1. Institutional theory Organizations and their environment
Ulla Eriksson-Zetterquist

2. Institutional theory
Are organizations rational tools for achieving clear cut purposes?
Why are organizations so similar (at least structurally?)
Why is it so hard to change organizations?
Är organisationen ett rationellt verktyg som uppnår sina mål genom att producera varor och tjänster?
Organisationer är institutionaliserade. Det som görs i en organisation påverkas snarast av omgivningen, och vad som gjorts tidigare.
Enbart på ytan framstår organisationer som rationella

3. Institutional theory - foundations
Origin: end of 19th century in economics, sociology, political science
Central: institutions are created when we construct our social reality
TODAY:
Three streams:
Early institutional theory
(New/neo) institutional theory
Scandinavian institutional theory

4. Institutional theory: basic assumptions
Organizations and their members are NOT rational actors but are effected by their environment and how things have been done before (’this is the way we have always done things’)
The myth about rationality is still very prevalent, and it is important to appear as rational.

5. Institutions Institutions are a pattern for collective action
Creates order, stability and predictability
Newcomers are taught ’how things have always been done here’
Opposite to ’habit’ (local, often individual)
Institutions are long lasting, and have a normative explanation

6. Examples of institutions
Collective patterns of actions that have been called ‘institutions” (examples):
Marriage, sexism, the contract, wage labour, the handshake, insurance, the formal organization, the army, presidency, the vacation, the corporation, voting.
Jeppson, 1991: 144
Some organizations, some cultural, some more structural
Variously “production systems, enabling structures, social programs, performance scripts
Each connotes stable designs for chronically repeated acticity sequences
Formal organizations: a packaged social technology, with accompanying rules and instructions for its incorporation and employement in a social setting
”programmed actions” (berger 6 Luckmann)

7. Pursuing the metaphors
Institution: represents a social order or pattern that has attained a certain state or property
Institutionalization: denotes the process of such attainment
order/pattern: standardized interaction sequences
An institution is then a social pattern that reveals a particular reproduction process
Followed by rewards and sanctions

8. Institutions…
Limits on how individuals and organizations can act, at the same time as they enable acting
Create and monitor rules of the game
Make organizations and individuals adapt to its ’institutional surrounding’ (and thus can make things that seem irrational)

9. Contemporary definition
..more-or-less taken-for-granted repetitive social behaviour that is underpinned by normative systems and cognitive understandings that give meaning to social exchange and thus enable self-reproducing social order. (Greenwood et al., 2008: 4-5, italics in original)

10. We being bearer of institutions
The beliefs, norms, rules, and understandings are not just ”out” there but additionally ”in here”. Participants, clients, constituents all participate in and are carriers of the culture. Thus, institutional environments are notoriously invasive. To paraphrase Pogo, We have met the environment and it is us! (Scott, 1983:16)
Det är oklart vad som avses här men av sammanhanget att döma förefaller det referera till en amerikansk samhälls- och kulturkritisk seriefigur.

11. Three modern uses of institution
Sociology:
Organized and established ways of action. These actions are what are seen as the rules for a community.
Political science:
Describes large or particularly important collectives and associations, often public or state owned.
Anthropology:
As cultural, often historical effects of social order.

12. Early institutional theory within organizational studies
Selznick, 1949, and others
“Officials [in organizations] orient their actions around rules even to the point where primary concern with conformity to the rules interferes with the achievement of the purposes of the organization” (Merton 1936:199)
Institutionalization: “organizations are infused with value beyond the technical requirements at hand” (Selznick, 1957:17)

13. Early institutional theory withing organization studies
People will defend the values and the organization, (even though it may be “dysfunctional” according to some set of criteria)
Organizations with more precisely defined goals and easily defined criteria for evaluation are less subject to institutionalization than those with diffuse goals and disputed evaluation criteria

14. Berger and Luckmann, 1966 How an institution is maintained
Product of human action, not always consious
Response to our need of predictability and structure in every day life
Saves energy
Makes it possible for us to spend time and energy to do extraordinary things
Reflektion
Creation of innovations
We choose the easiest (taken for granted, most accesible) way to do things and avoid chaos and disorder

15. Institutions thus provide us
Order
Stability
Predictibility
Flexibility
Ability to adjust

16. Why are organizations so similar?
(New/neo) institutional theory
Focus
Organizational structure
Processes within organizational fields
New and early institutional theory
Organization and environment effect each other: cultural aspects must be studied to understand how organizations develop
Organizing in practice is not the same as the formal image of an organization

17. Why don’t they seem to be individual (profit) maximizing actors?
New institutional theory : Why are labour markets, schools, national states and corporations so similar when it comes to structure?
Why don’t they seem to be individual (profit) maximizing actors?
What makes their practices so resilient?
How do they (the practices) become taken-for-granted?

