short written assignment

Chapter 10

Organizational Performance and Change

OVERVIEW

Formal organizations are, presumably, created for some purpose; hence, at the end of the day, one key outcome involves the evaluation of an organization’s performance in terms of its achievement of this purpose. Moreover, if the performance is deemed inadequate, another outcome is change, “righting” the organization to achieve its purpose. Although on the surface these issues seem straightforward, a long line of theoretical and empirical studies provide testimony to how complicated they really are. In this chapter, we review this literature to help you understand why both assessment of organizations’ performance and efforts to bring about intended, significant changes in organizations are so difficult.

Many if not most definitions of formal organizations include the concept of “goal” or “purpose” as a key element. For example, Blau and Scott (1962:5) assert:

In contrast to the social organization that emerges whenever men are living together, there are organizations that have been deliberately established for a certain purpose. If the accomplishment of an objective requires collective effort, men set up an organization designed to coordinate the activities of many persons and to furnish incentives for others to join them for this purpose.

The idea of a shared goal as a defining feature of organizations is consistent with commonsense notions of organizations as being deliberately created to accomplish some task collectively that individuals, acting alone, cannot. Barnard’s classic epitome of an organization as five people trying to move a large rock also reflects this notion. In line with this, it seems reasonable to step back, at various points in an organization’s life, to assess how well it’s performing with respect to its goals. This idea underlies the definition of organizational effectiveness as the degree to which “an organization realizes its goals” (Etzioni, 1964:8). It did not take long, however, for organizational theorists and researchers to recognize the problems inherent in conceptualizing effectiveness this way and in trying to use this approach in assessing organizational performance (Simon, 1964). Below, we discuss some of the problems of specifying exactly what the goals of an organization are, and

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some of the ways this is dealt with in different proposals for assessing organizational performance.

PROBLEMS OF DEFINING ORGANIZATIONAL GOALS

Let’s begin by thinking about how we might determine what the goals of an organization are. One tack we could take would be to examine the mission statement or some other document that offers a formal statement of the organization’s key objectives. The plural term, “objectives,” should signal one potential problem here: most organizations have multiple and, not infrequently, conflicting aims. ExxonMobil’s Financial and Operating Review section of their 2006 annual report (pp. 4–5) provides one example of this. The company’s focal business operations involve the production and sale of gas and oil, and you might assume that its goal is to maximize profits in this business. However, its list of key objectives includes the following (http://exxonmobil.com/corporate/files/corporate/xom_2006_SAR.pdf):

Promoting safety, health, and the environment Demonstrating sound corporate governance and high ethical standards Capturing quality investment opportunities Maintaining one of the strongest financial positions of any company

These goals are not necessarily inconsistent, but it is not hard to imagine circumstances under which the aim of ensuring individuals’ health and the maintenance of the natural environment in this industry might be at odds with that of maintaining a strong financial position. Thus, in gauging the extent to which the organization has realized its goals, one problem is: Which goal should be used?

Along with the multiplicity of goals that characterize most organizations, this list also serves to highlight another common problem in defining goals, the difference between what Perrow (1961:855) refers to as “official” and “operative” goals. He defines official goals as “the general purposes of the organization as put forth in the charter, annual reports, public statements by key executives and other authoritative pronouncements.” Official goals are usually stated in very abstract, broad, and hard-to-measure terms, such as those shown above from ExxonMobil. Operative goals, on the other hand, “designate the ends sought through the actual operating policies of the organization; they tell us what the organization actually is trying to do, regardless of what the official goals say are the aims.” Examining the operative goals entails examining the allocation of organizational resources: to what kinds of activities is the organization devoting relatively more of its money, time, and personnel? Operative goals may be linked directly to official goals, but the fact that they are defined by the relative allocation of organizational resources means that they probably reflect choices among competing values embodied in the latter. Thus, they could contribute to one official goal, while subverting another. An illustration of this is provided by an early study of two state employment agency units by Blau (1955), who found that although the agencies had the same official goals, they were clearly differentiated in terms of what they really were attempting to accomplish. One unit was highly competitive, with members striving to outproduce each other in the numbers of individuals placed, regardless of whether the placements resulted in a good “fit” for individuals and thus job retention. In the other unit, cooperation among the members and quality of placement for job seekers was stressed.

To make matters even more complicated, operative goals may develop that are unrelated to official goals. Perrow (1961) goes on to note:

Unofficial operative goals, on the other hand, are tied more directly to group interests, and while they may support, be irrelevant to, or subvert official goals, they bear no necessary connection with them. An interest in a major supplier may dictate the policies of a corporate executive. The prestige that attaches to utilizing elaborate high speed computers may dictate the reorganization of inventory and accounting departments. Racial prejudice may influence the selection procedures of an employment agency. The personal ambition of a hospital administrator may lead to community alliances and activities which bind the organization without enhancing its goal achievement. On the other hand, while the use of interns and residents as “cheap labor” may subvert the official goals of medical education, it may substantially further the official goal of providing a high quality of patient care. (p. 856)

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Thus, another issue in defining the goals of an organization is whether to take the official or operative goals as the “real” ones.

Even if we were able to construct a reasonable rationale for making the choice between using official or operative goals and for assigning primacy to one or two as the critical goals, we would encounter yet another definitional problem—specifying the temporal boundary of the goals. Attaining a particular goal in the short run, such as maximizing stock price, could be disastrous for a company in the long run if it achieved this by failing to invest sufficient resources in technology or basic staffing. Not making such investments might raise profits and lead investors and analysts to increase the stock value in the short run but create serious functional problems at a later date. This is a key limitation of the classic economic definition of business organizations’ goals, which is simply to “maximize shareholder value” (Davis, 2005). A rather ironic illustration of the importance of considering time in the context of defining goals and assessing goal achievement is provided by the once-popular management book In Search of Excellence (Peters and Waterman, 1982). In the early 1980s, the authors identified a number of companies as high achievers and sought to define the common properties of the companies that contributed to this position. Within five years of the book’s publication, however, a substantial number of the companies were in very serious financial trouble. Thus, it may be difficult to decide what the appropriate time frame for assessing goal attainment should be.

Apart from examining documents that specify official goals, or examining the allocation of resources to ascertain the operative goals, another tack to take in determining what the goals of an organization are might simply be to ask current members. You could even ask them to specify what the single most important goal is. This approach, however, would likely lead to the identification of another, rather different problem with the concept of organizational goal, one summed up by Cyert and March (1963:26), who assert, “People (i.e., individuals) have goals; collectives of people do not.” This distinction partly reflects concern over the potential confounding of individuals’ motivation for cooperating in an organizational context with the outcomes of that cooperative effort. To go back to Barnard’s favorite example of five people trying to move a stone, each person may have a different reason for wanting the stone moved (e.g., to make it easier to travel some route, to provide a dam in a stream, to test a theory of how to move stones with minimal effort). Thus, if you asked them what the goal of the enterprise is, each might well provide you with a different answer.

