Rational System View of Organizations

1. Rational System View of Organizations VISION STRATEGY DECISION SUPPORT SYSTEMS STRUCTURE HUMAN RESOURCE SYSTEMS REWARD SYSTEMS ORGANIZATIONAL CULTURE PERFORMANCE

2. Organizational Culture • Became a popular concept in the 1980s • Def: A cognitive framework consisting of attitudes, values, behavioral norms, and expectations shared by organizational members • Provides a sense of identity for members • Enhances commitment to the organization’s mission • Clarifies and reinforces standards of behavior (e.g. cooperative vs. individualistic) • “Strong” culture can enhance organizational performance • Supports the formal hierarchical channels of control

3. Destruction of Old Worker-Organization Contract Old Contract - Job security - Firm-specific training - Deskilling - Promotion opportunities - Seniority based pay

4. The New Order and Organizational Culture • Much less Job security as organizations are much more focused on market competition and serving shareholders • PROBLEM: Worker motivation & productivity • Managers have been focusing on building cultures that can foster more highly committed employees despite the lack of job security • Empowerment • Total Quality Management • Self-Managing Teams

5. Conflict View of Culture: A Control Strategy • Scientific management initially emerged in response to the early success of labor movements (as a strategy to gain control of the workplace) • As the labor movement began to grow in strength again in the early 20th century, challenging the principles of scientific management, human relations emerged as a new control strategy • Human relations is built on organizational psychology (testing, training...)—a managerial ideology that enhances control of workers by managers

6. Conflict View of Culture • Human Relations as Managerial Ideology • “Rational” authority (and techniques) of management over the “irrational” behaviors of workers • By using “objective” techniques of selection, training etc., human relations ideology masks a strategy to legitimate managerial authority and domination • Human relations techniques did not get challenged to the extent that Taylorism did because they were more subtle than the engineer’s stopwatch

7. Conflict View of Culture • Hence, human relations (personnel & HR) can be viewed as forms of expertise that become a critical resource in the politics of class struggle • While human relations emerged in opposition to unions, more recently a new vision has been emphasized--”humanistic” workplace relations introduced by an “enlightened” and “benevolent” management • “empowerment” (eliminating worker/manager conflict) • increasing productivity

8. Informal Organization • Predates rational systems concept of organizational culture—developed in ’30s, ‘40s & ‘50s. • Informal organization has to do with social interactions within the workplace that can challenge or subvert formal managerial attempts to control workers (e.g. Hawthorne studies) • A rational systems perspective cannot adequately cope with the notion of informal organization because informal social interactions often circumvent formal hierarchical positions in a bureaucracy

9. Making Out • Burawoy’s analysis of shop-floor culture provides insights similar to that of Roy (Banana Time), highlighting the role of informal organization and how it deviates from formal organization • In Burawoy’s shop, machine operators are engaged in a game to try to earn as much incentive pay as possible • To make out, however, a conspiracy among various shop floor people (auxiliary workers--crib attendant, inspector, trucker, etc.) needed to be in place

10. Making Out • The conspiracy involved allowing the building up of a kitty, chiseling (shifting time between jobs on a single shift) etc.--activities not formally endorsed my top management • This game of making out, and the resultant shop-floor culture, although against the formal rules, actually enhanced productivity in the plant • Hence, this self-organization of workers involved a struggle against management to defend the conditions of producing profit • In such cases, smart managers make sure to overlook such violations of formal rules

11. The Control of Labor • Informal organization (shop-floor culture) can be used to control labor--”voluntary servitude of workers to capital” • Focus on control: “Capitalists must…convince workers, through means subtle or brutal, to produce goods that they (capitalists) will profit from”--distinction between the purchase of “labor power” and the extraction of “useful labor” • Informal organizational control (worker self-management, making out, banana time) is an important aspect of bureaucratic control, making bureaucratic control coupled with informal social control the most powerful and subtle form of control over labor

12. The Control of Labor • These arguments about the control of labor are not, however, limited to lower-level manufacturing workers • Vicki Smith highlights control efforts aimed at middle managers during a bank restructuring • While we have been focusing on the concept of informal organization, much of what we have been referring to as informal organization is captured in the more contemporary concept of “corporate culture” which has to do with a broader set of organizational values and beliefs that inform and shape intraorganizational interaction (e.g. culture of “making out”)

13. Smith--Control in Financial Services • Study of a bank restructuring--focus on re-training of middle managers to implement new top management strategy • Top managers aim to transform organizational culture--buzzwords: • Flexibility • Empowerment • Entrepreneurial • Rightsizing • These are often cover words for extracting worker concessions/increasing productivity with less resources

14. Smith--Control in Financial Services • Middle managers were targeted as agents and objects of corporate restructuring • New corporate culture program: “Vision, Values & Strategy” • Why change: Turbulent environmental and financial condition (increased competition, poor performance) • Need to create a leaner, more entrepreneurial organization

15. Smith--Control in Financial Services • Middle managers did not appreciate top management implementation plan • Top managers were cutting resources and selectively shutting down retail bank branches without middle managers having any knowledge of what was going to occur • At the same time, middle managers were instructed to make their employees work harder (extract more productivity) despite resource cuts and layoffs • Middle managers were to focus on individuals, extracting the most out of each individual--no more corporate standards for evaluation/reward

16. Smith--Control in Financial Services • Hence, middle managers had to become more coercive under conditions of decreasing morale and organizational uncertainty • This led to a perverse outcome--”the platform of the new corporate culture substituted coercive, individualized responsibility for the autonomy and flexibility of the entrepreneur • Smith’s case generalizes our investigation of informal organization to think about corporate culture more generally--understanding the challenges of workers at all levels of the organization

17. Summary • More generally, Smith’s case highlights the problems that top management has in trying to manipulate corporate culture or informal organization as a control mechanism • While a rational system perspective views culture as a mechanism that top management can shape to attain increased performance (profits), Smith’s banking case brings up the problem of implementation

18. Summary • The most “rational” of plans can go awry in the implementation process if we don’t understand the complexity of informal organization • how people in an organization actually get things done • what kinds of conflicts exist in an organization • As Burawoy’s study showed, even when informal organization works in favor of managerial goals, the way in which work is done may be contrary to managerial rules

19. Summary • Hence, there is often a major disconnect between top manager approaches and the actual goings on in organizations • The implication for us is that an adequate understanding of organizations involves a blending of both the rational systems (managerial orientation) and natural systems (the informal social interactions and conflict in an organization) viewpoints