Systemizing the world

1. First, the word: Vilfredo Pareto and Talcott Parsons

It was the emergence of a common discourse of the organization as a social system that settled matters in favor of efficiency rather than a discussion of domination. The seminal figure in this conception was L. J. Henderson at Harvard, the central figure in the Pareto Circle, and the director of the Fatigue Laboratory, whose work at Hawthorne was an initial occasion for Mayo (1933) to address some human problems of industrial civilization.

Pareto was an Italian who held an economics chair at the University of Lausanne in Switzerland, and, at a time when the disciplinary boundaries had not firmed as much as they were to do subsequently, also contributed to sociology as the author of The mind and society (1935), the translation of his Trattato di sociologia generale (1916). The major conceptual innovation that he contributed was that social action could be neatly reduced to residues and derivations. People act on the basis of non-logical sentiments (residues) and invent justifications for them afterwards (derivations). It is the residues that comprise the real underlying problem, the par- ticular cause of the squabbles that lead to the ‘circulation of elites’, and the appro- priate subject matter for social science scholarship. Residues are rooted in the basic aspirations and drives of people and these are not necessarily coherent or logical.

Two types of residue are of particular importance: first, those associated with rule by guile, whose bearers are calculating, materialistic and innovating; second, those that rule by force and are more bureaucratic, idealistic and conservative. Societies tended to oscillate between rule by the two types, Pareto argues. There would be a tendency to equilibrium when the two types of residue were balanced in the governing elites. Because elites are circulatory, balance can be achieved but not guaranteed. On occasion, when the balance is too uneven, another set of con- tenders will replace the current elite. If there are too many guileful types in the gov- erning elites, this means that the ‘lions’, the violent conservative types, will be in the lower echelons, itching to take and capable of taking power when the cunning ‘foxes’ finally make a mess of things by being too cunning and corrupt. If the gov- erning elite is composed mostly of the violent conservative types, then it will fall into a bureaucratic, inefficient, and reactionary muddle, easy prey for calculating upwardly mobile guileful types, a theory that he illustrated with numerous classi- cal, historical and contemporary illustrations.

His economic ideas, expressed in the Manual of political economy (1971), were no less influential. He regarded individual preferences as the fundament of economics, not utilities. A utility was simply a way of rendering the underlying fundamental preference order. One of his most important ideas, for students of power as well as of economics, was the idea of Pareto optimality. Society enjoys maximum ophelim- ity (a non-utilitarian term that Pareto coined to mean economic satisfaction) when making someone else worse off makes no one better off. It introduces a non-zero- sum conception of positive power, one that influenced Talcott Parsons (1964).

Pareto was at the heart of Parsons’ great works that dominated mid-twentieth-century sociology. Pareto was instituted as one of the founders of sociology in The structure of social action (Parsons 1937) and Pareto dominated The social system (Parsons 1950), a project that had enormous influence on the unfolding of studies of organization and the placement of power within them. The acknowledgement of Pareto’s centrality is one of the first things one reads in the latter book:

The title, The Social System, goes back, more than to any other source, to the insistence of the late Professor L. J. Henderson on the extreme importance of the concept of sys- tem in scientific theory, and his clear realization that the attempt to delineate the social system as a system was the most important contribution of Pareto’s great work. This book therefore is an attempt to carry out Pareto’s intuition. (1950: vii)

2. Institutionalizing the organization as a social system

Parsons (1950) viewed organizations as systems in their own right, as did Roethlisberger and Dickson (1939: 551–68), who also developed a clear delimitation of the goals of the industrial system seen in terms of internal and external equilibrium (see also Barnard 1938). Indeed, in many ways Barnard saw these goals as sharp examples of social system characteristics rather than other, more amorphous, entities. Usually, he believed, the identification of organizational goals is relatively unproblematic. Moreover, they usually have well-defined hierarchies of relations of authority, often spelled out in organization charts. The services that goals perform are often stated as part of the organization’s mission statement. Hence, in an open systems per- spective, organizations seem to be a suitable object for analysis.

