that any subunit can enact the environment for its benefit and thereby lay claim to more power and resources. Such claims to importance take: place in a social environment of other claimants, who are also likely to be affected by the current power structure of the organization. Pfeffer and Salancik (in press) examined the effect of advocating the use of criteria most favorable to the subunit on resource allocations, controlling for other bases of allocation such as power and objective criteria. These authors found that there was a positive correlation between’ advocating one’s interests and resource allocations, but that this relationship was larger for more powerful subunits. The acceptance of arguments about what are the critical contingencies is itself determined by the distribution of power within the organization.
A second reason for expecting some indeterminacy in the relationship between environmental contingencies and internal power is that power can become institutionalized. By institutionalization we mean the establishment of relatively permanent structures and policies which favor one subunit’s influence. One source of institutionalization of power is the definition of organizational contingencies and problems. Power distributions may be stable because problems from the environment tend to be perceived in ways that define them as similar to past problems. In part, this is a normal tendency for persons to categorize problems in ways that are familiar and tractable. Cyert and March (1963) argued that the search for solutions to problems would initially be localized in those parts of the organization identifying the problem. The cognitive bias leading to the identification of problems as being within one’s specialty (Dearborn and Simon, 1958) and to searching for solutions requiring one’s specialty would create stability in a power structure determined by the requirements for dealing with contingencies. As new problems arise, they would tend to be categorized in familiar ways and solutions created with current capabilities. The more ambiguous the situation and the more uncertain the information and the impact of any given proposal, the more likely power will be institutionalized as a result of the tendency to identify contingencies in familiar terms.
Power also may be institutionalized by the intentional actions of power holders. While in power, a dominant coalition has the ability to formulate constitutions, rules, procedures, and information systems that limit the potential power of others and ensure their own, continuing control. Political leaders frequently use their power first to change a country’s constitution, claiming this is a necessary step, as a , way of ensuring their continued tenure in office. Another source of r institutionalization is the ability to coopt competing interest groups by offering small favors and rewards. The limited access and participation granted may be sufficient to ensure continued support even when new contingencies arise. Other sources of institutionalization include the ability to control and restrict the flow of information, both the flow from the environment and the distribution of information within the organization.
Whatever the source or form of institutionalization, the effect is to extend a subunit’s power beyond its utility to the organization for its survival. Institutionalization is, of course, not absolute, and when confronted with persistent failure, no dominant coalition is permanently secure. The evidence of past failures and problems and the crises which mark turnover in control frequently only represent the surfacing of previously undisclosed problems of current power holders. Indeed, one might suggest that a measure of the extent to which power is institutionalized is the magnitude of the problem that must occur before the organization responds.
The institutionalization of power, a topic not empirically explored, would tend to weaken any direct link between environmental contingencies and intraorganizational power. Thus, there should be an .imperfect relationship between the sources of organizational uncertainty and the distribution of influence.
Source: Pfeffer Jeffrey, Salancik Gerald (2003), The External Control of Organizations: A Resource Dependence Perspective, Stanford Business Books; 1st edition