Wednesday, May 13, 2015

Foundations of a General Theory of the Organization III (ends and contemporary theories)

In my last post I offered a 30,000 feet overview of the history of organizations, from the Paleolithic to the end of WWII, and I promised to tackle modern organization theories in a following post. We will be dealing with that in short order, but first we need to appreciate a point I only tangentially mentioned then: how the dominant form of organization has suffered its own Copernican revolution, putting front and center what I contended was a secondary concern in traditional societies. If we come to think about it, most mildly complex societies (from Sumerian cities on, I would dare to say almost all that have gone beyond the hunter-gatherer stage) have at least the following organizational forms:

·         F1. Political (who is a subject of rights, how are those rights acquired, what kind of regulations apply to civil interactions between subjects, what penalties are applicable for non compliance)

·         F2. Educational (how people acquire the skills necessary to earn a living or contribute to the community, what kind of regulations apply to the period of that acquisition, what kind of recognition and certification is in place)

·         F3. Religious (what kind of beliefs are deemed acceptable about the supernatural, about a potential source of meaning that goes beyond the world of physical appearances perceivable through the senses and that has the ability to dictate how we should behave, at least in certain aspects of our lives)

·         F4. Productive/ Commercial (how people deal with the production and exchange of material goods, what kind of contractual forms are acceptable, who can enter into them and what are the penalties for potential violations)

There is naturally an order of precedence between them, as each can command the behavior of their common members to a greater extent than others (in our previous terminology, some of them are necessarily more intense than others). I contended in my previous post that in pre-modern (pre Industrial revolution) societies, that order was, for the majority of citizens (read Fi > Fj as "organizational form i is dominant over organizational form j"):

F3 > F1 > F4 > F2

Altough soon after the Peace of Westphalia the birth of the modern state had the effect of putting the belonging to a certain political society in front of belonging to a certain (mostly fractured and made unpopular by the horrors inflicted by their respective zealots) religion, so:

F1 > F3 > F4 > F2

Well, it has been the (intended) consequence of the Enlightenment to push the religious belonging still further in the order of precedence, to the extent that in  European societies today it configures an even smaller part of people’s lives than their educational affiliation (so their perspective of life is shaped more by them being a physician or a lawyer or an engineer than by them believing in Christ or Muhammad or the Buddah or in none at all), but that pushing has had the (unintended) additional consequence of pulling the productive/ commercial form to the utmost forefront, displacing even the political/ national as most influential in controlling everyday’s lives, thus for contemporary men and women:

F4 > F1 > F2 > F3

So it can be argued that modern man follows the dictate of his corporation (or his trade, if he is an independent professional) first and foremost, as he spends most of the day devoted to the business that can most markedly optimize his income, and according to the rules dictated by the professional body he belongs to. During that pursuit he nominally also obeys the law of the land he belongs to, but such law has been engineered by what we may call “social selection” to ensure his compliance with the (mostly private) corporations that can decide what is produced, and to whom it is distributed, so from the taxes he pays to the hours he devotes to work, the age at which he starts and stops working, the repressive apparatus that controls that nobody steps out of line he and the recognition he gets from his peers, all the other forms of organization (not just the political) are attuned to the needs of the productive, and reinforce a life system in which he is but a cog in an immense machine finely tuned to maximize the production of material goods (not happy individuals, not transcendent truths, not engaged families, not sources of meaningful lives), because, as I have already reminded my readers ad nauseam, the ability to produce more material goods than the neighbors translated in an invincible advantage in the battlefield, so whole societies had every incentive to pursue that path of development (and those who, by choice or lack of ability, did not, were crushed and did not transmit their cultural heritage to modern ones, the civilizational equivalent of “the survival of the fittest”).