‘Organizations’ is not a common ordinary language category. The generic con-cept of organization is ambiguous because it refers to a non-existent reality that has been synthesized in an abstract concept.2 It allows substitution for other terms, such as ‘corporation’, ‘monopoly’ or ‘bureaucracy’. These words, because of their association with the power of money and state actions, or more precisely with the consequences that private accumulation and unchecked state intervention have for employment and citizens’ welfare, became strongly questioned by some important sectors of society in the postwar era. Corporations were seen as having been responsible for the Depression, while state bureaucracies were seen to have been responsible in both Japan and Germany for the war. Neither the corporation nor the bureaucracy seemed especially liberal or neutral categories. The nascent disci- pline of organization studies had to be careful not to appear as a servant to power, or to employ terms that would undoubtedly compromise its declared objectivity and neutrality. Theoretical asepsis was an indispensable condition for combating any suspicions that could have brought into question the scientific nature of this knowledge, serving the interests of increased productivity and combating the human problem at the core of organized employment relations – that seemingly docile bodies may harbor intractably resistant wills – through disciplined routine for efficient operation of organizations.

By utilizing a sufficiently general and abstract concept, substantive differences that existed between establishments as varied in nature and social function as the business, school, university, prison, hospital, government agency, church or politi- cal party were eliminated (March and Simon 1958). It was a designation that per- mitted distinct realities to be made equivalent and comparable, having reduced these spaces to the behavior of certain structural variables in relation to their envi- ronment. Relying upon their inalterable faith in positive science, these approxima- tions assumed that the discovery of such relationships, which were thought to be deterministic, would permit the experts to establish the most appropriate struc- tural design for the organization to achieve a perfect match with its environment (Pugh and Hickson 1976). In short, through the terminological cunning repre- sented by the term organization, and with the new language that would follow, the large corporation recuperated social legitimacy to the point of being situated as the exemplary experience for all other types of organizations to follow. Thus, the cor- poration’s economic success, manifested in the accumulation of great fortunes, projected itself as a preferred laboratory for experts in organization; the universal principles of structural design and guidance that guarantee the rational operation of any formal organization were to be discovered in these spaces as readily as in a public sector bureaucracy.

The structural vision synthesized ambivalence towards modernity expressed through the progressive bureaucratization of the world and the growing dissemina- tion of market-based rationality. The tensions between general regulation mecha- nisms and freedom of exchange prefigured the landscape of a world dominated by an institutional isomorphism in which organizations essentially operate with free- dom but are always subject to the pressures of competition and the demands of their contingent media of mobilization: technologies, environments, size, and so on.

The modern world is a huge market into which, over the course of the last cen- tury, the institutions that preserve the unity of society and protect the public inter- est have been gradually incorporated. However, their original purposes have been gradually displaced, as they have been forced to operate under commercial rules that turn their functions and responsibilities into commodities and their establish- ments into bureaucratic corporations oriented towards efficiency, in order to develop competitive advantages that translate into economic success. Undoubtedly, this tendency towards incorporating all human activity into a commercial logic generates grave distortions that have led to the dismantling of the social contract upon which welfare capitalism had been built (Jacoby 1997).

The study of organizations and the examination of their structures and man- agement are considered to be non-problematic, since the normality of instrumental rationality from which they are organized and operated, associated with the intro- jection of work routines and rules of conduct of individual existence, make it difficult to appreciate the phenomena on any other terms. Because of this, it is pre- cipitously assumed that organizational problems are essentially technical and that experts should properly solve them, which implies recognition of the problems as inescapable ingredients of modern human existence. Due to the fact that we have become accustomed to living under their mandate, we all too easily forget that the modern operation of these rules and organizational and governmental instruments gives rise to profound practical consequences. It is a question of mechanisms that bring about certain effects; these give rise to particular forms of social distribution, to arrangements of individuals, groups and populations grouped and differenti- ated in order to determine their social position. In only observing the technical content of the organizational mechanisms, one loses sight of the social effects pro- duced by their operation, setting aside the fundamental importance of the forms of regulation and governance from which conduct is directed. Because of this, the means become, indeed, are the ends, as the study of intentions and effects increas- ingly rests on an understanding of how things get done.

