Introduction
As Richard Scott pointed out, not until recently have scholars become concerned with social and cultural environment rather than technical, interdependence in organizational processes; the exchange of goods and services is downplayed. With a broader definition of institutional environment, which includes not merely formal rules, procedures and norms, but also the symbolic systems, cognitive models and moral templates that guide people’s behaviors, the new institutionalism offers a distinctively sociological perspective for studying and understanding organizations. Nevertheless, the institutional change also provoked an array of issues that have long been facing the institutional organization theory and have been widely discussed by institutionalists.
In this paper, I am going to illustrate as follows two main problems that carry the most argumentations among institutionalists– how to reconcile the conflict between efficiency and institutional rules in organizations isomorphic with institutional environment, by comparing Jens Beckert’s Agency, entrepreneurs, and institutional change and John W. Meyer and Brian Rowan’s Institutionalized organizations; to what degree should organizations be institutionalized, by comparing John W. Meyer and Brian Rowan’s Institutionalized organizations and Charles Perrow’s Overboard with myth and symbols. The three works will be referred to without specific citations.
How to deal with interest- driven behavior and institutional change
If organizational structures and strategies are shaped by institutional environments, what is the role of ‘strategic choice’ in the management of organizations? Meyer and Beckert gave their seemingly completely diverging solutions on this persistent question, but the ultimate result they want to achieve is the same.
In Meyer and Rowan’s view, an organization whose success depends primarily on isomorphism with institutionalized rules confronts structural inconsistencies, which make a concern for efficiency and tight coordination and control problematic, in two detailed ways.
The first is represented by ceremonial activity, which is significant with respect to categorical rules but not in its concrete effects. For example, a sick worker must be treated by a doctor using accepted medical procedures, categorical rules as referred to, even though the worker could be more effectively treated by other unaccepted procedures. More extremely, some ceremonial activities are pure costs from the point of view of efficiency as illustrated by the example of hiring a Noble Prize winner, the expenditure of which lowers the school’s return considering the immediate outcomes, in spite of the research grants, brighter students, or reputational gains the celebrated name may bring.
The other aspect of the conflict between categorical rules and efficiency arise because of the incapability of generalized rules of the institutional environment to deal with varied technical activities with specific, unstandardized, and possibly unique conditions. Example exists as a governmental mandated curriculum may be inappropriate for the students at hand.
The above two aspects are illustrations of conflicts and inconsistencies in an institutionalized organization’s efforts to conform to the ceremonial rules of production. In addition to the four partial solutions to the inconsistency mentioned in their paper, Meyer and Rowan put forward a solution that employs two interrelated devices: decoupling and the logic of confidence.
Decoupling. - As proposed by Meyer and Rowan, “because attempts to control and coordinate activities in institutionalized organizations lead to conflicts and loss of legitimacy, elements of structure are decoupled from activities and from each other.” Organizations built around efficiency require close alignments between structures and activities, but a policy of close alignment in institutionalized organizations merely makes public a record of inefficiency and inconsistency.
To enact decoupling process, institutionalized organizations protect their formal structures by means of delegation, professionalization, as well as goal ambiguity, and by eliminating output data, minimizing inspection and evaluation on the basis of technical performance, and informally handling coordination, interdependence, together with mutual adjustments among structural units. Thus, decoupling enables organizations to maintain standardized, legitimating, formal structures while their activities vary in response to practical considerations.
The logic of confidence and good faith. – As proposed by Meyer and Rowan, “The more an organization’s structure is derived from institutionalized myths, the more it maintains elaborate displays of confidence, satisfaction, and good faith, internally and externally.” It is the confidence and good faith of internal participants and external constituents that legitimates institutionalized organizations, enabling them to appear useful in spite of the lack of technical validation and coordination and control.
Considerations of face characterize ceremonial management. Confidence in structural elements is maintained through three practices- avoidance, discretion, and overlooking. Avoidance and discretion are encouraged by decoupling autonomous subunits; overlooking anomalies is also quite common. Therefore, by absorbing uncertainty through maintenance of face and interdependencies on decoupling, it is able to preserve the formal structure of the organization. The evidence that the participants also commit themselves to making things work out backstage and engaging in informal coordination to keep technical activities running smoothly and avoid public embarrassments makes commitments built up by displays of morale and satisfaction not simply vacuous affirmations of institutionalized myths. Likewise, institutionalized organizations, even though maintain high levels of confidence and good faith, minimize and ceremonialize inspection and evaluation since inspection and evaluation can uncover events and deviations that undermine legitimacy.