One way that Cyert and March (1963) propose to deal with this issue is to conceive of the goals of an organization as the intersection of the goals of key participants, or what they call “the dominant coalition” (pp. 30–31). The goal in Barnard’s example (the intersection of the five individuals’ personal goals) would be moving the rock to some particular spot. Given this objective, other individuals may be recruited to participate in the enterprise in exchange for “side payments,” or inducements that the key participants provide; in exchange for these, individuals agree to contribute their activities to achieve the goals as defined. (You may remember this model of organizations being discussed in Chapter 6 on decision-making.) This doesn’t quite get us out of the thicket of trying to define goals by asking members, however, since members are still apt to have different perceptions of what “the organization’s goals” are, and these will probably be closely allied to what their main duties are in the organization (Barnard, 1968:231). Thus, the members of the research and development group at ExxonMobil might be expected to perceive the development of new technology as the key goal of the organization, members of the legal department might see maintaining safety and health (thus avoiding crippling lawsuits) as the key goal, and so forth.

Temporal boundaries are also a problem with this approach, since subjectively defined organizational goals may also shift over time. This can be the result of a number of forces, including environmental changes that lead to new emphases within the organization as well as changes in members of the dominant coalition (i.e., turnover in top executives) who set new priorities for the organization. Michels’s (1949) classic study of the development of oligarchy in political parties and labor unions is illustrative of this. As an oligarchical elite becomes entrenched, the goals that the elites once shared with the rank and file tend to be displaced by other goals among elites—such as perpetuating themselves in office (Tolbert and Hiatt, forthcoming).

There are other sources of shifts in goals, of course. Organizations may begin to emphasize goals that are easily quantifiable, at the expense of those that are not so easily quantified. Universities look at the number of faculty publications rather than at the more-difficult-to-measure goal of classroom teaching; business firms look at output per worker rather than at “diligence, cooperation, punctuality, loyalty, and

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responsibility” (Gross, 1968:542). If organizations do begin to emphasize that which is easily quantifiable, then there is a shift of goals in that direction. Goal shifts are also possible when there is slack in the organization and it is secure. A study of the National Council of Churches found that staff interactions guided by a new professional ideology and strong purposive commitments contributed to major and radical goal shifts within the organization (Jenkins, 1977). This study also suggests that threats to the organization’s domain would probably lead to a more conservative stance. Finally, an additional source of goal shifts lies outside the organization and involves indirect pressures from the general environment. Economic conditions lead to expansion or contraction of operations; technological developments must be accommodated; core social values and legal requirements shift. Organizational goals are adjusted to these environmental conditions.

A classic study of changing goals is provided by Sills’s (1957) analysis of the March of Dimes Foundation, which had been created to raise funds for the treatment of individuals who suffered the crippling effects of polio and for research on this disease. A technological development, the discovery of an effective vaccine, essentially eliminated the need for the continued existence of the organization. You could say that its effectiveness created the conditions for the organization’s demise. Since the organization had grown very large at this point, with a regular, salaried staff that ran it, as well as legions of volunteer workers, closing down the organization was not viewed as a desirable option. Hence it shifted its goals, to raising funds for research on and ultimately elimination of all kinds of birth defects; this is not a goal that is likely to be achieved any time soon.

APPROACHES TO ORGANIZATIONAL EFFECTIVENESS

The preceding discussion of the nature of organizational goals has convinced you, we hope, that the seemingly straightforward approach to assessing organizational performance in terms of goal achievement is fraught with problems (Campbell, 1977). Nonetheless, the desire of investors, government agencies, charitable foundations, and others to be able to evaluate the performance of organizations spurred efforts to develop other ways of assessing effectiveness, leading to a variety of proposed approaches, or models (Georgiou, 1973; Pennings and Goodman, 1977; Seashore and Yuchtman, 1967; Steers, 1977; Yuchtman and Seashore, 1967). We describe some of these below.

System-Resource Approach

One approach advocated by Seashore and Yuchtman (1967), labeled as the system-resource model, defines an effective organization in terms of its “ability to exploit its environment in the acquisition of scarce and value resources to sustain its functioning” (p. 393). Implicitly, this approach assumes that the key goal of an organization is to survive; this is, in the authors’ terminology, the ultimate criterion of effectiveness, which can only be assessed over a long period of time. However, they suggest that there are also penultimate criteria, whose level of attainment at given points in time will affect the ability of the organization to achieve the ultimate goal. In their conception, penultimate criteria have a number of defining characteristics:

[T]hey are relatively few in number; they are “output” or “results” criteria referring to things sought for their own value; they have trade-off value in relation to one another; they are in turn wholly caused by partially independent sets of lesser performance variables; their sum in some weighted mixture over time wholly determines the ultimate criterion. (p. 379)

These penultimate criteria, in turn, are determined by a large number of short-term performance measures; Seashore and Yuchtman refer to these as “subsidiary variables.” Thus, the conception of effectiveness reflects the idea that the long-run performance of an organization depends on how well it performs overall on a variety of dimensions, even though performance on any single dimension at any given point in time may be unrelated (or even inversely related) to its performance on another.

They applied these ideas in a study of seventy-five insurance companies, from whom they collected all kinds of financial and other information (over two hundred variables!) for an eleven-year time period, 1952–

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1962. They reduced the number of variables to seventy-six based on redundancy, missing or poor-quality information, and so forth, and conducted a factor analysis to determine which variables “hung together” as indicators of performance. This resulted in a set of ten factors, such as business volume (e.g., number of policies written), new member productivity (relative number of policy sales by new sales staff compared to those of older staff), and manpower growth. Some of these factors, such as business volume, were very stable over time, whereas others, such as new member productivity, varied considerably across time—that is, the level of new member productivity at one point in time was not related to the level of the same factor at a later point. Moreover, the strength of the relations among the different factors was not very consistent. They conclude:

These sales organizations are maximizing their ability to get resources when they optimize, as an interdependent set, the ten performance factors isolated. This optimizing process involves balancing off some exploitative strategies against others; for example, increased market penetration against temporarily higher production costs; short-run gains against deferred gains; exploiting the manager for current sales as against exploiting him for staff growth and development. The optimum pattern of performance for each of the organizations may be unique to the extent that their histories and environments differ, and they may fall into a limited number of types of alternative general strategies that are equally effective as long as each type maintains its own internal balancing principle. (p. 394)

From the standpoint of thinking about how to assess the effectiveness of an organization, the primary implications of this approach are that the conclusions one draws will depend on what measures are chosen and at what point in time the data are collected on these measures (since not all measures of performance at a given point in time are positively related), and the autocorrelations of a given measure over time may not be very high, or even negative. Thus, it offers important caveats, though not necessarily clear directions for how to assess effectiveness.