18. Formal structure as myth and ceremony (Meyer & Rowan 1977)
Formal structure (organizational chart, work planes, policies) is not what really is done in an organization
I.e. That coordination happens, rules and procedures are followed and activities are aligned with formal structure does not have to be the case!
Talk ≠ decision ≠ action (Brunsson)

19. Rather Plans are loosely coupled/de-coupled to activities
Rules are broken and neglected
Decisions have unexpected consequences
Techniques are not always efficient and effective

20. The reason?
The norm of rationality is an institutionalized myth. However:
We believe that it exists and that it works
We support this with arguments in order to understand and explain it.

21. Example
Vocabularies of structure which are isomorphic with institutional rules provide prudent, rational, and legitimate accounts. Organizations described in legitimated vocabularies are assumed to be oriented to collectively defined, and often collectively mandated, ends. The myths of personnel services, for example, not only account for the rationality of employment practices but also indicate that personnel services are valuable to an organization. Employees, applicants, managers, trustees, and governmental agencies are predisposed to trust the hiring practices of organizations that follow legitimate procedures – such as equal opportunity programs, or personality testing – and they are more willing to participate in or to fund such organizations. (Meyer and Rowan, 1977: )

22. Myths (institutionalized)
Myths about:
Accounting, corporate social resonsibility, personnel recruitment, safety regulations,
Are assumed to be efficient
Show the organization as rational, modern, working with appropriate methods, responsible
Myths are spread and there is pressure on organizations to adopt them
Makes organizations: rational, legitimate, stable, gives access to resources -> survival

23. Myths Make organizations look alike
A problem must be solved in legitimate ways:
E.g. quality problems must be solved with ISO 9000, not new ways of organizing.

24. Organizational fields
The environment is created by and creates in turn organizations
Organizations have to adapt to the structure in their organizational field.
Organizational field:
Organizations that exchange raw material, goods, knowledge, professional values etc
Concept is kind of like industry but wider, including suppliers, customer groups, legitslators, pressure groups etc.

25. The consequence of belonging to a field: becoming similar through isomorphism (DiMaggio & Powell, 1983)
Coercive pressure
Political pressure
Legislation, adaption to new technology
Mimetic pressure
Uncertainty (from unclear objectives, overload of information)
Imitate a more successful org in the field
Normative
Comes from professionalization
By hiring professionals one get people with similar education ->homogenization
Professional networks -> enhance homogenization

26. Why then isomorphism? Make organizations
successful
survive
Develop a common language
Provides legitimate stories – it is known what a ”technician” or ”accountant” do
Organizations do change, not due to what the organization need, but through restraints, regulations, organizing among the members within the field.

27. Loose coupling
The formal structure is loosely coupled from what really happes in the org:
-> two organizational structures:
Formal: changes when laws, norms and fashions change.
Informal: coordinates what people do in an organization

28. Loose coupling: function
To follow institutionalised myths give legitimacy
Legitimacy assures resources (financial, media support, customer support, employees)
Makes it possible for the org to seemingly live up to different (often incompatible) demands from all sorts of interested parties (eg both sustainability and profitability)
Gives the org leeway to act

29. Why is it so difficult to change organizations?
Scandinavian institutionalism: both change and stability is the norm for organizing
Focus on processes (rather than field)
How are identities formed?
How are rules established and broken?
How does deinstitutionalization happen?

30. Change through reforms
Reforms are (a better) solution to problems in organizations
Can be something that has been done earlier but are ”repackaged” and seems new
Reforms are often forgotten after a while
Personnel turnover, change of management, change of mgmt consultant, new reforms
Change focuses the weak spots in the org -> not good for morale, productivity or innovativeness

31. Ideas, fashions, and management recipes that travel
How do ideas travel?
Why do ideas travel?
What ideas travel?

32. How do management ideas travel? Diffusion theory
There must be an energy source (managament, consultant)
In the ideal world ideas travel without resistance (no friction)
Ideas will not change during their journey

33. How do management ideas travel? Translation theory
It is difficult or impossible to find ’the original source’
Friction and resistance give life and energy to an idea
Ideas change when they travel, but that might mean that they get better
Translation is an active and collective process that creates, not just reproduce

34. Why do management ideas travel ?
There are sellers of ideas (universities, consultancy firms)
They are seen as good and rational (institutionalized myths)
Uncertainty: professionals mimic each other, professionals travel from org to org

35. Ideas come and go, like fashion
Fashion= a collective selection mechanism
Fashion allows conformity AND individuality
Fashion reproduces AND changes an old order

36. Deinstitutionalization
Ideas and trends loose status
E.g Swedish municipalities with ’målstyrning’ (management by objectives)
Fashions become too popular
Organizations want to be unique
Start looking for new trends

37. Summary: What is the point of institutions?
Institutions are made by us at the same time as they make us (”we invent culture so that culture can invent us”)
Effect how people within and outside the institution act and can act, sets rules of the game.
Defines the criteria for success and failure

38. Summary institutional theory
Many different approaches
Focus: why organizations are not rational actors and how stability is achieved
Scandinavian institutionalism
Focus on the process instead of the results
Both stability and change is the usual state of affairs!
Fashions and trends are effecting organizing