In our original definition what distinguishes those four “forms” (or “layers”, as they overlap and a typical person would be a member of all four) would be the different ends they pursue, as regarding essential features (adaptability, dominance, voluntariness, isocracy, simplicity and egalitarianism) we have seen any of them can run the full gamut between each of their extremes, and the same applies for the features we said we would not investigate more (size and inclusiveness). In order to clarify a bit more our definition, let’s then make explicit what we understand to be the end of each form:

·         F1 (political): political institutions (even the most virtualized ones in our highly interconnected post-modern world) have inherited the original intent of the first clans and tribes: to survive and to perpetuate themselves, with a modicum of continuity (so they can adapt, and given enough time, even renounce most of their defining characteristic features as long as they have a unified story they can tell about how a continuous “they” evolved and adopted the new ones). That’s why they need some form of external recognition (badges, flags, banners, mottos, even state mascots), so they can know that, whoever carries them (regardless of sex, race, ideology, aesthetic preferences or inclinations)is standing for each one of the members of the group, it “represents” them, and justifies thus their continued existence/ relevance. It has to be noted that continuance translates in biological terms to reproduction, so in that respect modern societies (with the exception of some outliers as Somalia, Nigeria and the like, but just give them time) are failing abysmally, as they have not been able to give their citizens reasons enough to keep on doing exactly that (reproducing themselves) at least at the replacement rate

·         F2 (educational): the avowed end of educational organizations is to equip their alumni with a certain body of knowledge, and occasionally to further that body with the addition of new elements congruent with the previous ones that formed it. As that body (be it the syllabus of primary education, the corpus of modern physics or the great mass of Western literary tradition, usually splintered by nation) is always inherited from the past those organizations are inherently conservative, or should be (there have been some instances throughout history of revolutionary schools that wanted to contribute to the creation of one sort of “new man” or another starting from scratch, and to my knowledge all have been abject failures), although we well-meaning heirs of the Enlightenment tend to believe a well-educated citizen is capable of critical thinking and to question the shackles of tradition (the old Kantian adage of sapere aude! –dare to know by yourself! And to apply your own measuring stick to all knowledge that comes your way, unencumbered by the dead weight of the past! Which unfortunately is a dead end and just substitutes some irrational beliefs by others equally unfounded). Let’s leave it at the point of remarking the somewhat contradictory nature of educational institutions (in their best incarnation, in their worst they are monolithic factories of indoctrinated drones) which contributes to explain why, influential as they are in shaping their pupils Weltanschauung, they have never been all that dominant

·         F3 (religious): the end of religious organizations is to embody a transcendent truth i. e. non physical, non material, but somehow more fundamental than what the senses can perceive. That truth is codified in the organization’s “faith”, and I have used the term “embody” as some organizations want to extend that faith (through proselytism, preaching to the infidels and so on) while others are content to keep it to themselves. In some cases the obeisance of the precepts of the faith is supposed to cause some ultramundane reward (in an indefinitely long afterlife, of a more or less sensualistic nature), whilst in others it has the opposite effect of causing the definitive annihilation of the individual member (the Buddhist Nirvana). So it has in common with the educational (with which it sometimes shares many more features, to the point of having their own institutions devoted to the instruction of the faithful, as primary or even secondary concern) the pursuit of the extension of certain kind of knowledge, but in opposition to what we grouped under F2, that knowledge is of a metaphysical nature, has to do with what goes beyond the information conveyed by the senses. As I have argued elsewhere (Jeez, we are quite materialist, aren't we?) our age is distinctly antimetaphysic, and the dominant reason is clearly opposed to the mere possibility of something non-material (not knowable by the senses) existing, so unsurprisingly a manifestation of that antipathy is the wilting and significant loss of dominance of F3 organizations

