ORGANIZATIONAL THEORY

Organizational Theory

Organizational Theory

Introduction

Organizational decision-making theory must be differentiated from rational choice theory. The essence of rational choice models resides in the assumption that individuals make decisions on a voluntary basis. Individual decision makers are antecedent to groups, and thus the only independent, self-interested, rational calculative actors, who maximize utility based on one stable set of rank order preferences to maximize their rewards and limit their costs. They have full information and behave independently of others and their own previous decisions, without constraints. If these conditions are satisfied, these “rational” choices yield a Pareto-like optimality equilibrium in which no one can do better without making someone else worse off. Social action is a zero-sum game. Individual decision making makes organizational functioning rational.

Case Studies

In the early 1990s, the American Sociological Association published a paperback titled Teaching Formal Organizations. Paul DiMaggio's syllabus within that collection was a tour de force treatment of the evolution of organizational forms, from the tightly coupled firms of the 19th century to the moderately coupled bureaucracies of the 20th century to the loosely coupled networks of the 21st century. Unfortunately, few authors in organization studies understand this historical evolution in organizational forms.

A particularly problematic issue is the recent migration of economically trained scholars into strategic management slots who—for paradigmatic issues—are trained to see complex organizations as simple firms using unitary utility functions in which CEOs are equivalent to the organization, and both are rational actors. Another problem is the tendency of organizational scholars to hold onto the models they learned in graduate school. For example, Chandler's four case studies made a transition from uni-divisional forms to the multidivisional form in the 1920s and 1930s, and Chandler did not write about this transition until the 1950s, but the M-form organization is still being studied in the 2000s.

A third problem is the rise of “new organizational formists” who are quite willing to ignore the evolution of organizational forms and jump directly to the latest attempt to describe loosely coupled networks, such as virtual organizations, transnational corporations, and network centric organizations. The solution to all three of these problems is a heavier investment by organization studies scholars in understanding the complex evolution of complex organizational forms.

Complex Organizational Processes Within Complex Organizations

During the 1970s and 1980s, there were many studies that shifted attention away from organizations as entities toward organizations as contexts. “Complex organizations” might no longer be a thing to be studied directly, but might instead be a context in which complex processes take place, or a repertoire of perspectives on complex phenomena.

As Herbert Simon, James G. March, Karl Weick, and others have continued to push for more focus on organizational processes, the Complex Organizations courses in sociology departments have shifted away from a sequence of organizational forms toward a repertoire of process-based organization theories. From a pedagogical perspective, a Complex Organizations doctoral seminar structured around the evolution of organizational forms should precede an Organization Theory (Theories) doctoral seminar structured around different views of complex organizational ...