Participant-Satisfaction Approach

Barnard (1968) set the tone for participant-satisfaction models in his discussion of efficiency, which he defined in terms of the ability of the organization to attract contributions from members that were needed for the organization to continue to exist. (Note that Barnard used the term efficiency in a way that is a little confusing, given contemporary definitions of efficiency as the ratio of inputs to outputs—that is, maximizing outputs with minimal inputs.) Thus, organizational success was not viewed as the achievement of goals but rather as survival of the organization through securing contributions by providing sufficient rewards or incentives. Georgiou (1973), building on the work of Barnard, argues:

[T]he emergence of organizations, their structure of roles, division of labor, and distribution of power, as well as their maintenance, change, and dissolution can best be understood as outcomes of the complex exchanges between individuals pursuing a diversity of goals. Although the primary focus of interest lies in the behavior within organizations, and the impact of the environment on this, the reciprocal influence of the organization on the environment is also accommodated. Since not all of the incentives derived from the processes of organizational exchange are consumed within the interpersonal relations of the members, organizational contributors gain resources with which they can influence the environment. (p. 308)

The implication of Georgiou’s argument for effectiveness is that incentives within organizations must be adequate for maintaining the contributions of organizational members and must also contain a surplus for developing power capabilities for dealing with the environment. A basic problem with this argument is that it does not disclose how the incentives are brought into the organization in the first place. If a major incentive is money, the money must be secured. To be sure, money is brought into the organization through exchanges with the environment, but it appears that the system-resource approach or a goal model dealing with profit is necessary before considering individual inducements.

Cummings (1977) approaches effectiveness from a related perspective. He states:

One possibly fruitful way to conceive of an organization and the processes that define it is as an instrument or an arena within which participants can engage in behavior they perceive as instrumental to their goals. From this perspective, an effective organization is one in which the greatest percentage of participants perceive themselves as

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free to use the organization and its subsystem as instruments for their own ends. It is also argued that the greater the degree of perceived organizational instrumentality by each participant, the more effective the organization. Thus, this definition of an effective organization is entirely psychological in perspective. It attempts to incorporate both the number of persons who see the organization as a key instrument in fulfilling their needs and, for each person, the degree to which the organization is so perceived. (pp. 59–60)

According to this approach, factors such as profitability, efficiency, and productivity are necessary conditions for organizational survival and are not ends in themselves. The organization must acquire enough resources to permit it to be instrumental for its members. A loosely related approach argues that more effective organizations are those in which the members agree with the goals of the organization and thus work more consistently to achieve them (Steers, 1977).

Approaching organizational effectiveness from the perspective of individuals and their instrumental gains or their goals has three major problems. The first problem, which is particularly the case for Steers’s approach, is that individuals have varying forms of linkages to the organizations of which they are a part. People’s involvement in organizations can be alienative, calculative, or moral (Etzioni, 1961, 1975). These different forms of involvement preclude the possibility of individual and goal congruence in many types of organizations. A second, and more basic, problem in these psychological formulations is that their focus on instrumentality for individuals neglects the activities or operations of the organization as a whole or by subunits. Although the instrumentality approach is capable of being generalized across organizations, it misses the fact that organizational outputs do something in society. The outputs may be consumed and enjoyed by some, but they also could be environmentally harmful in general. The outputs may affect people in other organizations as much as people within a focal organization. The psychological approach also downplays the reality of conflicts among goals and decisions that must be made in the face of environmental pressures. The problem is basically one of overlooking a major part of organizational reality. For example, some research indicates that there is a positive relationship between workers’ commitment to the organization and some effectiveness indicators such as adaptability, turnover, and tardiness. No such relationship was found with the effectiveness indicators of operating costs and absenteeism, however (Angle and Perry, 1981). Reducing effectiveness considerations to the individual level misses the point that there can be conflicts between desirable outcomes, such as lowered operating costs and lowered turnover.

A third problem with this individualistic approach is that it misses the fact that individuals outside the organization are affected by what organizations do. A study of the juvenile justice system found that the “clients” of a juvenile justice system network had clearly different views of the effectiveness of organizations such as the police, courts, and probation departments from those of the members of those agencies (Giordano, 1976, 1977). That is hardly surprising, of course, since the clients in this case were juveniles who had been in trouble with the law. Nonetheless, a client perspective on effectiveness would seem to be a critical component of any comprehensive effectiveness analysis.

Stakeholder Approach

Inherent in many of these models and in the debates surrounding them is the idea that it is folly to try to conceptualize organizations as simply effective or ineffective (Campbell, 1977). Some (e.g., Pennings and Goodman, 1977; Perrow, 1977) began to suggest that the concept of effectiveness requires a referent: you need to specify for which set of interests an organization can be said to be effective. This view underlies what has come to be called a stakeholder approach (or sometimes, multiple constituency approach) to assessing effectiveness (Cameron and Whetten, 1981; Connolly, Conlon, and Deutsch, 1980; Tsui, 1990). This approach recognizes that different sets of people who contribute to and are important for the organization are apt to have differing objectives they seek to satisfy through the organization and that these differences should be explicitly recognized (Donaldson and Preston, 1995). Although work in this tradition shares the recognition that there are different (and probably conflicting) organizational goals associated with different (and also possibly conflicting) groups, it differs in terms of the relative weight that is assigned to the preferences of different groups in coming up with an overall assessment of the organization. Zammuto (1984) identified four distinct stakeholder approaches on this basis, what he terms relativistic, power, social justice, and evolutionary.

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A relativist approach entails identifying key constituencies, collecting information from each set of constituents about the effectiveness of the organization based on their own criteria, and then presenting the results to whatever audience seeks it (e.g., Connolly, Conlon, and Deutsch, 1980). According to Zammuto (1984), in this approach

an overall judgment of organizational effectiveness is viewed as being neither possible nor desirable because the approach does not make any assumptions concerning the relative primacy of one constituency’s judgments over those of any other constituency. Instead the relativist evaluator takes the position that overall judgments should be made by someone else, preferably the consumer of the evaluative information. (p. 607)

While the agnosticism of this approach to the question, “effective for whom?” has some appeal, it’s worth noting that it provides little or no guidance for possible organizational change, unless of course all constituencies converge in a common assessment—intuitively, an unlikely outcome (Meyer and Zucker, 1989). It also ignores the likelihood that the constituency that commissions such collection of data is very likely to be one controlling critical resources.