Meyer and Rowan ended their paper with a solution of maintaining the organization in a loosely coupled state to solve the structural inconsistency of whether to support institutionalized myths or to attend to practical activity when an action must be taken.
Whereas in his paper, Beckert argued that under market conditions, institutional rules and intentional rational agency can be conceptualized as antagonistic mechanisms that contradict each other, but, nevertheless, remain interdependent. Beckert refers to “strategic agency” as the planned persuasion of profit based on a rational assessment of available means and strategic conditions. By putting forward two propositions for the incorporation of interests and agency which were made by organization theorists working within the institutionalist tradition, Beckert gave a completely different solution of incorporation from Meyer, who suggested a solution of decoupling, in response to the structural inconsistency caused by isomorphic processes of organizational change. And even, in the integrated model developed by Beckert, the recognition that interests and institutions are inseparably interwoven shows the significant role interests have played, which is opposite to the attitude of Meyer and Rowan, who to some degree neglect the function of interests in the relationship.
Beckert first developed a dynamic model of the relationship between strategic choice and institutional pressures which unfolds around the notion of uncertainty. The theoretical concept of uncertainty refers to situations in which intentionally rational actors cannot deduce strategies from their preference rankings, because the complexity of the situation and the informational constraints do not allow them to assign probabilities to the possible consequences of choices. Beckert explained rational actors by referring to Schumpeter’s notion, in which managers are characterized to act on the basis of routines while entrepreneurs are the innovators who leave behind routines and devote their attention to new options by violating institutional rules, whose behavior is described as creative destruction.
Beckert’s model is based on three propositions. First, strategic agency can only be expected if institutionalized structures prevail which reduce uncertainty for organizational actors. In other words, institutions reduce uncertainty by creating expectations in the behavior of others. Second, strategic agency that violates existing institutional rules can be expected in situations characterized by relatively high degrees of certainty within an institutional field. Third, institutionalizing agents’ work prevails in situations of high uncertainty within an institutional field. These two propositions entail that it is only once institutionalized rules are in place that actors can act strategically in the sense of a rational enhancement of goals. Simultaneously, the creative destruction by entrepreneurs creates “spaces of uncertainty” of the environment by decreasing the predictability of other actors. Eventually, the “spaces of uncertainty” will be filled once again by the newly emerging substitute institutions, which can be either the innovation of creative destruction or the institutionalized practices remain unaffected. And the re-embedding process is done by managers.
In brief, the main idea of Beckert’s model can be expressed as: entrepreneurs destroy existing institutions. By this, they create the need for the re-embedding processes of managers which, in turn, re-establishes institutional stability as the basis for the strategic agency of entrepreneurs.
The question follows as to how the entrepreneurial mode of behavior can be reconciled with institutional theory. How can one view actors as being embedded in institutional frameworks and simultaneously provide space for at least a selective transcendence of these cultural frames?
Beckert referred to Anthony Giddens’s theory of structuration for a possible solution to the above problem. Based on Giddens’s theory, the routinized character of day-to-day activities does not imply that agents cannot make deliberate choices. For Giddens, he sees as one of the main characteristics of modern societies the issue of choice. Action cannot be understood as the simple execution of existing scripts, but develops in a duality between agency and structure. In short, routinized activities form the enabling basis for social interaction but are selectively and partially open to reflexivity. Furthermore, not all action can take the form of reflected strategy. Instead, only a few decisions reach the level of discursive consciousness and take a reflexive position towards taken-for-granted rules.
Rather than decoupling and the logic of confidence, Beckert pointed out three stabilizing factors to remain the formal structure of institutions: actors’ not always disregarding sunk-costs of organizational habits and routines, legitimacy, and power. To simply illustrate these factors, conservative actors are not willing to take reflective actions when high uncertainty presents but rather obey to rules by imitation; management of legitimacy has to take into account the negative consequences resulting from violations of institutionalized demands; power based on superior resources may take means to prevent creative destructive behavior.
