The Assessment of External Demands of Organizations

Many of the problems organizations face in attempting to adapt to their environments stem from the inability to predict or assess the potency and demands of various interest groups, how these demands conflict- or how they constrain- the^organization s actions. Operating in ignorance of its interdependence and constraints, the organization can make strategic errors. It can fail to satisfy some demands and heed others when that is not necessary. It can place itself in positions of interdependence that would be better avoided. It may provide information to groups which leaves the organization vulnerable to future influence. Often the critical problem is not that , the organization is immobilized but that it is ignorant.

We have argued that the effective organization is one which responds to the demands from its environment according to its dependence on the various components of the environment. We presented this as a model which could predict organizational behavior, as illustrated in the case of the Israeli managers and their accession to government demands. This model also serves, however, as a framework for what the organization should do to ensure its survival and success. The extent to which such a model can serve as a guide to action is affected by the organization’s own awareness of its environment and the manner in which it enacts that environment. The increasing diversity’ of interest groups and their distance from the organization s immediate activities make the enactment process problematic. We shall suggest a methodology which can serve both as a guide to organizations and as a method for assessing organizational effectiveness. It is a methodology designed to increase awareness of the contingencies facing an organization. The procedure may be applied to actions of organizations that have already occurred as well as to possible future actions.

1. Determining Interest Qroups

The first task in assessing external demands is to ascertain those groups or organizations that are relevant for the functioning of the focal organization or for a particular activity. Friedlander and  Pickle’s (1968) study provides one such list for small businesses on an aggregated level. A useful guide for developing a list of relevant interest, groups is to consider what resources and activities are critical to the organization and what individuals or groups do at presenp or could potentially, provide or affect those resources. For example, in one- study of a university applied-research organization that conducted re-search on the distribution and accumulation of lead in the ecosystem, the following groups were recognized as affecting the activities of the research group: faculty from various departments in the university; the professional groups and decision maters affecting faculty careers, such as editors of scientific journals; the funding agency, the RANN division of the National Science Foundation; Congress which appropriated funds to the funding agency; the various federal and state agencies involved in the regulation of environmental effects, including the Environmental Protection Agency; the industrial organizations which produced the lead; the industrial organizations that used lead, including those that used lead in gasoline; and the research divisions and associations of these various governmental and industrial organi- . zations. In an analysis of the organization over a four-year period, it was evident that all these groups affected both what the organization did and how its basic structure evolved (Salancik and Lamont, 1975). Recognizing interdependence is not always easy, and a sequential questioning of the key actors in the organization may be a useful beginning.

2. Weighting Interest Groups

Having determined who is relevant to the organization, the next step is to recognize that all may not be of equal importance. It becomes necessary to weight the relative power of the various groups. One possible method is to have representatives from each group rate all the other groups in terms of their assessment of each group’s importance for the organization. An averaging of the responses of all group representatives will generally be found to be very reliable, as most participants in a situation are fairly accurate estimators of their relative positions. One problem with this method, however, is that the less visible interest groups may be ignored or underestimated.

Another procedure would involve identifying the critical resources which the organization needs and analyzing which groups or individ-uals control them. For example, a radio station depends on advertising revenue. But this does not tell one how critical advertisers are to the organization. If advertisers are difficult to get, then they may have a great deal of influence over the station’s programming. On the other r’ljand, the advertisers are interested in a radio-time purchase primarily because of the ability to reach an audience. The size of an audience itself may depend on the presence of a good disc jocky or the radio station’s restriction of competition.

3. The Criteria of Groups

The next task is to determine the criteria or values by which each group evaluates the organization. Measures may be obtained both by using the perceptions of the organization and by directiy asking group representatives. One should expect to find differences and even inconsistencies in hi the criteria used by the various groups to evaluate the organization. A generalized approach to the measurement of group values has been demonstrated by Rokeach (1968) in a study of the values of citizens in the United States. Rokeach had individuals rank order 18 generalized values in terms of their importance to their daily lives. He found that the values held by groups varied. Rokeach also found that various political philosophies varied in their ranking of values. Rokeach’s approach of having individuals rank a set of standard values is useful when it is possible to develop a set of criteria that are relevant to several groups. Salancik (1975) has shown that Rokeach’s values can validly distinguish the interests of social groups toward future events.

