The literature is littered with predictions about what future organizations will look like and how they will operate and be managed. The fact that most of these predictions have not been realized is, we believe, a consequence of the inadequate theoretical base underlying them. We would like to conclude our exposition of the resource dependence perspective by considering one of the more frequently seen predictions concerning organizational futures and then consider what the evidence we have developed suggests about this forecast.
Recently, humanists such as Warren Bennis, Abraham Maslow, and Douglas McGregor have predicted the demise of bureaucracy as an organizational form. In a climate of social values that stress participation and democracy, bureaucracies, with their centralized structures of authority and control, are anachronistic. With a more skilled and more educated work force, with increasingly sophisticated technologies, the prediction has been that professional, rather than bureaucratic, organizational forms would emerge. Power would be based on skills and knowledge, and consistent with the professional model, self- control or collegial control would be emphasized over control by the organizational hierarchy. Unfettered by inappropriate strategies of motivation and rigid, dehumanizing structures, the new workers, educated and creative, would adjust their activities to the needs of the organization and realize their creative potential in the process.
Originally, this prediction was based more on beliefs and values than on anything else. But then, these authors discovered the environment and found, they thought, a whole new, empirically based foundation for their beliefs and the associated application of those beliefs, organizational development. Miles has summarized this argument quite well:
The environment, as they (OD theorists) see it, is becoming increasingly turbulent and this, they argue, makes it especially important that orga- nizations adopt the kinds of structure and processes mentioned above… OD writers tend to believe that the linkage among the elements in most organizational environments are becoming more numerous and more complex, that the rate of change in environmental conditions is increasing, and that traditional bureaucratic structures are becoming less and less adequate. It is argued that new and more adaptive structures and processes are required and that these in turn demand new levels of interpersonal skill and awareness which OD (organizational development) can best provide (1974:170-171).
Unfortunately, the issue of what effects uncertainty has on the structure of organizations, and even if uncertainty is increasing, is more complicated than suggested by numbered systems (Likert, 1967) and two-category archetypes (McGregor, 1960). We attempt below to provide some thought about these complexities, not because we envision better views of the future but because different futures appear more probable.
A recurrent theme reported in this book has been that organizations attempt to manage or avoid uncertainty. Rather than accepting uncertainty as an unavoidable fate, organizations seek to create around themselves more stable and predictable environments. Thus, to forecast increasingly turbulent and unpredictable environments is to simultaneously predict attempts to create negotiated, predictable environments. Greater turbulence produces greater efforts to manage the environment. The implied contradiction in that statement can be understood by considering the nature of interdependence in social systems and how interdependence changes form without changing in magnitude.
We have described how organizations cope with the uncertainty created by interdependence by managing interdependence through interorganizational coordination. By law, collusion, merger, cooptation, and other strategies, organizations seek to avoid uncertainty arising from their need to acquire and maintain resources. Managing interdependence, however, does not avoid interdependence. Indeed, it is the case that the solution to one problem frequently creates different difficulties. The typical solution to problems of interdependence is to structure and coordinate the organization’s behavior more closely with other organizations. This strategy, however, creates its own problems.
For example, steel manufacturers depend upon coal as a resource. Seeking to remove uncertainty of supply, the manufacturers may integrate backward and purchase coal mines or coal companies. Although the purchase of a coal mine reduces the organization s dependence on uncertain suppliers, the dependence on coal itself has not been eliminated. In fact, if major technological changes in steel manufacturing eliminate the need for coal, the vertically integrated firm with its own source of coal may be less able to change. And, as a consequence of being more heavily invested in resources used in the manufacture of steel, the organization is now more dependent on the steel market. Also, since the merged organization is presumably larger, capital requirements may be greater, as is the organizations visibility to regulators and others who will make demands of it.
Solving the uncertainty deriving from interdependence with suppliers leads the organization to create an environment which makes it even more important to stabilize than the other elements in the environment. To assure markets, the organization may press to have laws passed restricting competition. The organization may invite major clients or financial institutions to sit on its board of directors, or it may invest in joint ventures in partnership with major competitors. The immediate effects of these efforts may be to stabilize the flow of resources to the steel manufacturer and reduce the uncertainty confronted by the organization in the short run.
A closer examination’ of the situation, however, reveals that the interdependence and uncertainty has merely been shifted not eliminated. By merging with coal companies, the organization’s problematic dependence is shifted from one resource to others and from suppliers to markets. By restricting competition through legislation, the organization now depends on legislators. The organization becomes more connected to elements of its environment, and the environment itself becomes more interconnected over time as various organizations engage in these strategies. The more tightly connected the system becomes, the more the fate of each is linked to the fate of all other organizations. Linked to a particular financial institution for capital, the steel manufacturer now needs the survival and health of that particular financial institution. Linked to a particular legislator, the company requires the political survival and health of that person.
If one considers the consequences of the actions for other organizations, it is even more evident how interdependence is shifted rather than eliminated. The steel manufacturer who acquired the coal company gains control over the supply and leaves other steel firms less able to acquire their own coal. The others become more interdependent with other suppliers and may find it necessary to increasingly coordinate their behaviors. Essentially, the merging organization has shifted the costs of interdependence to other parts of the system. The same thing occurs when market coordination occurs; the interdepen dence of sellers is shifted to make buyers more interdependent and more dependent on the sellers as a collectivity.