·         F4 (productive/ commercial): We have to start by declaring  that the stated end of a capitalist enterprise doesn’t make any sense. According to Marx (and, wrong as he was in so many other things, I believe he was fundamentally right in this one), they produce commodities so they can sell them in exchange for money, which in turn they can use (investing it to buy more raw materials, labor and means of production) to produce more commodities in a never ending expansion. Why would anybody want to participate in such a pointless exercise? It is as illogical as the proverbial saucer full of mud used by Anscombe as quintessential example of irrational desire. Even after the legerdemain of dividing enterprises in a “department I” devoted to producing means of production and a “department II” which produces the means of consumption (consumer goods like clothing and foodstuffs) that enable both the capitalists and the workers to survive, it defies explanation to pursue a production (be it directly or indirectly) well beyond what is needed to keep reproducing. So we are faced with the paradox of the most dominant organizational form in our time having an end we can not share due to its sheer irrationality. The resolution of the paradox comes from considering the double production (or the double flow of transformation) that the enterprise enables. Seen from the standpoint of the consumer of its goods, it transforms labor power (variable capital) and raw materials, with the participation of a certain amount of tools, machines and real estate (fixed capital) into mostly unneeded commodities (the fact that most humans are duped into not noticing that lack of necessity doesn’t make them less unnecessary). Totally unexplainable. But seen from the standpoint of its workers, it transforms their time into money (salary), which has been “fetishized” to the point of becoming the main and almost only marker of social status (at this point Marx was quite off the mark, believing money was just another commodity, marked by its convenience to facilitate the exchange of the rest, and we have to turn to Freud of all people to understand that common drive towards a zero sum social recognition –although the very own Freud never understood the real depth of such drive, and confounded himself and his followers claiming it was towards something as banal as sex). Now everything makes sense: the end of the corporation is to maximize the social status of its workers. For those in managerial positions, it has the potential to enhance it a lot, and their interest can be fully aligned with that of the company (the better the latter goes, as measured by its ability to turn out ever growing quantities of whatever the market will pay for, regardless of its utility, the higher the salaries and other perks and the higher the prestige of the former). For those at the bottom of the corporate hierarchy there is always certain misalignment, certain air of broken promise in the implicit possibility (more theoretical than real nowadays) of climbing through the ranks and reaching a more rewarding position. But as long as corporations can dangle in front of the eyes of the masses even the tiniest sliver of possibility of social advancement it seems they will keep on finding throngs of volunteers to jump through as many hops as needed to slave as many hours as demanded even in the humblest position.

Now we have an operational definition of what “economic” corporations (be they productive or commercial) pursue, which allows us to differentiate them from other types of organizations. We can thus review what theories have been advanced in the last half of a century to explain how they work and what could be tweaked to improve their “performance” (mostly understood as the capability to further the apparent end –churning more material goods nobody really needs, as that is the most reliable proxy for their capability to further the implicit end that really makes their leaders tick –earning tons of money so they can outshine their peers). We will focus on four theoretical frameworks: Coase’s (structures to minimize transaction costs), Hammer’s (structures to optimize processes, understanding those to be the most important source of competitive advantage), Christensen’s (focusing on the ability of corporations to innovate to outgrow their competitors) and what, for lack of a single proponent, I will call the hodgepodge approach (identifying best practices of “leading” companies to emulate, as expounded by the likes of Peters, Joyce and Nohria).

But we will not do that in this post, which has already reached the limits of the tolerable length. As a treat to my readers (or at least to those that managed to get this far) before leaving I’ll leave a list of books I would recommend for having a passable understanding of organizations:

The Republic (Plato)

Politics (Aristotle)

The Prince (Machiavelli)

The Wealth of Nations (Adam Smith), Vols I-III and Vols IV-V

Capital (Karl Marx) Vol I, Vol II and Vol III (you thought you could do with just one, uh? sorry but nope, the third is the worst written, but the meatiest)

Economy and Society (Max Weber)

The Organization Man (William H. Whyte)

“The Nature of the Firm” (Roland H. Coase)

The New Industrial State (John Kenneth Galbraith)

The Innovator’s Dilemma (Clayton Christensen)

In Search of Excellence (Tom Peters and Robert H. Waterman)

What Really Works. The 4+2 formula for continued business success (William Joyce, Nitin Nohria and Bruce Roberson)

Are all of them good books? Most definitely not (the last four are pretty weak, and within them the last two are positively atrocious, being made from a 99% of unsubstantiated blather that turned out to be mostly false), but that’s the price of knowledge, sometimes you have to sift through a pile of dung to find a nugget of it…

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