Organizational Rationality, Effectiveness, Efficiency and Control
Organizations are purposeful collective action structures. This means that organizations are made up of multiple individuals working together to accomplish a goal. How they work together to achieve a goal depends on organizational structure. Organizational structure is the patterns of relations between individuals. Organizational structure is related to organizational rationality, efficiency, effectiveness and control systems.
Rationality connects individuals with organizations. Rationality is the reasoning behind individual behavior. Individual rationality is dependent upon one's position within the organizational structure. For example, a janitor may see coffee spilled all over the floor. This would likely cause the janitor to reason it is her job to clean it up and take actions to do so. On the other hand, a manager may see coffee spilled all over the floor. This would likely cause the manager to reason it is not her job to clean it up but she should report it to someone to get the janitor to handle it. In short, organizational structure affects rationality and individual behavior.
Organizational structure affects the behavior of individuals in organizations completing purposeful tasks to achieve a collective goal. As such, organizational structure also effects the efficiency and effectiveness of organizations. The effectiveness of an organization is the adequacy of the organization in achieving its desired goal. On the other hand, efficiency is the extent to which resources are minimized and outputs maximized in the pursuit of achieving the desired goals. Whereas effectiveness focuses on just the end outcome, efficiency focuses on economizing the means by which the group achieves their goal. Formal rationality, scientific management, human relations theory and decision making theory each address efficiency and effectiveness, as researchers search for the best form of social organization. However, the consistency of individual rationality and the efficiency and effectiveness of organizations is dependent upon control systems built into the organizational structure.
Control is the power to determine individual behavior. Control systems are built into organizational structures in order to influence individual rationality, maintain consistency and enhance the efficiency and effectiveness of organizations. As such, control is a critical aspect of formal rationality, scientific management, human relations theory and decision making theory.
Although formal rationality, scientific management, human relations theory and decision making theory each address issues of rationality, effectiveness, efficiency and control in organizations, they all have different assumptions which leads to completing claims about how organizations work and effect on individuals.
Weber describes three different ideal types of authority: legal rational authority, charismatic authority and traditional authority (Weber 1970). Unlike charismatic authority and traditional authority, legal rational authority is impersonal- authority is not tied to the individual but their position within a formal organization. According to Weber, modern society is increasingly characterized by legal-rational authority, which increases the importance and prevalence of bureaucracies and officials (Weber 1970).
From the formal rationality perspective, the most prevalent organizational structure in modern society is the bureaucracy. According to Weber (1970), the bureaucratic ideal type consists of different characteristics: (1) Bureaucracies have rules and regulations and the authority to give commands and designate official duties, (2) Bureaucracies are hierarchical with ordered authority and the ability to manage turn-over, (3) Bureaucracies consist of formal written documentation of activities, thus establishing an organizational history, (4) Bureaucracies are made up of bureaucratic managers who are experts and receive specialized training, (5) Bureaucracies are ideally operating at full working capacity, and (6) Bureaucratic managers are subject to a set of stable and learnable rules. In short, from this perspective, organizations are characterized by bureaucracies and bureaucratic managers (i.e., officials).
According to formal rationality, bureaucracies are maintained by officials. From Weber's (1970) ideal type, officials are individuals pursuing a career within a bureaucracy with the following characteristics: (1) Officials have social prestige compared to the governed, (2) Officials are appointed by a superior with bureaucratic authority, (3) Officials receive life-tenure, (4) Officials receive compensation through a fixed salary, and (5) Officials are set for a lifelong career advancing thin the hierarchical structure of the bureaucracy. From the formal rationality perspective, modern organizations work as systems of legal-rational authority maintained by officials.
Although Weber's theory of bureaucracies focuses on formal, legal-rational aspects of organizations which affect individual rationality, according to Weber, rationality consists of both formal and substantive rationality. Formal rationality is the written rules and regulations guiding individual behavior, whereas substantive rationality is the group value orientations that guide behavior. Although Weber's ideal type of bureaucracies emphasizes the formal rational aspects affecting individual behavior, this does not mean he believed individuals in bureaucracies are not influenced by value orientations. This is because ideal types to not reflect the empirical world in detail, they just represent the salient and conspicuous characteristics of empirical reality.
According to Weber, bureaucracies are currently the most efficient and effective form of social organization. Whereas traditional and charismatic authority systems allows for personal relations to affect the treatment of individuals within organizations, the ideal bureaucratic type promotes equal treatment and universalism (Perrow 1986). Bureaucracies have technical advantages, as they ensure continity and reduce personal friction.
From the formal rational perspective, organizations are systems of control through formal rational means. Organizational control is ensured through the development of the bureaucratic structure and maintained through formal lines of authority, formal lines of communication and information flow between those two lines (McNeil 1978). Organizations control individual behavior by setting individuals in formal roles within the organizational hierarchy, controlling how they communicate with others based on their position and influencing what information they receive. Control systems emerge as formal rational tools helping organizations achieve their goals and they expand along with the bureaucratic structure. For example, after facing problems with employee turnover or inconsistency of employees in completing the same task , a company might create standard operating procedures, which is a set of rules and regulations determining precisely how tasks should be completed. Control systems influence the rationality of officials in regards to precisely how and when to complete tasks and can be used to increase organizational efficiency. In short, from the formal rational perspective, bureaucracies work as a control system of written rules and regulations which determine the behavior of officials.