A power approach, on the other hand, explicitly uses assessment criteria based on the goals of the group that is most critical to the organization, or what has been referred to as the “dominant coalition.” One way to do this, presumably, is to let the organizational members negotiate the criteria to be used in assessing an organization’s performance; the outcome of such negotiation can be assumed to reflect the preferences of the most powerful internal constituents of the organization (Pennings and Goodman, 1977). Pennings and Goodman recognize that there are requirements set by both internal and external stakeholders that must be met if an organization is to survive, but just meeting these constraints does not imply that an organization has a high degree of effectiveness. Rather, effectiveness is indicated by the degree to which an organization meets or exceeds the objectives defined by the dominant coalition. If an organization is a publicly traded firm, many economists would argue that effectiveness is indicated very simply in the stock price of the firm (Jensen, 2002); this is the logic behind the notion that “maximizing shareholder value” should be the goal of all publicly held businesses. Of course, this ignores the fact that shareholders are not an undifferentiated group with a single objective. Employee shareholders, small investors, and large investors may have very different time frames for their investments and thus different values at any given point. In this context, a power approach is consistent with making “maximize shareholder value” equate to “maximize the current goals of a few large investors.” A logical problem with this approach is that achieving these goals may result in the demise of the organization, insofar as keeping current stock value high results in inability of the organization to function in the long run, as it did at Enron (McLean and Elkind, 2004). Interestingly, partly in response to the power of external shareholders, many corporations have in recent years launched stock repurchase plans, allowing business firms to buy back stock. Although this practice runs counter to the logic of “market discipline,” it may have acquired increased legitimacy as a result of some of the failures of market discipline, as exemplified by Enron (Zajac and Westphal, 2004).

The exact opposite of a power approach is what is referred to as the social justice approach, as advocated by Keeley (1978, 1984). Building on the work of the social philosopher John Rawls, Keeley suggests that a guiding principle for organizational evaluation should be “maximization of the least advantaged participants in a social system” (1978:285). Keeley proposes that this approach could be operationalized by minimizing the regret that participants experience in their interactions with the organization. Keeley’s (1984) later work shifts to the idea of minimizing organizational harm but retains the same flavor. He recognizes the difficulties associated with the actual application of the approach but claims that the approach contains an optimization principle that goal models do not contain. He argues that it is possible to specify the manner in which group regret or harm can be minimized across organizations, though it is not possible to specify how goal attainment can be optimized across organizations, given the diversity of goals. Although this seems hopelessly idealistic at first blush, Keeley argues for its essential pragmatism in the long run:

It may seem perverse to focus on regretful organizational participants rather than on those, possibly more in number, who enjoy the outcomes of cooperative activity. But the point is that generally aversive system consequences ought not, and, in the long run, probably will not, be tolerated by some participants so that positive consequences can be produced for others. Systems that minimize the aversive consequences of interaction are, therefore, claimed to be

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more just as well as more stable in the long run. (p. 290)

Finally, an evolutionary approach, as described by Zammuto (1982), takes into account the possibility that the relative power and the importance of different constituencies will change over time and that constituencies’ preferences may change as well. Thus, this approach downplays the utility (and even underscores the potential harm) of attempting to evaluate the effectiveness of organizations at a single point in time. This is certainly consistent with the cautionary example offered by In Search of Excellence, which we discussed in the preceding paragraphs. It suggests that organizations that can adapt to best meet the demands of an organization’s most important constituents as these change over time should be considered to be most effective.

While a stakeholder approach in general seems to be more sensible than a simple goal-based approach, one implication of this review is that a stakeholder approach in fact requires analysts to prioritize stakeholders on the basis of some underlying values or goals that they ascribe to the organization—whether this be satisfaction of the needs of powerful members, realization of social justice values, or long-term survival of the organization. Recognizing that such choices need to be made explicit is a useful contribution of a stakeholder approach.

Although the ambiguities and problems in assessing organizational effectiveness have led some to argue that effectiveness as an overall concept has little or no utility (e.g., Hannan and Freeman, 1977a), we think that it would be a serious mistake simply to ignore issues and findings that have been developed in regard to organizational effectiveness. As we noted, the perceived need to evaluate organizations as part of deciding whether to transact with them—whether by investors, government agencies, private charities, or others— remains as strong today as it ever was. If organizational researchers throw up their hands in the face of problems involved in assessment, this is not going to mitigate this pressure. Instead, we advocate the importance of recognizing issues that have been raised in our review of previous efforts to help guide efforts to conduct performance assessment, and to interpret (with due caution) the outcomes of these efforts. In this light, let us summarize issues that any effectiveness study should take into consideration, both in terms of design and in terms of drawing conclusions.

EVALUATING ORGANIZATIONAL PERFORMANCE: KEY ISSUES

1. Organizations face multiple and conflicting environmental constraints. These constraints may be imposed on an organization; they may be bargained for; they may be discovered; or they may be self-imposed (Seashore, 1977). Imposed constraints are beyond organizational control. They involve our familiar environmental dimensions such as legal requirements and economic pressures. To be sure, organizations lobby for legal and regulative advantage, but taxes and regulations are essentially imposed on organizations. This imposition is not just from government. A computer or software manufacturer, such as Microsoft, that develops new systems is imposing this environment on users, if those users must adopt the new system to stay “state of the art.” Bargained constraints involve contractual agreements and competitive pressures in markets. Discovered constraints are environmental constraints that appear unexpectedly, as when a coal company finds that its vein of ore has run out. Self-imposed constraints involve the definitions of the environment that organizations utilize. For example, a study of newspaper coverage of an oil spill documented the fact that newspapers differed markedly in the amount of space given to the spill (Molotch and Lester, 1975). Organizational policy thus defines the importance of environmental elements.

Regardless of the source of the constraints, the fact that they frequently conflict must be stressed, since efforts to deal with one constraint may operate against the meeting of another. Indeed, organizational units facing multiple contingencies are more prone to face design misfit and lower performance than those in simpler situations (Gresov, 1989). As a general rule, the larger and more complex the organization, the greater the range and variety of constraints it will face. Organizations have to consider their environments, recognize and order the constraints that are confronted, and attempt to predict the consequences of their actions—all within the limitations on decision-making and rationality we have considered.

2. Organizations have multiple and conflicting goals. This point has been beaten to death, but one more pass is necessary here. A case from the University at Albany is instructive. It involved a threatened budget cut,

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which is an annual event that sometimes results in real cuts and sometimes does not. In the case being described, the threatened cuts were severe. Each vice president had to make up a list of “target” positions in his or her area. We know that decisions that are made in such situations are the result of power coalitions. At the same time, goals do not just disappear. Issues such as the emphasis on research, needs for the continued recruitment and retention of high-quality students and faculty to achieve the goal of being a high-quality university, and reiterations of the importance of having a safe and attractive campus were voiced and were much more than rhetoric. When the cuts were made, they were based on goals and power coalitions. Both contained contradictions that were played out in actions.

