When it is recognized that actual decisions must take place in some such institutional setting, it can be seen that the “correctness” of any particular decision may be judged from two different standpoints. In the broader sense it is “correct” if it is consistent with the general social value scale80—if its consequences are socially desirable. In the narrower sense, it is “correct” if it is consistent with the frame of reference that has been organizationally assigned to the decider.
This distinction is well illustrated in the literature of what is called “welfare economics.”81 In a private economy, the institution of private property permits a considerable degree of decentralization in decisionmaking. It is assumed that each individual will make his decisions in terms of the maximization of his “profit” or “utility.” A decision is “correct” if it achieves this maximization. But the welfare economist evaluates decisions from another standpoint. He wants to know the extent to which the maximization of personal utility is compatible with the maximization of social value. When choice is viewed from within the individual’s environment, advertising is explainable as a technique for increasing profit. Viewing choice from the social viewpoint, the welfare economist questions the social value of energies expended on advertising.82
This distinction between general social value and organizational value leads, in turn, to a third notion of correctness—the “correctness” of the organizational environment itself. That is, the social value of the organiza- tional structure may be determined by noting the degree of coincidence between the organizationally correct and the socially correct decisions.
A private economy, for instance, is commonly justified on the ground that a high degree of coincidence exists between the two kinds of correctness. When it is recognized that under certain circumstances—conditions of monopoly, for instance—a considerable discrepancy arises, changes are demanded in the environment of decision (trust-busting, rate regulation, or the like) that will eliminate or reduce the discrepancies.
1. Meaning of the Phrase “Social Value”
The term “social value,” as used here, is best understood in terms of a hierarchy of organizations, or social institutions. A society establishes certain very general values through its basic institutional structure, and attempts to bring about some conformity between these general values and the organizational values of the various groups that exist within it This has already been illustrated in the previous paragraph. In the same way, any large organization—a business firm or a government—seeks to bring the organizational goals of its parts—departments, bureaus, and so forth—into conformity with the objectives of the organization as a whole.
What is meant by “social value” here is the objectives of some larger organization or social structure in relation to the “organizational values” of its components. Viewed from the standpoint of the legislative body or the citizenry, in so far as these have any formulated objectives, the objectives of the Department of the Interior or the United States Steel Corporation are organizational objectives. Viewed from the standpoint of the Secretary of the Interior or the president of the steel company, the objectives of his agency are the “social objectives” to which the organizational objectives of the component divisions and bureaus must conform.
Since it is difficult to establish subsidiary objectives that will always be consistent with the general objective, the individual who is a member of the subsidiary organization will sometimes make decisions that are consistent with the partial objective of his particular organizational component, but inconsistent with the broader goal of the organization as a whole. It is this problem—of reconciling the “role-taking” that the organization imposes on individuals with the achievement of goals transcending these particular roles—that provides the principal subject-matter of this chapter.
2. An Example of the Conflict
By way of illustration, let us consider the decision-making process in a cies: the State Relief Administration cared for employable unemployed persons and their families; the county welfare departments cared for unemployable unemployed persons. The division of function was largely historical in origin and was not supported by any very cogent reasons; but that is beside the point.
From the standpoint of the state as a whole, the objective of welfare administration was to care for the unemployed and to guarantee them a certain minimum standard of living. It was desirable, moreover, to accomplish this objective as efficiently as possible. That is, once the rules of eligibility had been established and standards for the size of family budgets determined, the administrative task was to see that eligible persons, and only eligible persons, qualified for relief; that their budgets conformed to the standards authorized; and that these ends were attained with the least possible expenditure of funds. The State Relief Administration was presumably trying to accomplish this objective with its area of activity limited to employable persons, while the county welfare departments were aiming at the same objective with their areas of activity limited to unemployable persons.
But if these objectives are viewed organizationally, a competitive ele- ment immediately enters into the decisions of the state and county administrative officials, respectively. One way in which the state agency could increase its efficiency (measured in terms of its own limited objective, and not in terms of the objective of the state as a whole) was to make certain that any unemployable persons on its rolls were discovered and transferred to the county. One way in which the county agency could increase its efficiency (measured, again, in terms of the limited organizational objective) was to make certain that any employable persons on its rolls were discovered and transferred to the state.
