organizational analysis

organizational analysis, in management science, the study of the processes that characterize all kinds of organizations, including business firms, government agencies, labour unions, and voluntary associations such as sports clubs, charities, and political parties. Any organization is a social unit with three properties: (1) it is a corporate (or group) actor, (2) it claims a special and limited purpose (such as making profits or providing medical care), and (3) its creators intend it to last beyond the accomplishment of a single action, if not indefinitely.

Modern cultures are marked by an increase in the importance, influence, and power of organizations. Consequently, contemporary studies in social science and management have emphasized the analysis of organizations. Yet much of the research is narrowly focused on the properties associated with particular types of organizations, such as hospitals, prisons, government agencies, businesses, schools, and churches. While many of its findings are associated with business management, the field of organizational analysis is far more general: it studies the processes that apply to all kinds of organizations. One goal of such inquiry is the identification of more-effective management strategies. See also business organization.

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Max Weber, 1918.

Leif Geiges

Contemporary organizational analysis and management science owe much of their early development to the German sociologist Max Weber (1864–1920), who originated the scientific study of organizations. In work examining the relationship between bureaucracy and modernization (eventually published as Theory of Social and Economic Organization; 1947), Weber attributed the rise of organizations to the expansion of markets, to developments in the law, and especially to changes in the nature of authority.

The term authority applies to situations in which one person willingly accepts the direction of another. Until modern times, authority was inherited, meaning that princes begat princes and peasants begat peasants. Weber identified the institutional structure of a new “rational-legal” authority, observing that rights of control increasingly derived from expertise rather than lineage. He documented the ways in which this development, which he called rationalization, underlay the rise of the modern state bureaucracy. According to Weber, organizations were able to develop unparalleled calculability and efficiency by combining two structures: (1) a system of explicit rules, upheld by clearly marked jurisdictions between offices and by permanent files documenting the processing of cases, and (2) a unique division of labour. The latter structure gave rise to the modern bureaucrat—a person who was required to be an expert in the relevant rules and who had to be shielded from inappropriate influences to guarantee fairness and objectivity. This shift away from tradition and inheritance permanently changed the nature of organizations. Weber thought that these two structures would cause organizations to follow, invariably and automatically, the objectives set down by political authorities.

One of Weber’s contemporaries, the German-born Italian sociologist Robert Michels, vigorously disputed Weber’s claim that organizations would pursue official objectives in machinelike fashion. According to Michels’s “iron law of oligarchy,” the top leaders of organizations—even those that are member-controlled—tend to develop a strong personal interest in maintaining their powers and privileges. Michels held that self-interest prevents such leaders from doing anything that would risk the survival of the organization—even if this means subverting the organization’s original goals and principles. Michels made this claim in an attempt to explain why the leaders of the officially internationalist and antiwar German Social Democratic Party strongly supported Germany’s declaration of war in 1914.

The essential point of the Weber-Michels debate has not been settled; questions persist over the degree to which the pursuit of official goals characterizes organizational action. Does the creation of organizations (such as churches, investment syndicates, or human rights groups) for the achievement of some collective goal subtly shape the agendas that will be pursued? This question—whether official or personal leadership is more influential—has considerable practical significance, because social movements (such as pacifism and environmentalism) almost always take shape as organizational structures in contemporary societies. Organizational analysis identifies ways in which the personal goals of these groups inform their respective organizational structures.

While German scholars were examining the rise of modern organizations within a broad sociological perspective, American engineers and management consultants were initiating the study of the management of work in industrial settings. Close examination of work groups revealed that routine patterns of behaviour (“informal organization”) often did not match the organizational charts or other official depictions of the organization (“formal organization”). These findings led researchers to identify and describe patterns of informal organization. Their investigations, which have become part of the core literature of organizational analysis, demonstrated unequivocally that participation in organizations is influenced strongly by social ties and by unofficial networks of communication. (See collective behaviour.)

As organizational analysis developed into a distinct field of inquiry in the late 1940s, research in the United States progressed in two theoretical directions. One became known as the Carnegie School, because its central figures, the American social scientists Herbert A. Simon and James G. March, taught at the Carnegie Institute of Technology (now Carnegie Mellon University). Their research, published in Organizations (1958), applied general principles of behavioral science to action within organizations, acknowledging that, while humans intend to be rational in their decision making, actual conditions impose a certain amount of subjectivity. Simon and March took the position that decision makers, while “intendedly rational,” face such great uncertainty that their actions cannot be understood by standard models of rational choice (i.e., decision theory). The Carnegie approach defined the central problem of organizations as managing the uncertainties inherent in complex work. For example, the “administrative man” (such as the bureaucratic official depicted by Weber) goes about solving problems by relying on a highly routinized search for satisfactory (but not necessarily optimal) actions. The work of Simon and March set the agenda for subsequent research on organizational learning and, more specifically, on the relationship between learning and the adaptability of organizations.

The second theoretical approach, known as institutionalism, focused on the organization as a whole. The American sociologist and legal scholar Philip Selznick, like Michels, emphasized the nonrational aspects of organizations. Using the Tennessee Valley Authority (TVA) as an example, he argued that one of the most important features of organizations is the tendency for structures and processes to become “infused with value beyond the technical requirements at hand.” (TVA and the Grass Roots: A Study in the Sociology of Formal Organization [1949].) That is to say, an organization’s structures and processes tend to take on new meanings that are unrelated to the reasons they were adopted in the first place. This is the sense in which organizations become institutionalized and structures resist change.

Selznick also believed, as did institutionalist sociologists such as the American Talcott Parsons, that all organizations have a crucial need to gain support from key constituencies in the larger social system. The task of constituency building and networking is the basic job responsibility of top managers. Selznick documented a classic example of such efforts in his study of overtures by officials of the TVA to the leaders of local environmental groups. Because they had invited environmentalists to take part in the utility’s decision-making process, TVA managers put themselves in a better position to handle public criticism of the TVA’s mission.