3. Organizations have multiple and conflicting internal and external stakeholders, a point that is partly related to the preceding one. By stakeholders we mean those people affected by an organization (Marcus and Goodman, 1991; Tsui, 1990). They may be employees, members, customers, clients, or the public at large. Stakeholders can also be other organizations such as suppliers and customers. Individual and organizational stakeholders obviously can have different and contradictory interests (Harrison and Freeman, 1999; Somaya, Williamson, and Zhang, 2007). Although it may be necessary to draw conclusions about organizations’ performance, prioritizing the objectives of one set of stakeholders is very likely to create problems and pressures from other stakeholders in response.

4. The outcomes of any assessment effort will almost certainly depend on the time frame that it used. There are intraorganizational variations in the time frames that may affect efforts to understand the performance of the organization as a whole (Lawrence and Lorsch, 1967). The degree and mix of environmental constraints also vary over time. Constraints that were critical at one point may disappear as threats. New problems arise. Time also plays a role in the history of an organization, since new organizations are more vulnerable. How to incorporate the temporal dimension in assessing effectiveness is essentially one of judgment. Decisions must be made with regard to the time frame of reference for analyzing goal attainment, the nature and phasing of environmental constraints, and the historical situation of the organization. Failing to recognize this can lead the analyst and the practitioner to real problems. For the analyst it is only a poor study; for the practitioner it is organizational decline or death.

ORGANIZATIONAL CHANGE AND TRANSFORMATION

There is another key outcome for organizations, one that is often a corollary of efforts to assess performance: change. With the exception of population ecology, most organizational research is predicated on the assumption that change is a pervasive aspect of organizations. Child and Kieser (1981), for example, assert:

Organizations are constantly changing. Movements in external conditions such as competition, innovation, public demand, and governmental policy require that new strategies, methods of working, and outputs be devised for an organization merely to continue at its present level of operations. Internal factors also promote change in that managers and other members of an organization may seek not just its maintenance but also its growth, in order to secure improved benefits and satisfactions for themselves. (p. 28)

But how do such changes take place? Many changes may occur, if not completely haphazardly, in a piecemeal fashion that doesn’t reflect consideration of long-term direction but simply immediate solutions to immediate problems as they are perceived. At some point, though, members of an organization may stop to take a longer-term view of how it is functioning (either voluntarily or because circumstances—e.g., imminent failure—dictate this) and decide that some significant alterations in operations are needed. There are a number of different lines of work that address the challenges of bringing about change in organizations, ranging from problems of organizational learning to those of large-scale organizational transformation. Below, we review some of the main ideas from these literatures.

ORGANIZATIONAL CHANGE: LEARNING AND TRANSFORMATION

Closely aligned with work on organizational decision-making, research and theory on organizational learning

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has examined how organizations get, interpret, and act on information that leads to changes that are designed to improve their functioning. Glynn, Lant, and Milliken (1994) distinguish two different strands of research and theory on this topic. One, referred to as adaptive learning, is very directly tied to work from the Carnegie School on processes of decision-making (Cyert and March, 1963; March and Simon, 1958; Simon, 1957). This work focuses on linking the cognitive processes of individuals to structural properties of organizations (Argote and Greve, 2007). The other, referred to as the knowledge development approach, comes out of research on small groups in social psychology and focuses primarily on factors that affect communication and patterns of interaction among members of a group.

An Adaptive Learning Approach

The adaptive learning approach is predicated on the view of organizations as a series of programs, or sets of rules, for making decisions that lead to the accomplishment of various tasks. Routine use of these programs economizes on individuals’ decision-making efforts and contributes to the efficiency and reliability of organizations’ outcomes. However, when programs fail to yield outcomes that are at or above some standard that has been set (e.g., the organization’s revenues drop below the past quarter’s or those of the past year), a search for new programs, or a nonroutine revision of the existing programs, is set in motion. March and Simon (1958:174–175) suggest that the beginning of a round of learning in organizations entails the “devising and evaluation of new performance programs that have not previously been a part of the organization’s repertory and cannot be introduced by a simple application of programmed switching rules.” (Their view of programs includes the notion that organizations may have established rules for changing programs; when the programs yield unsatisfactory results and the established rules for changing the programs also fail to yield satisfactory results, search processes—and learning—begin.) This approach assumes that organizational search is usually relatively limited, in part because choices for new programs are shaped by existing programs because these create cognitive frameworks and categories for analyzing problems (Cohen and Levinthal, 1990). Thus, learning (and hence change) in organizations is viewed as occurring incrementally and as being reflected in the systematic alteration of standard sets of decision rules, or programs. This latter point is important because “organizational learning” connotes more than the acquisition of knowledge by individuals; for individuals’ knowledge to become part of the knowledge of an organization, it must be embedded in rules and common procedures that enable it to persist (Carley, 1992; Levitt and March, 1988).

An illustration of research in this tradition is provided by a study of accidents among U.S. commercial airlines by Haunschild and Sullivan (2002). The question the authors address is whether organizations are more likely to learn from accidents that have complex, more ambiguous causes (what they call heterogeneous accidents) or clearer, easier-to-diagnose causes (homogeneous accidents). Heterogeneous accidents often involve a series of events (e.g., a warning light coming on indicating engine problems, a pilot’s failure to notice and/or notify anyone of this, a lack of required maintenance checks by the crew), thus requiring a deeper analysis of a broad range of possible underlying sources of problems. They note that this complex analysis is likely to generate debate among people charged with evaluating the causes, entailing more a carefully developed articulation of suspected problems and possible solutions. In this light, heterogeneous accidents might be expected to produce greater organizational learning. On the other hand, they also make the case that homogeneous accidents, especially when they occur repeatedly, may make a particular problem more salient and increase the perceived need to address it. Hence, the opposite prediction, that learning will increase as the number of homogeneous accidents increases, could be seen as plausible. Using reduction in the rates of accidents over time (between 1983 and 1997) as an indicator of organizational learning, Haunschild and Sullivan found that, in general, heterogeneous accidents were more likely to lead to organizational learning. However, the impact of this depended partly on whether the organization was a generalist (indicated by having a variety of types of airplanes in its fleet) or a specialist (having only a single type of airplane). They argue that the complexity of generalist organizations makes processing of information more difficult, and this makes learning from heterogeneity more difficult as well. In line with this, they found that heterogeneous accidents led to greater learning among specialist airlines, but not among generalists. However, unlike specialists, generalists also seemed to learn from others’ experiences as well as from their own. This may be because

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generalists are often larger and are apt to have the resources to engage in more intensive monitoring of what is happening in the industry in general. Thus, this research focuses on the link between structural conditions (organizational complexity) and processes involved in organizational learning (drawing causal inferences), which is characteristic of an adaptive learning approach. Because the authors use archival data, they could not directly examine the creation or modification of programs that presumably underpin the reduction of accidents. (For a more close-grained analysis of such processes, see the interesting observational study of product development teams in two firms conducted by Miner, Bassoff, and Moorman, 2001.)