As a result, each organization sought the relative maximization of its own objective, and a great deal of time, effort, and money was spent by these agencies in attempting to shift clients from one to the other in borderline cases. This competitive activity is entirely understandable from the point of view of the organizational objectives of each organization, but it contributed nothing toward the maximization of the broader social value.
It should be noted, however, that there is nothing inevitable about this development. Decisions are not made by “organizations” but by human beings behaving as members of organizations. There is no logical necessity that a member of an organization shall make his decisions in terms of values which are organizationally limited. How can this phenomenon be explained? To understand it, we must make clear first the distinction between men’s personal and organizational decisions.
3. Impersonality of Organization Decisions
Barnard has very clearly pointed out that the decisions which a person makes as a member of an organization are quite distinct from his personal decisions:
The system, then, to which we give the name “organization” is a system composed of the activities of human beings. What makes these activities a system is that the efforts of different persons are here coordinated. For this reason their significant aspects are not personal. They are deter- mined by the system either as to manner, or degree, or time. Most of the efforts in cooperative systems are easily seen to be impersonal. For example, a clerk writing on a report form for a corporation is obviously doing something at a place, on a form, and about a subject that clearly never could engage his strictly personal interest. Hence, when we say that we are concerned with a system of coordinated human efforts, we mean that although persons are agents of the action, the action is not personal in the aspect important for the study of cooperative systems.5
At a later point, Barnard shows clearly why this is so. Personal consid- erations determine whether a person will participate in an organization; but, if he decides to participate, they will not determine the content of his organizational behavior:
Every effort that is a constituent of organization, that is, every coordinated cooperative effort, may involve two acts of decision. The first is the . decision of the person affected as to whether or not he will contribute this effort as a matter of personal choice. It is a detail of the process of repeated personal decisions that determine whether or not the individual will be or will continue to be a contributor to the organization…. This act of decision is outside the system of efforts constituting the organization .. . although it is, as we have seen, a subject for organized attention.
The second type of decision has no direct or specific relation to personal results, but views the effort concerning which decision is to be made non- personally from the viewpoint of its organization effect and of its relation to organization purpose. This second act of decision is often made in a direct sense by individuals, but it is impersonal and organizational in its intent and effect. Very often it is also organizational in its process, as for example in legislatures, or when boards or committees determine action. The act of decision is a part of the organization itself.
This distinction between the two types of decision is frequently rec- ognized in ordinary affairs. We very often say or hear sentences similar to this: “If this were my business, I think I would decide the question this way—but it is not my personal affair”; or, “I think the situation requires such and such an answer—but I am not in a position to determine what ought to be done”; or “The decision should be made by someone else.” This is in effect a restatement, with a different emphasis, of the suggestions in Chapter VII that a sort of dual personality is required of individuals contributing to organization action—the private personality, and the organization personality.6
Once the system of values which is to govern an administrative choice has been specified, there is one and only one “best” decision, and this decision is determined by the organizational values and situation, and not by the personal motives of the member of the organization who makes the decision. Within the area of discretion, once an individual has decided, on the basis of his personal motives, to recognize the organizational objectives, his further behavior is determined not by personal motives, but by the demands of efficiency.
There is a limit, however, to this proposition. There is an area of acceptance within which the individual will behave “organizationally.” When the organizational demands fall outside this area, personal motives reassert themselves, and the organization, to that extent, ceases to exist.
When a person is behaving impersonally, then, an organizational value scale is substituted for his personal value scale as the criterion of “correctness” in his decisions. Hence, his decision may be considered as a variable, depending for its specific character upon the particular organizational value scale which governs it.
We still do not have an answer to the question of why an individual employs one particular organizational value scale as his criterion of choice, rather than one or more of all the innumerable other scales he might use. We can now turn our attention to this question.
Source: Simon Herbert A. (1997), Administrative Behavior, Free Press; Subsequent edition.