The implications are obvious. A non-reflective approach to organizational problems gives rise to incomplete interpretations of social problems, to the tacit acceptance of the everyday realities in which we find ourselves immersed, leading us to the acceptance that little can be done in the face of these problems, which are essentially generalizably organizational rather than qualitatively specific.

In synthesis, organization science, as a field of knowledge dedicated to the analy- sis of organizational forms and governmental actions and means, assumes that very specific attention is given to the systems and procedures that regulate action. However, this is always undertaken with the understanding that these systems and procedures are a product of highly contingent social relationships and processes from which society is established, organized, and transformed. An organization conceived as a social system is merely an amplification of abstractedness, a double- order magnitude of abstraction. What makes the abstraction possible? The key notion is the goal. All social systems have a central value system that integrates all the disparate abstract systems that comprise it into a holistic entity. The central value system provides shared orientations towards action. The shared central val- ues of organizations are expressed in its goals. Values and goals originate from the cultural and institutional environment. Organization goals must always be legiti- mated by organization values, which, in turn, are required to be consistent with social values. The legitimacy of organization goals arises from the contribution that can be made to the functional requirements of the wider social system. Thus, these goals stand in an overarching relationship to subsystem goals, and, in turn, are sub- ordinated to the overarching societal system goals with which they are integrated. The integration of society’s values into organization goals should mean that organization roles are harmoniously designed and structured in terms of the nor- mative expectations that individuals bring to their membership of the organiza- tion. Being a member is seen as a more or less explicit acceptance on their part of equilibrium between their preferences and the opportunities available. The oppor- tunities must offer sufficient inducement or they would not choose to express their preferences by becoming members. The assumption is that there is a balance between inducements and contributions, as both Barnard and Simon developed. One consequence of this assumption is to make any actual exchange necessarily, a priori, a fair exchange. The overall processes of socialization in the broader social system help make this possible. Individuals internalize societal norms through socialization and strive to gain both psychological and instrumental satisfaction in these terms; that is, they seek satisfaction through socially sanctioned means to achieve socially given ends, or in organizations, they accept the legitimacy of orga-nizational means to achieve given organizational goals.

As the values and specific normative requirements accord, they regulate the system. They do so through dealing with four general problems, which have to be solved if survival of the organizational system is to ensue. These are the four func- tional problems that any system must address and resolve:

  • Adaptation : acquiring the necessary resources for day-to-day functioning and reproduction.
  • Goal attainment : how the system mobilizes resources once they have been obtained.
  • Integration : how subsystems are tied together and subordinated to overall goal attainment.
  • Latent tension management : how the system deals with latent tensions, dis- agreements or lack of shared values, which might arise from time to time.

For Parsons, change is either endogenous or exogenous. Endogenous change arises from disequilibrium between two sets of functional subsystems: those that stress efficiency, which include adaptation and goal attainment, and those that stress stability, which includes integration and latency. However, exogenous change is more likely, suggests Parsons, especially as there are changes in the central value system. When change occurs, the organization system will strive for a new equilibrium posi- tion (see Henderson et al. 1937). Much of this is apparently Paretian, although Desmarez (1986) disagrees, indicating that Pareto’s conception is dynamic, looking at deep changes or ruptures of the system rather than adaptive adjustments.

Apparently Paretian it may be; improbable it undoubtedly is. Extra systemic changes do not always produce adaptive responses. Social systems have no neces- sary affinity for virtuous cycles of equilibrium; they can as easily disintegrate as integrate, in vicious cycles. Changes can sometimes occur in a revolutionary fash- ion; they can be sudden and profound. Internal conflicts and contradictions can sometimes generate change. Values and goals, as Parsons sees them, are reifications (Silverman 1970). Moreover, they are reifications that, in Weber’s terms, imply a structure of dominancy.