There is a separate line of studies of innovation in organizations (e.g., Damanpour and Evan, 1984; Hage, 1980, 1999; Moch, 1976; Moch and Morse, 1977; Pennings, 1987; Zaltman, Duncan, and Holbek, 1973) that could also be viewed from an adaptive learning approach, although the connections are not always drawn between these studies and the latter approach. Part of the reason for this is that many studies of innovation do not explicitly focus on the interaction between the cognitive properties of individuals and structural properties of organizations, as an adaptive learning approach does. Instead, much of the work on innovation has been concerned with identifying characteristics of innovations that make them more “adoptable” and characteristics of organizations that make them more “adopting.” An innovation is defined as a significant departure from existing practices or technologies (Kimberly and Evanisko, 1981). (The parallels between this concept and that of March and Simon’s notion of changing performance programs, as we described above, are worth noting. To repeat, March and Simon defined change as involving “new performance programs that have not previously been a part of the organization’s repertory and cannot be introduced by a simple application of programmed switching rules.”) Zaltman, Duncan, and Holbek (1973) proposed a long list of factors that make innovations more likely to be adopted, including lower cost, compatibility with the existing organizational systems, the ability to be modified later, a lack of complexity. On the other side, Hage and Aiken (1970) proposed a list of organizational characteristics that were posited to increase the propensity to adopt innovations. These included greater decentralization, less formalization, greater emphasis on quality (versus volume) in production, and higher levels of training among organizational members. There was, over a period, some debate in this literature over the relative importance of the characteristics of the innovation, organizational characteristics, and characteristics of decision-makers in determining the propensity of organizations to adopt innovation (e.g., Hage and Dewar, 1973 versus Baldridge and Burnham, 1975), which ultimately concluded that all factors interacted as influences (Damanpour, 1991).

In general, work from the adaptive learning tradition, in combination with some of the older studies of innovation, suggests a number of factors that often impede organizational learning. One is that individuals’ cognitive preferences for stability and the use of routine programs often lead to a lack of recognition of “failures” in the programs (Milliken and Lant, 1991). This is consistent with the findings of a study by Manns and March (1978) of university departments, that under conditions of financial constraint, more powerful departments were less likely to innovate, in terms of offering a wider variety of courses, changing the number of credits assigned to courses, and so forth, than weaker ones. One way to interpret this finding is that increased power and resources enable members to indulge their cognitive preferences for stability. Another impediment to learning is organizational structure, particularly structure that contributes to the perpetuation of existing programs. This notion is consistent with the findings of Hage and Aiken, that greater formalization leads to less innovation. In other words, encoding performance programs in writing makes them less likely to be targeted by “problemistic search” (Cyert and March, 1963) and thus less likely to be modified. Interestingly, another barrier to learning, suggested by March (1991), is incremental learning itself. Incremental learning, in March’s terms, involves “exploitation” of an organization’s existing knowledge base—members become used to making small alterations in organizational practices and procedures and viewing this as the right way to go about changing the organization. This typically limits what he calls “exploration,” the search for very different knowledge and ideas that might call the organization’s existing knowledge base into question. Thus, when the conditions facing organizations change dramatically, those organizations that have acquired the greatest competence in operating in previous conditions are apt to find it most difficult to adapt and are most vulnerable to failure.

A Knowledge Development Approach

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Although adaptive learning and knowledge development approaches overlap, a distinguishing feature of work that we would characterize as part of the latter tradition is the attention given to relational influences and social processes that affect knowledge transfer—the understanding, sharing, and accepting (or not) of information and ideas that lead to different ways of doing things in organizations. Researchers have examined a variety of group characteristics that may affect such transfer processes. For example, Edmondson (1999) studied the impact of culture, in particular, a culture that fosters a sense of psychological safety, “confidence that the team will not embarrass, reject, or punish someone for speaking up.” Using data collected from a number of independent teams in a manufacturing company, she concluded that psychological safety led to enhanced team performance, as measured by self-reports from members of each team and her own observations of each team’s performance. On the basis of her research, she attributes this relationship to the greater efforts of team members in psychologically safe groups to engage in learning behaviors such as discussions about how to improve the team’s operations and collection of data relevant to the team from a wide variety of sources. Another example is provided by a study by Darr and Kurtzberg (2000), who considered the impact of similarity among franchises (including location, customer base, and strategy) on franchisees’ propensity to adopt ideas and practices from each other. They found that firms were most attentive to others that were pursuing similar business strategies and were more likely to learn from them, indicated by the relationship between a given firm’s changing production costs and those of other firms.

One last example that we’ll offer comes from an experimental study examining the impact of shared social identity on the transfer of knowledge (Kane, Argote, and Levine, 2005). Following a line of studies that have suggested personnel changes as an important mechanism for transferring ideas and information across groups and organizations (e.g., Boeker, 1997), participants in the experiment were divided into sets of two teams, each containing three members, and each team was given the task of assembling origami sailboats. To manipulate a sense of shared social identity, some pairs of teams were given a common superordinate team name along with name tags of the same color and were intermixed around a table while the general task was explained to them. The pairs of teams without a shared identity were not given a common name, each team had different colored name tags, and the teams were seated on opposite sides of the table while the task was explained. The teams were then separated into two rooms, where one team was provided with a set of instructions for constructing the sailboats very efficiently, while the other team was provided with instructions that were less efficient. After the teams had worked for awhile, one member of each team was rotated into the other team. The researchers were interested in seeing whether having a superordinate team identity would affect the ability of the rotated member to influence the methods the team used in constructing the sailboats. They hypothesized that when the rotated member had been trained using the more efficient method (had superior knowledge), the team would be more likely to change their method than when the rotated member had been trained with the less efficient method (had inferior knowledge), but this would only occur when the two teams had a superordinate identity. The results of the study supported their hypotheses. When teams shared a superordinate identity, they adopted the superior method 67 percent of the time in the first trial, and 75 percent of the time in the second. (Surprisingly, teams with a superordinate identity adopted an inferior method brought by the rotating member 8 percent of the time!) In contrast, when the teams did not share a superordinate identity, they only adopted the superior method brought by the rotating member 25 percent of the time. Thus, this study provides strong evidence of the influence of social relationships on groups’ willingness to accept ideas and information and thus to learn.

Percentage of Teams Adopting Methods of Rotated Team Member

Adapted from Aimee A. Kane, Linda Argote, and John M. Levine, “Knowledge Transfer between Groups via Personnel Rotation: Effects

Trial Rotating Member Has Superior Knowledge Rotating Member Has Inferior Knowledge Superordinate Identity Condition

1 67 8 2 75 0

No Superordinate Identity Condition 1 25 0 2 25 0

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of Social Identity and Knowledge Quality,” Organizational Behavior and Human Decision Processes 96 (2005): 62.

