Cultural Theory and Bureaucratic Organizations

Institutions DoctorR&D No Smoking sign Institutionalized rule + social role (behavior, relations, expectations) Actual activities + meaning and value Institutionalized rules effects organizational structures and their implementation in actual technical work

Background A contingency theory approach used to dominate thinking about organizational structure and design. Formal structure=f(size, technology and envi.) Formal structures were thought of as optimizing co-ordination and control and thus efficiency, in line with the contingencies set by the environment of the organization.

New Institutionalism in Organization Theory Important questions posed in the late 1970’s –Why are organizations so similar? –Why are organizational structures becoming increasingly complex? Founding texts –Meyer, John and Brian Rowan, 1977, "Institutionalized Organizations:Formal Structure as Myth and Ceremony". American Journal of Sociology, Vol.83, No.2: –DiMaggio, Paul and Walter W. Powell, 1983, "The Iron Cage Revisited: Institutional Isomorphism and Collective Rationality in Organizational Fields". American Sociological Review. Vol. 48, April: An “institutional turn” in many social sciences in the 1980’s.

Definition A process by which certain social relationships and actions come to be taken for granted A state of affairs in which shared cognitions define what has meaning and what actions are possible Conventions are not mere conveniences, but take a rulelike status in social thought and action

Dividing Lines (1) A focus on broad but finite slice of the social arena: organizational structures that are industry-wide, national or international in scope [labor markets, corporations, states Persistence of practices is explained by both their taken-for-granted quality and the reproduction of structure by being to some extent self-sustaining

Dividing Lines (2) Actors act on the basis of models of choice but of taken-for-granted expectations gained through socialization, education, on-the-job training and conventions. Individual choices cannot be properly understood outside of the cultural and historical frameworks in which they are embedded

Dividing Lines (3) Institutionalized arrangements are reproduced because of: –Technical interdependence –Physical sunk-costs –Individuals often cannot even conceive of appropriate alternatives –Individuals regard as unrealistic the alternatives they can imagine Institutions do not just constrain options: they establish the very criteria by which people discover their preferences (In other words, some sunk costs are cognitive)

When organization change does occur it is likely to be episodic and dramatic, responding to institutional change at the macro level, rather than incremental and smooth.

Institutional theory proposed the following answers: Companies do not only seek to be efficient and effective but also legitimate Formal organizational structures arise as reflections of rationalized institutional rules Formal structures become isomorphic with myths of the institutional environment Structures tend to be decoupled from each other and from ongoing activities

What is formal structure? Conventional theories assume that coordination and control are the critical dimensions on which formal organizations have succeeded –Rationalized formal structure is assumed to be the most effective way to coordinate and control the complex relational networks involved in modern technical or work activities –The need for coordination, and thus for more complex structures increase with size, technology and more complex division of labor across organizations This is based on the view that organizations function according to their formal structures and blueprints

Incomplete theories of formal structure Much research had shown that organizations do not function according to their blueprints –Great gap between formal and informal organizations –Element of formal structures are only loosely coupled to each other and to activities –Rules are often violated, decisions are often unimplemented or they have uncertain consequences –Evaluations and inspection systems are subverted or vague Despite this, formal organizations are endemic in modern societies. Meyer & Rowan conclude that there is need for an explanation of the rise of formal structure that is partially free from the assumption that, in practice, formal structures actually coordinate and control work.

Institutional sources of formal structure Elements of formal structure are deeply ingrained in, and reflect, widespread understandings of social reality Institutional rules function as myths –Rationalized and impersonal prescriptions –Highly institutionalised, taken for granted as legitimate Elelments of formal structure that function as myths: –Professions (lawyers, teachers, doctors etc.) –Programs (buisness - departments, universities – subject areas, hospitals – clinical areas) –Technologies (production, accounting, personnel selection) The growth of rationalized institutional structures lead to more formal organisational structures –Easier to create –Seen as necessary

How do organizations act to gain legitimacy? In prevailing theories, legitimacy was a given But Meyer & Rowan argue that organizations strive for legitimacy as well as for effectiveness

TWO LOGICS OF DECISION MAKING A logic of consequences Alternatives: What actions are possible? Expectations: What future consequences might follow from each alternative? Preferences: How valuable are the consequences of each alternative? Decision rule: Choose among alternatives in terms of the values of their consequences A logic of appropriateness Recognition: What kind of situation is this Identity: What kind of person am I? or What kind of organization is this? Rules: What does a person such as I, or an organization such as this, do in a situation as this?