3. Parsons’ systems theor y

The differentiation of organization from social theory had been under way for some time. In the wake of the call to systematicity that was inscribed in the first volume of the Administrative Science Quarterly by its editor J. D. Thompson (1956a) and by the doyen of social scientists, Talcott Parsons (1956), it was evident that organization theories’ key concerns were to be constituted within the assump- tion of the individual as an element in an organization conceived as a system. The system approach in contingency theory appeared necessary because it referred to the organizational level, complementing the level of disciplinary relations inside groups which personnel and human relations theory, later human resources theory, had carved out. The shift in focus on power from personnel to systems was fully achieved only with the publication of J. D. Thompson’s (1967) Organizations in action, but it had been well signposted.

Slowly, gradually, in the period between the wars, a twofold set of changes occurred that framed the way in which organization theory would approach power in the era after the Second World War. These were a displacement of central focus from personnel to systems, and a shift in concern from rationality to uncertainty. The models of organization and administration derived from scientific manage- ment and formal theories of administration and the ideas that were developed in human relations came together in the notion of an organization as a social system, open to changes introduced from its environment, in which the informal organi- zation of Mayo and the formal organization of the Classical School were separate subsystems.3 There is sometimes a distinction made between rational and natural systems, or between closed and open systems, but few theorists are concerned with a closed system model any more. The notion of the organization as a functional and open system is a paramount conception and leads to a particular view of power.

An explicit organization theory of power emerged in the postwar era. However, its practitioners seemed unable to recognize, authentically, what it was that they purported to be addressing. The claim to address power was made from within a systems framework. Within its terms, the most rational world would be one that accorded with the patterns of a closed system, in which uncertainty had been removed. Uncertainty basically signals freedom rather than closure; it signals the limits of the organization in controlling the actions of others. It was in seeking to define the limits to systematicity that control and power became key elements. That which was uncontrollable, unexpected, unanticipated, – in a word, uncertain – spoilt the systematic picture. And for the spoilers there was a name. And the name was power. Power was seen as the antithesis of authority, undermining attempts to increase efficiency.4 A consequence of this shift was that, as far as power was con- cerned, the focus on rationality had to shift to uncertainty. Uncertainty became seen as one of a number of resources that conferred power. (As we shall see subse- quently, lists of these resources were compiled and theories of the lists constructed. It was dull stuff but one supposes someone had to do it.)

The conception of open system organizations presumes that, in principle, a total rationality is possible; however, in practice, as Thompson (1967) theorized, although organizations strive to be rational, because they are open systems, they can rarely if ever achieve such rationality. Reed (1985: 21) characterized the tension between the cult of theoretical rationality and the struggle with irrational practices as an intellectual schizophrenia in organization studies. Organizations are always open to irrationalities even as they strive to be rational. When the failure of the sys- tem to rationalize all relations within it creates dependencies that are not mapped on to the formally rational structure of dominancy, or, in other words, when what is taken for granted as authority does not extend its remit to all niches, segments or strata of the organization in question, then there is power.

Power is the enemy of reason and rationality but also of the individual’s freedom to act. Where there is irrationality in the organization then there we will find power, because power derives not from rationality, from reason, from rule, but from irra- tionality, unreason and an absence of rules. That is the scene seen from the systemic heights; from within the system’s depths there is also the informal realm of the orga- nization. In other words, power is a dysfunction when seen from a system point of view, while informality is the result when seen from a psychological point of view.

Where residual sources of uncertainty remained in otherwise rationalized systems then these were to be seen as unanticipated irrationalities of rationalizing systems. These residues had a name, a special status, and denoted a distinct space in the emergent pantheon of organization studies. The name was uncertainty; the status was indicated by an absence of rule, and a consequent inability to predict, control, and contain what those who inhabited this space might be able to do. All of this denoted an absence of functioning authority.

Source: Clegg Stewart, Courpasson David, Phillips Nelson X. (2006), Power and Organizations, SAGE Publications Ltd; 1st edition.

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