The equilibrium of the organization

The question may next be raised why the individual accepts these organi- zational influences—why he accommodates his behavior to the demands the organization makes upon him. To understand how the behavior of

tion, it is necessary to study the relation between the personal motivation of the individual and the objectives toward which the activity of the organization is oriented.

If a business organization be taken, for the moment, as the type, three kinds of participants can be distinguished: entrepreneurs, employees, and customers.4 Entrepreneurs are distinguished by the fact that their decisions ultimately control the activities of employees; employees, by the fact that they contribute their (undifferentiated) time and efforts to the organization in return for wages; customers, by the fact that they contribute money to the organization in return for its products. (Any actual human being can, of course, stand in more than one of these relations to an organization, e.g. a Red Cross volunteer, who is really a composite customer and employee.)

Each of these participants has his own personal motives for engaging in these organizational activities. Simplifying the motives and adopting the standpoint of economic theory, we may say that the entrepreneur seeks profit (i.e. an excess of revenues over expenditures), the employees seek wages, and the customers find (at certain prices) the exchange of money for products attractive. The entrepreneur gains the right to dispose of the employees’ time by entering into employment contracts with them; he obtains funds to pay wages by entering into sales contracts with the customers. If these two sets of contracts are sufficiently advantageous, the entrepreneur makes a profit and, what is perhaps more important for our purposes, the organization remains in existence. If the contracts are not sufficiently advantageous, the entrepreneur becomes unable to maintain inducements to keep others in organized activity with him, and may even lose his own inducement to continue his organizational efforts. In either event, the organization disappears unless an equilibrium can be reached at some level of activity. In any actual organization, of course, the entrepreneur will depend upon many inducements other than the purely economic ones mentioned above: prestige, “good will,” loyalty, and others.

In an organization such as that just described, there appears, in addition to the personal aims of the participants, an organisation objective, or objectives. If the organization is a shoe factory, for example, it assumes the objective of making shoes. Whose objective is this—the entrepreneur’s, the customers’, or the employees’? To deny that it belongs to any of these would seem to posit some “group mind,” some organismic entity which is over and above its human components. The true explanation is simpler: the organization objective is, indirectly, a personal objective of all the participants. It is the means whereby their organizational activity is bound together to achieve a satisfaction of their own diverse personal motives. It is by employing workers to make shoes and by selling them that the entrepreneur makes his profit; it is by accepting the direction of the entrepreneur in the making of shoes that the employee earns his wage; and it is by buying the finished shoes that the customer obtains his satisfaction from the organization. Since the entrepreneur wishes a profit, and since he controls the behavior of the employees (within their respective areas of acceptance), it behooves him to guide the behavior of the employees by the criterion of “making shoes as efficiently as possible.” In so far, then, as he can control behavior in the organization, he establishes this as the objective of the behavior.

It is to be noted that the objectives of the customer are very closely, and rather directly, related to the objectives of the organization; the objectives of the entrepreneur are closely related to the survival of the organization; while the objectives of the employee are directly related to neither of these, but are brought into the organization scheme by the existence of his area of acceptance. Granted that pure “entrepreneurs,” “customers,” and “employees” do not exist; granted further that this scheme needs to be modified somewhat to fit voluntary, religious, and governmental organizations, still it is the existence of these three type roles which gives behavior in administrative organizations the particular character that we recognize.

Source: Simon Herbert A. (1997), Administrative Behavior, Free Press; Subsequent edition.

Leave a Reply

Your email address will not be published. Required fields are marked *