In general, work in this tradition, like that of adaptive learning, also indicates that there are many barriers to organizational learning (Argote, 1999), although, as noted, the barriers underscored by the knowledge development literature involve relational influences rather than the sorts of cognitive tendencies and limitations emphasized by work in the adaptive learning tradition.

In combination, the two traditions suggest that there are substantial barriers to incremental organizational learning and, hence, to organizational change. To make matters worse, there are occasions when even incremental learning and incremental organizational change are not sufficient, when organizational survival requires major transformational changes. This brings us to the debates and research on organizational transformation.

TRANSFORMATIONAL CHANGE

Although bringing about incremental change in organizations may not be easy, particularly change that truly improves organizational functioning, both research and everyday observations of organizations attest that this sort of change does occur with some frequency. On the other hand, there is much more debate about both the frequency of occurrence and the general efficacy of transformational change. The concept of transformational change connotes a significant alteration in some core property of organizations, such as official goals and mission, basic technology, or other aspects that are central to their identity. By identity, we mean features that members and nonmembers use to “distinguish the organization from others with which it might be compared” (Albert and Whetten, 1985:265; see also Dutton, Dukerich, and Harquail, 1994). As we noted in our discussion of population ecology in Chapter 9, two key premises underlying this theoretical framework are that fundamental change in organizations is extremely rare (excluding death as a type of change, of course) and that efforts to bring about transformational change are almost always fatal. A huge practical management literature on how to change organizations certainly provides strong testimony to arguments of powerful inertial forces in organizations and the difficulties inherent in bringing about significant organizational change. This was also acknowledged by an early analyst of organizational change, Herbert Kaufman (1971), who noted:

In short, I am not saying that organizational change is invariably good or bad, progressive or conservative, beneficial or injurious. It may run either way in any given instance. But it is always confronted by strong forces holding it in check and sharply circumscribing the capacity of organizations to react to new conditions—sometimes with grave results. (p. 8)

Kaufman went on to describe the factors within organizations that contribute to resistance to change. These include the “collective benefits of stability” or familiarity with existing patterns, “calculated opposition to change” by groups within the organization that may have altruistic or selfish motivations, and a simple “inability to change” (p. 3). The last point refers to the fact that organizations develop “mental blinders” that preclude change capability. This happens as personnel are selected and trained to do what was done in the past in the manner in which it was done in the past.

However, whether the likelihood of transformational change in organizations is quite as miniscule as suggested and whether such change is likely to do mortal harm, especially, are subject to contention.

Case Studies of Organizational Transformation

There is a venerable tradition in sociology of case studies that have examined instances of transformational change. We’ve discussed some of these, such as Sills’s (1957) study of the March of Dimes Foundation, the organization that redefined its key mission to be the eradication of birth defects after its original mission, eradication of polio, was accomplished through the discovery of a vaccine. As described in Chapter 9, the case of the Tennessee Valley Authority (TVA)—the organization that was founded to provide services for the desperately impoverished farmers of the Deep South during the Great Depression, but that ended up serving

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primarily the wealthier farmers in the region as a result of co-optation—is another example (Selznick, 1966). This is a case where the operative goals, as we discussed in a preceding section, were substantially changed, though the official goals remained the same. Clark (1972) compared three cases of private colleges, Reed, Antioch, and Swarthmore, each of which underwent major transformations in its curricular emphases and academic orientations. Still another case of transformational change is provided by a study by Zald (1970) of the Young Men’s Christian Association (YMCA) (see also Zald and Denton, 1963). Zald’s analysis provides very useful insights into factors that affect organizational transformation, so we’ll describe this in a little more detail.

Founded in London in the mid-1800s, the YMCA was originally created to recruit young men who had migrated from the country to urban areas in pursuit of new industrial jobs to evangelical Christianity. In exchange for cheap meals and information on “wholesome” boarding houses and jobs, the migrants were expected to attend missionary church services and ultimately to become members of evangelical churches associated with the YMCA. In the United States, new immigrants to the country were often the targets of the organization’s outreach efforts. However, as the flood of immigrants in the late 1800s turned into a small stream by the early 1900s and as secularization became a prominent trend, the emphasis of the organization on religious conversion shifted to developing the “whole man” by providing an array of physical, social, and intellectual activities. In addition to changing the primarily goal, the organization also changed its primary client group as well, from exclusively young Protestant men to include women and members of other religious denominations as well.

Zald’s analysis focuses on the characteristics of the organization that enabled it to undertake this transformation successfully. One is the broad formulation of the organization’s initial goal, which was to contribute to members’ development of strong moral character. As he points out, this goal permits enormous potential diversification, since a wide range of activities can be viewed as being perfectly consistent with that objective; it also does not limit the set of target clients served by the organizations’ activities. In addition, the organization’s primary means of financing, through the dues paid by members, encouraged it to pay close attention to changing environmental conditions—that is, to the wants and interests of potential members. As he suggests, dependence on a single constituent, such as a particular church or charity, would almost certainly have muted the impact of changes in societal preferences and attitudes on organizational decision-makers’ choices of services to provide. Adaptation to the environment was also facilitated by the federated structure of the organization, in which local associations were provided with considerable autonomy, allowing them to make changes that were consistent with local conditions. More recent research suggesting the importance of “interconnected organizational forms,” such as franchises and strategic alliances (e.g., Baum and Ingram, 1998; Powell, Koput, and Smith-Doerr, 1996), in helping spread ideas and information (Argote et al., 2000) supports the idea that this structure may also have facilitated organizational learning among different parts of the organization.

All of these studies provide fascinating insights into processes that promote and accompany organizational transformations. As a set, they suggest that transformations are apt to occur when major environmental changes take place that limit organizations’ ability to continue to get resources without changing (e.g., technological advances in the March of Dimes Foundation, changes in demographics and dominant cultural values in the YMCA). Clark’s (1972) study of the three colleges, in particular, underscores the key role played by organizational leaders in selecting and promoting a specific response to changing environmental conditions. This is consistent with the popular management literature on the importance of transformational leaders (Bass, 1985; Burns, 1978; Judge and Piccolo, 2004). It’s worth noting, however, that Lipset’s (1960) study of the way in which the efforts by socialist party leaders, swept into office by Canadian elections in the 1930s, to transform provincial governance were effectively sabotaged by lower-management civil servants sounds a cautionary note for this literature. Zald’s study suggests the importance of diversified resource dependencies, rather than more concentrated dependence, in enabling organizations to undertake transformational efforts. However, there is one important point to note here: because they are all studies of organizations that undertook and survived the transformation process, we are limited in drawing conclusions from these cases about the kinds of organizations that are likely to undertake transformations (since we have no comparative information on organizations that faced similar conditions and did not seek to transform themselves), or the conditions that

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allow transformations to be successful (since we lack information on organizations that tried to transform themselves and failed). However, a number of more recent studies coming out of the tradition of population ecology, based on comparative data from organizations undergoing transformational change, provide more systematic insights.