4. The Impact of Actions on Criteria

Information about different groups and their values is useful only when it is applied to assessing potential reactions to activities or outputs of the focal organization. The next step, then, is to assess, for a given action or result, how it will affect the various criteria of the groups. This task of judgment can be accomplished using either experts or representatives from the various groups. Essentially, it requires asking a question of the following form: If this event (outcome) were to occur, would it increase, decrease, or have no effect on this criterion? The question, of course, is repeated for each criterion for each group.

Information about the impact of events on criteria can be usefully incorporated with the information about the groups and their preferred interests. Three things can be derived: (1) estimates of the extent to which a given event potentially satisfies any given interest group; (2) estimates of the extent to which a particular event potentially satisfies some groups while simultaneously dissatisfying others: and (3) estimates of the extent to which the event potentially satisfies groups that are important to the organization.

A final useful assessment to make in evaluating the effectiveness of organizational actions is to obtain measures or estimates of the interdependence between the various interest groups. Interdependence among the criteria of the groups means that in attaining one criterion, the criteria impoitant to another group must also be attained. For instance, if it is the case that customers are the most important determinant of a firm’s profits, then the owner’s interest in profits will be served only as the customers’ interests are also served. One general-ized method for determining interdependencies is the cross-impact method. This procedure involves listing the events (or organizational interest groups) along a vertical and horizontal array, and then considering for each group in the vertical array its interdependence with each group on the horizontal list. Thus, for one group the question is asked: If this group’s criteria are met, what impact will it have on the ability to meet the criteria of each other group?

The asssesment procedure we have described is diagrammed in Figure 4.2. We have elaborated this assessment procedure partly because it can be a useful systematic way of evaluating the potential effects of proposed or completed actions. However, this procedure also forces an explicit recognition of the basis of organizational behavior. The central questions of organizational action are, we believe: who wants what and how important is it that the demand be satisfied? and what are the implications of the satisfaction of one demand for the satisfaction of other demands?

It may be difficult for the reader to appreciate how easily organizations may mislead themselves about their own situations. We can illustrate this point by examining a typical response of a public university to what is being called a crisis in higher education. For specific details, we shall consider the University of Illinois at Urbana-Cham- paign, but the scenario is ¡essentially being repeated, with few varia- tions, throughout the country.

For many years public universities received ever-increasing bud-get allocations, based not only on their ever-increasing student enroll- merits but also on an ability to command a great deal of legislative support. This period of receiving virtually all the budget requested ended in the late 1960s. The retirement of a state senator from St. Joseph, who was the ranking member and chairman of the appropriations committee, may have been a contributing factor to the problem in Illinois. St. Joseph is only eight miles from Urbana-Champaign, and the university was a pet project of the senator. For whatever reason, the budget increases soon began to fall behind the rate of inflation. But, what is interesting is not the problem but the response. The university responded to the withdrawal of financial support by initiating measurement procedures to guide internal budget allocations and reallocations and to document its cost efficiency. Program budgeting experts were hired at the top administrative levels, and information systems were expanded. While the procedures, and even the preliminary report leading to their development, are lengthy, one salient feature can be briefly described: there was no provision for the assessment of organizational effectiveness using the opinions, beliefs, or values of the groups or organizations relevant to the university. Rather, all procedures relied on essentially internal accounting standards and measurements, such as student/faculty ratios, student failure ratios, students educated per dollar, and so forth. Thus, the university had followed many other organizations down the path of mistaking cost- efficiency for effectiveness.

FIGURE 4.2 Methodology for Assessing Organizational Effectiveness

By way of contrast, it should be noted that other government agencies have not placed themselves in the same trap. When the soaring costs of the public medical or welfare programs were called into question, frequently the programs were justified by statements such as, “all Americans have a right to adequate medical care,” or “all Americans have a right to an adequate living.” In these instances, the values or objectives themselves were justified, regardless of the cost or considerations of efficiency that were involved. Later, the university attempted to point out the achievements of the organization and how it had helped the state, but frequently the achievements were couched in terms of criteria important to the faculty rather than to the general public.

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

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