Scientific management also makes certain assumptions about rationality in organizations. However, scientific management assumptions of rationality are very different from Weber. Weber sees rationality as both substantive and formal, whereas scientific management theory does not acknowledge substantive rationality. Under scientific management, rationality is strictly viewed through a positivist lens, where things are assumed to be able to be unbiased, calculable and comparable. Scientific management focuses on the formal aspects of organizations and does not account for the substantive values associated with human rationality.
Like Weber, scientific management sees bureaucratic control as an instrument to increase the efficiency and effectiveness of organizations. However, scientific management tends to focus on organizational efficiency over organizational effectiveness. According to Taylor (1970), managers have the responsibility to ensure organizational efficiency by controlling the labor process. Managers can increase the efficiency and effectiveness of organizations through scientific management principles applied to maximize worker incentive. In short, from the scientific management perspective, managers should determine and quantify all of the factors influencing the production process and use scientific tests to formally arrange the production process in a way that maximizes organizational efficiency.
Whereas formal rationality focuses on the way formal rules and regulations control the behavior of individuals in organizations, scientific management focuses on the way managers can influence the formal rules and regulations which determine individual behavior. From the scientific management perspective, organizational control can be ensured by managers through the scientific management of the work process. Control systems emerge as a result of management efforts to increase efficiency. Control systems are maintained by managers and are used to influence individual rationality and motivate workers to increase their productivity. In conclusion, from this perspective, organizations work due to managerial control of the production process.
Human Relations Theory
From the human relations theory perspective, organizations are systems with formal and informal structures. Furthermore, informal structures have more impact on the rationality of individuals in the organization than formal structures. Organizations are made up of working groups with goals, relationships and processes which differ from the formal structure of the organization. Norms are not strictly defined by managers but they emerge within working groups. Furthermore, status is not formally given but informally obtained (Burroway 1984). Individuals become attached to certain values which influence group performance and organizational output (Roethlisberger and Dickson 1970).
Whereas scientific management focuses on the power of managers to influence worker productivity through the administration of formal rules and regulations guiding the work process, human relations theory focuses on both the power of working groups and managers to influence worker productivity by determining the culture of informal groups. Human relations theorists assume that groups and individuals are important to increase productivity, because power comes from the bottom up (Barnard 1970). Cooperation among working groups is essential because it gives power to those higher up in the organization. Organizational inefficiency and ineffectiveness develops when conflict arises from incongruence between the formal and informal structures of organizations (Roethlisberger and Dickson 1970). Since working groups influence informal structures contributing to the behavior of workers in the organization, it is critical to include the actions and cultures of workers when studying the factors related to organizational efficiency and effectiveness. However, human relations theory still holds a managerial bias, meaning workers are viewed as manipulable by management for the aim of increasing organizational effectiveness.
Human relations theory critiques scientific management measures of the work processes related to organizational efficiency and effectiveness. Scientific management attempts to break down and quantify the work processes related to organizational output. Human relations theory claims it is not possible to break down and quantify all of the factors related to organizational effectiveness and efficiency. Instead, it assumes that the sum is greater than the parts and it is not possible to reduce group characteristics to the characteristics of individual tasks.
Whereas scientific management and formal rationality focus on the formal aspects of control systems, human relations theory focuses on the informal aspects. From the human relations perspective, control systems emerge within informal working groups, are influenced by both formal and informal processes and consist of norms and beliefs influencing individual behavior. Organizational control can be ensured by management through the establishment of benefits initiated to influence worker norms and beliefs such that cooperation and company loyalty among working groups is increased. From this perspective, informal and formal control systems influence individual beliefs and rationality and determine how organizations and individuals in organizations work.
From the decision making perspective, organizational structure is fluid, as it must be enacted each moment as individuals must continuously perceive and make sense of the world around them. However, sense making is limited due to bounded rationality (i.e., limits in information and constraints on individuals to adequately assess information). According to decision making theory, organizations are made up of a mix of goals, problems and possible solutions (Levitt and Naas 1989). In order to ensure routine behavior in organizations, programs are developed. Programs are routinized activities in response to frequently experienced stimuli. Programs facilitate, yet limit worker understanding. Programs increase understanding, as they evoke meaning to common experiences. However, programs limit understanding, as they focus attention to some events, while ignoring others. Organizations affect individual rationality through programs which influence individual attention and subgoals along with the division of labor and communication structures.
Whereas scientific management and human relations focus on managerial decisions to increase efficiency, decision making theory focuses on effectiveness. Decision making theorists claim decisions are usually determined by effectiveness, not efficiency (March and Simon 1958). Individuals tend to routinize their behavior and develop programs in response to stimuli. It is costly for actors to have efficiency involved when making decisions. Instead, actors tend to think of effectiveness when completing tasks- they just worry about getting the job done.
Decision making theory strongly contrasts with both the scientific management and human relations theory. Decision making theory strongly criticizes the managerial bias, as it claims it is not possible for mangers to control the work process. From this perspective, control systems are situated (Vaughn 1998). Control systems emerge as a result of past decisions and other's interpretation of responses, they cannot be determined by current management. All individuals in the organization, including managers, face bounded rationality. As such, everyone within the organization is constrained in their ability to adequately assess information and control organizational outcomes.
Decision making theory builds from formal rational perspectives of organizations, but according to decision making theory, formal rationality only has half of the equation. Whereas formal rationality emphasizes how organizational control is ensured through a focus of information, decision making theory emphasizes how both the focus of information and the focus of attention is related to organizational control (March and Simon 1958). Historically developed control systems (i.e., programs) influence the way individuals decide when and how to act when experiencing particular stimuli. In conclusion, according to decision making theory, organizations work as sets of continuously enacted programed responses, allowing worker discretion and flexibility in how a mix of goals is achieved.
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