Comparing Meyer and Rowan’s and Beckert’s papers, I have found out some similarities and differences. Meyer, Rowan and Becker all deem that independent of the origin of rational institutional myths, to become isomorphic with institutional environments makes an organization survive, success and better fit to the modernity. While Meyer and Rowan provided a microscopic view of the structural inconsistency between efficiency and institutional rules by proposing concrete solutions of decoupling and the logic of confidence, Beckert presented a macroscopic explanation of the two contradictory mechanisms, which are both essential to his dynamic model of interests and institutions. As far as I am concerned, by recognizing that it is natural and inevitable for the ambivalent mechanisms-interest and institutional myths- to coexist, Beckert went a step further than Meyer and Rowan, who stagnated at the level of conceptualization of the inconsistency of the two mechanisms by underestimating the significance of interest and agency. Though they mentioned different stabilizing factors to sustain the formal structure of institutions: decoupling and the logic of confidence by Meyer, actor’s role, legitimacy and power by Beckert, the essence are basically the same: preventing conflicts that can be prevented by using power or avoiding inspection and evaluation, dealing with activities cannot be avoided by working things out backstage and informally. Above all, I think the combination of their contribution makes a better and comprehensive understanding of the relationship between the taken-for-granted character of institutions and the notions of intentionality and purposiveness.
Overboard with myth and symbols?
As a complement and extension of the important puzzle: the discrepancy between formal structures and production activities, Charles Perrow advanced in his review essay of Meyer and Scott’s Organizational environment an empirical research of superintendents, principals, and teachers in San Francisco school districts. The result of the research indicated that something was amiss in these organizations. Reforms were announced with enthusiasm and then evaporated. Rules and requirements filled the file cabinets, but teachers taught as they pleased and neither principals nor superintendents took much notice. Is this loosely coupling state of school organizations the one that Meyer and Rowan aimed to achieve in his proposed solution to the puzzle of structural inconsistency mentioned before, or is there overboard with myth and symbols as quoted in the title of Perrow’s review essay?
Noted in Meyer and Rowan’s paper, an organization’s structure that adheres to the prescriptions of myths in the institutional environment demonstrates that it is acting on collectively valued purposes in a proper and adequate manner; vocabularies of structure which are isomorphic with institutional rules provide prudent, rational, and legitimate accounts; the rise of an elaborate institutional environment stabilizes both external and internal organizational relationships, etc.: these are all benefits of a formal structure that integrates proper institutional elements. But what if an organization is overboard with myth and symbols?
Perrow’s review essay dealt with this problem. As illustrated by the example of hospitals, the complexity of regulation of hospitals arises not because of a rational myth but because hospitals keep trying to find a way to get around a regulation; this only means that another regulation has to be issued to close off that loophole. This way of integrating rules by pretending to concentrate on conformity to institutional environment is obviously irrational and inefficient. Worse still, this infatuation with cultural myths and symbols to the neglect of power and group interest issues even leads to some distressing examples, but I am not going to exemplify as the purpose here is to clarify the appropriate degree of the isomorphism with myth and symbols.
Conclusion
In this reflection paper, I discussed two issues regarding the organization’s isomorphic process with institutional environment. One is the problem of how strategic agency can be reconciled with the taken-for-granted character of institutions. The other serves as a reminder as the institutionalization process goes on.
For me, the papers of Meyer, Rowan and Beckert both gave justifiable explanations to reconcile the controversy between agency’s intentional role and taken-for-granted rules. The difference is that they view the problem at varied levels. But I should say I am more convinced by Beckert since he gave a more comprehensive and integrated model without underestimating the significance of interest and agency. Though integrating institutional myth and symbols make them survive and succeed, organizations should attend also to power and group interest issues and grasp the scale. As scholars’ commitments continue, there must be more sound theories coming up and more problems solved.
References:
Meyer, John W., and Brian Rowan. (1977). Institutionalized Organizations: Formal Structure as Myth and Ceremony. American Journal of Sociology 83: 340-64.
Beckert, J. (1999). Agency, Entrepreneurs, and Institutional Change. The Role of Strategic Choice and Institutionalized Practices in Organizations, Organization Studies 20: 777-799.
Perrow, C. (1985), “Overboard with myths and symbols”, American Journal of Sociology, 91:151-155.