What is appropriate and legitimate is institutionally defined

What is an institution and what is the institutional environment? Institutions can be described as written and unwritten rules Includes norms, values, expectations… ….as well as rules, regulations, laws and standards They are taken-for-granted assumptions about the world

Institutional environments Hierarchical relations Circulated ideas, expectations Exchange relations Regulations, audits, rankings and evaluations

Organizations are driven to incorporate the practices and procedures defined by prevailing rationalized concepts of organizational work and institutionalized in society. Organizations that do so increase their legitimacy and their survival prospects, independent of the immediate efficacy of the acquired practices and procedures

Conflicts between conformity to institutionalized rules and efficiency criteria ↓ Building gaps between formal structures And actual work activities ↓ Maintaining ceremonial conformity

Organizational success and survival Organizations that incorporate societally legitimated rationalized elements in their formal structures maximize their legitimacy and increase their resources and survival capabilities Categorical rules may sometimes conflict with the logic of efficiency –What is good for legitimacy may be seen as costs in efficiency terms –Institutional rules are generalized –Inconsistent institutional demands Organizations may resolve conflicts by decoupling elements of structure from each other and from activities

What makes organizations so similar? DiMaggio and Powell (1983) The iron cage revisited: Institutional isomorphism and collective rationality in organizational fields. Two main claims: –The engine of rationalization and bureaucratization has moved from the competitive marketplace to the state and the professions –Once a set of organizations emerges as a field, a paradox arises: rational actors make their organizations increasingly similar as they try to change them Rather than emphasize diversity, they ask and investigate why organizations in different settings look so much alike

Organizational fields Those organizations that, in the aggregate, constitute a recognized area of institutional life: key suppliers, resource and product consumers, regulatory agencies, and other organizations that produce similar services or products. The virtue of this unit of analysis is that it directs our attention not simply to competing firms, as does the population approach of Hannan and Freeman (1977), or to networks of organizations that actually interact, as does the interorganizational approach of Laumann et al. (1978), but to the totality of relevant actors

The process of institutional definition, or ”structuration”, consists of four parts An increase in the extent of interaction among organizations in the field The emergence of sharply defined interorganizational structures of domination and patterns of coalition An increase in the information load with which organizations in the field must contend The development of a mutual awareness among participants in a set of organizations that they are involved in a common enterprise.

Three pillars of institutions RegulativeNormativeCognitive Basis of compliance Expedience (how it must be) Social obligation (how it aught to be) Taken for granted (how it is) MechanismsCoerciveNormativeMimetic Cultures Rules, laws, sanctions Values, expectations Categories, typifications, identities Basis of legitimacy Legally sanctioned Morally governed Conceptually supported

Predictors of isomorphic change Organization level predictors –Dependence on other organizations –Centralization of organization’s resource supply –Uncertainty between means and ends –Ambiguous goals –Reliance on academic credentials –Participation in trade and professional organizations Field level predictors –Dependence upon a single source of support –Transaction with state –Few visible alternatives –Uncertain technologies and goals –Extent of professionalization –Extent of structuration

How can we use this? Legitimacy important Formal organizations are driven by rational institutional rules functioning as myths Organizations tend to become alike as managers are trying to change them Three mechanisms of isomorphism: coercive, normative and cognitive

European management education Educational organisations typically highly institutionalised –Rationalised myths about what a university is, about professors and teachers, etc. –Dependent on legitimacy by incorporating rationalised institutional elements –Loosely coupled Recent developments –Proliferation of MBA programs –National deregulation –Internationalization of student flows –Competition among business schools –Collaborations, alliances and joint programs –Accreditation, rankings, guidelines and standards –Competition and collaboration among regulators

Structuration processes in the field of European management education A common template (centered around MBA) A common understanding of who is in and who is out, who is good and who is not good Competing efforts to define what good management education is Regulation leads to further regulations Reputation structures are reinforced

Structuring and forming a field The adopting organisation –Strive for legitimacy, uncertainty etc. (Meyer & Rowan; DiMAggio & Powell) The circulated ideas: –The ideas and models being diffused, –Processes of imitation and identification increase diffusion and shapes the field - what is being imitated and why? The actors involved in circulation of ideas –A growth in regulations and other forms of evaluations, standards help structure the field

Ideas and models in management education Expansion of management education in Europe since 1950s –“Business school”-model –MBA programs New elements and new models are incorporated not because of their technical efficiency, but because it is believed to be appropriate –“In some sense if you want to be a serious management/business school you have to have an MBA course, a really good MBA course, and ours fulfill in that sense the same kind of role that it would in most other schools” (MBA admissions officer, European business school)

Identity and Imitation Processes driven by identity construction and imitation –Who am I like? Whom do I want to look like? What is appropriate for me? Organizations and individuals develop and change through processes of imitation –Imitation may lead to increased homogenization and to “more of the same” but also to variation and innovation Imitation are often active processes of translation

A precision of the translation perspective: Imitation as editing Practice and experience as such cannot be circulated, but it is the accounts, presentations and representations of such practices and experiences that are being imitated and circulated. Accounts may be shaped differently in different settings - accounts are edited. Such editing is done in several steps. It may concern details as well as more general ideas. There are many, sometimes intertwined, editors. The context restricts and guides the editing. This infrastructure of editing may be understood as sets of editing rules.

Editors and regulators With the expansion of business schools and MBA programs, a growth in the number of regulations, standards, accreditations, rankings etc has followed: –Demands for order and stability –Expectations of similarity and comparability These contribute to creating norms, values and expectations about what management education is and should be –Who is good? Who counts? Who is in? They also diffuse ideas further – make them public and accessible to a wide audience –Serve as basis for comparisons – defines a ”true” business school. They edit the presentations and representations, the ideas and the models, and construct generalized templates for organizing –Drives further imitation and translation

Outcomes Prototypes (models to imitate) Templates (models to use for assessing) Regulations: standards and rules Identities This is what we would call structuration of an institutional field