Comparative Studies of Organizational Transformation

As we discussed, population ecologists’ arguments for selection as the key mechanism in producing observed shifts in organizational populations rest on the assumption that organizations rarely undergo significant change and that when they do, it’s likely to be fatal to their survival (Hannan and Freeman, 1984). The latter assumption, in particular, has been put to test by a number of studies in this tradition, with less than overwhelming support for it.

For example, Kelly and Amburgey (1991) studied the impact of going from a specialist airline (carrying only one type of product—mail, passengers, cargo, and so on) to a generalist airline (carrying mixed types of products) and vice versa, using data from the airline industry between 1962 and 1985. This industry was affected by a significant environmental jolt (Meyer, 1982) in 1978, in the form of deregulation. A rapid increase in the foundings of new airlines in the wake of this change increased competition among airlines enormously and led many of the airlines to make key shifts in their strategy, reflected in changes from specialists to generalists and the reverse. This is notably inconsistent with the argument that organizations tend toward inertia; moreover, Kelly and Amburgey’s findings indicate that neither a shift toward specialism nor one in the opposite direction, toward generalism, had any significant impact on the airlines’ chances of survival. Likewise, Kraatz and Zajac (1996) found that the adoption of business and other professional programs by liberal arts colleges—a shift that sharply contradicted their identity as generalist educational institutions—had no significant negative effect on their survival chances. Research by Haveman (1992) on savings and loan organizations (thrifts), members of an industry that was also significantly shaken up by the wave of deregulations that swept the United States in the 1980s as well as by rapid computerization during this decade, also challenges the notion that transformational changes generally raise rates of organizational failure. As deregulation and other economic changes made the two key traditional activities of thrifts, maintaining savings account for small investors and providing fixed-rate residential mortgages, less and less profitable, many attempted to move into new domains, such as nonresidential (commercial) mortgages, various types of investment activities, and other consumer loans (e.g., credit cards, automobile loans). Haveman examined the impact of these kinds of domain shifts on thrifts’ financial performance and their survival chances. She found evidence of substantial change in these organizations over time: the average level of firm assets invested in residential mortgages dropped from nearly 80 percent in 1977 to just about half in 1986. Moreover, the more thrifts diversified into other financial domains, generally, the better their financial performance, at least in the short term. Not all domain changes had a positive effect in terms of enhancing survival; most had no effect on this, although a few actually increased the likelihood of survival. Again, as with the Kelly and Amburgey study, these results run counter to arguments that selection is almost inevitably the primary motor of population change. Other studies, however, have provided some evidence that core changes in organizations have negative consequences (e.g., Amburgey, Kelly, and Barnett, 1993).

As Baum (1996) cautions, much remains to be understood about the conditions under which organizational transformations will yield successful outcomes or the opposite. Older and larger organizations, for example, may have the resources and the reputation to invest in making significant changes and to ride out the difficulties in operations that are apt to occur with change, whereas smaller, younger organizations may lack these. This is in contrast to the usual image of the latter sorts of organizations as being more flexible and more adaptive; perhaps this holds for smaller changes, but not transformational ones. Some evidence along these lines is provided by another study of the thrift industry by Haveman (1993a). In this study, she examined how size affected the organization’s propensity to shift domains. Her results suggested that for some types of domain changes, both very large and very small organizations were at a disadvantage. Her proposed explanation is that small organizations lack the resources to undertake significant change, whereas the largest organizations tend to be the most bureaucratized; thus, it takes much more effort to bring about significant

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alterations in practices. For some types of domain changes, though, it appeared that the larger the organization, the more likely it was to make the change. It may be that entry into some markets, or some kinds of transformation, simply requires such concentrated efforts and large expenditures of resources that only very large organizations can undertake them. In other cases, the level of resources required may be high, but not so high as to make it out of reach of more medium-sized organizations, who are less held back by high levels of formalization, complexity, and other correlates of size.

SUMMARY AND CONCLUSIONS

In this chapter, we have considered two basic outcomes for organizations: evaluation of performance and change. We assume that generally the latter outcome reflects the former, although performance evaluations may not be conducted as fully as the literature that we discussed on effectiveness and performance suggests they should be. The absence of regular, full-blown assessments of effectiveness in many organizations is understandable, in light of our discussion of the complexities involved in this task. However, as we argued, awareness of such complexities may be useful and shouldn’t necessarily lead to abandoning these efforts in despair. As some of the literature on adaptive learning suggests, organizations may undertake changes with little sense of what the nature of the problem to be solved is, which of course stymies efforts to produce outcomes that have real benefits (Cohen, March, and Olsen, 1972). And there is an underlying theme in much of the practical management literature, at least, that organizational change is inherently desirable. We suspect that acting on this assumption is very conducive to garbage-can-model processes. Moreover, as a sterling example of contemporary organizational malfunctioning and mismanagement, the case of the Enron Corporation should highlight the dangers of undertaking change without careful reflection of where this might lead. This corporation embodied, in many ways, current prescriptions for changing organizations: strong, charismatic leaders who imbued members with a sense of complete commitment to the organization, the creation of a strong culture through careful selection of members to fit with the organization’s values and through rituals that embodied these values, alignment of the reward system with that culture and the organization’s objectives, and so on. These features did in fact result in the transformation of a relatively small organization operating routinely in the business of selling gas and oil properties into a mammoth investment corporation and, to the dismay of many stockholders and employees, into a fraudulent operation on a scale not witnessed within the last century or more (McLean and Elkind, 2004). Periodic evaluations of organizational performance may be fraught with ambiguities and difficult choices, but they do have the advantage of encouraging reflection on what the organization is doing.

This brings us to the point of departure for this book. Organizations are powerful members of our society; their actions and outcomes affect not just those directly involved in day-to-day operations—employees, stockholders, suppliers, customers and clients—but whole societies and international communities. They are very complex actors indeed, and many puzzles about how and why they operate the way that they do and under what conditions they change or refuse to change remain. By surveying research and theory, we have tried to provide you with insights into their functioning that we hope will prove useful to you both as a member of organizations and as a member of society who will participate in shaping the rules and environments that govern these powerful actors.

EXERCISES

Discuss the goals, environments, and stakeholders of your two organizations. To what degree are contradictions or conflicts present?

Pick a change that occurred within your organizations that you witnessed, or heard about. What were the factors that led to the change, and what was the process through which change occurred (how did the search take place, what solutions were considered, why was a given solution chosen)? Were the changes successful, would you say?

1.

2.

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