The only changes which alter the amount of interdependence are those which (1) increase the amount of available resources and (2) decrease the number of contenders for those resources. If there is a scarcity of some resource, the fact that one organization stabilizes its acquisition of the resource through some form of social coordination does not alter the fact of the scarcity. It solves one organization’s problem by transferring the problem to others. One can see this illustrated in the recent “energy crisis” (more properly, a shortage of inexpensive oil). Most of the changes made in response to that crisis were attempts to redistribute the problem of not having enough cheap oil. Some organizations stored reserves in larger amounts, while others sought new forms of energy. However, the changes that reduce conditions of scarcity are those that lead to new sources of energy or less use of energy; other changes merely reallocate the cost of scarcity.
Social systems can be evaluated according to how the burdens and costs of interdependence are allocated. Those who suffer the costs are those with the least power in the social system, and indeed, social power becomes defined and determined in the process of managing interdependence. Power is the ability to organize activities to minimize uncertainties and costs, and as mentioned previously, power is inevitably organized around the most critical and scarce resources in the social system. Solutions to problems of interdependence require the concentration of power. Strategies to manage interdependence require interlocking activities with others, and such interlocking produces concentrated power. Those organizations not involved in the resultant structure are less powerful and less able to cope with their problems of interdependence.
Because the problems facing one organization are generally due to the activities of another organization, it is inevitable that the solution to problems involve interlocking activities among the organizations and an attempt tO’influence the other organization’s activities to the focal organization’s benefit. This interlocking of activities develops a concentration of power. Those who are least powerful in a social system are those who are least able to organize and structure the activities of other social actors for their own interests. The resulting environment is one which is increasingly structured and interlocked, coordinated, comprised of larger and larger organizations and greater concentrations of social power. The burdens of interdependence are shifted to the less organized and less powerful actors. In the modern economic environment, the least organized group of social actors are consumers, and contrary to the view of consumers portrayed in some economic and marketing theories, the consumer is increasingly likely to bear the cost of interdependence in the economic system. One might think that a solution to the consumers’ problems is to concentrate power, and many actions of consumer interest groups are attempts to accomplish just that. However, while coordination makes the consumer more powerful, it also makes influence more possible. It is easier to target influence to affect a few organizations than millions of independent actors. Thus, ironically, the very structuring of activities that produces social power makes the social actors so interconnected that they are more likely targets for influence.
If all organizations attempted to solve their own problems of critical uncertainties and dependencies by interlocking behaviors with others, the resulting environment is one of more tightly coordinated organizational action. Decision structures developed for initiating and coordinating actions must, of necessity, become more centralized with greater concentrations of power. The system is too complex, too interconnected, and too potent to rely on haphazard adjustments made by its components.
Therefore, the net result of various organizational actions would appear to he the creation of larger organizations operating in environments that are increasingly regulated and politically controlled. A single organization’s larger^ size and increased commitment to given areas of activity make it less able to adapt and means that any failure is more consequential. Thus, there is increased need for coordination with other critical actors. This increased need for coordination leads to an increasingly interconnected environment in which power is increasingly concentrated. One might project from this that the environment that will evolve will be a stable and cooperative set of actors. Such will be the case as long as none of the parties have interests which conflict, and this circumstance is more likely to the extent that resources are plentiful. If there is a scarcity of critical resources, the consequence of greater interconnectedness is greater uncertainty. The response to that uncertainty will be even more interlocking of behavior and an even greater concentration of power.
This scenario does not suggest an increase in decentralized, participative management structures as a result of turbulent organizational environments. Rather, we would suggest that uncertainty will result in greater efforts at coordination, which require the concentration of power and decision discretion. We would argue that in the first place, uncertainty is managed so that the prediction of increasing en- vironmental uncertainty is questionable. In the second place, increasing interconnectedness is likely to be met with increasingly concentrated decision structures, not decentralized structures as many have predicted. There is some evidence that external pressure is accompanied by decision centralization (Hamblin, 1958; Korten, 1962;
Pfeifer and Leblebici, 1973). If turbulence and uncertainty is perceived as stress or pressure, then centralization is a more correct prediction than decentralization.
Before we can have confidence in the preceding description, there are a number of other variables that must be considered. Ultimately, the need for coordination is a function of environmental munificence. Scarcity is not itself a given, but depends in part on the definition of the organization’s requirements and the number of organizations contending for those resources. Definitions of required resources can change and do so as organizations adapt to their environments. A second unknown is the extent to which power can be increasingly concentrated. At some point, concentration must cease as the cost of coordination becomes too high, threatening the survival of individual social actors and posing too great a loss of autonomy consistent with survival. Moreover, the ability to coordinate must have limits also, perhaps determined by the ability to see the relationship between sets of actors and activities.
Unfortunately, speculations about the evolution of social systems require facts and knowledge that are not presendy available. Because it has not been studied, there is litde information about how organizational responses and environments evolve over time. The cycle of contextual effect, organizational response, and new contexts must be examined more fully in the future to describe adequately the external control of organizations.
Source: Pfeffer Jeffrey, Salancik Gerald (2003), The External Control of Organizations: A Resource Dependence Perspective, Stanford Business Books; 1st edition