Revisiting theoretical presuppositions and the future of organizational theory

[Ed note: This is the third of 14 posts in a virtual panel on The Future of Organizational Sociology.]

Organizational scholars have raised a number of questions with regard to the future of organizational theory. Is organizational sociology losing its audience? If so, is it because of the expansion of organizational studies in business schools and the increased interests in questions asked by other subfields in sociology? If organizational theory is losing its audience, is the shift due solely to changes external to the field or can it be explained by the origins and development of organizational theory itself?

Some organizational sociologists may be concerned by the expansion of graduate programs in business schools as undermining job opportunities for organizational sociologist. Although this is a relevant concern, it should not come as a surprise. Despite the interdisciplinary focus of a few graduate programs in organizational studies, business (and public administration) schools have questioned the relevance of the sociology of organizations for years. Many of these questions emerge from the inherently conflicting disciplinary agendas and the failure to confront and resolve these conflicting agendas.

Although organizational theory may be losing some of its audience, there are many reasons to be optimistic about the future of field. Organizational theory has a long and rich history of high-quality empirical studies and useful concepts that explain a wide range of organizational phenomena. Despite these strengths, in my view, if organizational theory is to retain its audience, the primary task is to build on these analytic tools to construct organizational theories with greater explanatory power.

A central problem with organizational theory is the inherent tension between the sociological imperative and the managerial imperative and the development of theories that attempt to incorporate both imperatives. Although rarely discussed in current organizational theorizing, these competing agendas are impediments to theory development.

On the one hand, in the classical tradition, the sociological imperative produces knowledge that explains the origin and nature of society where organizations are conceptualized as specific instances of a broader process of social organization. The sociological imperative lends itself toward research questions related to how different structures emerge and the implications of the historically specific organizational structures for society including how inequality emerges, who holds power, and how power is exercised. The answer to these questions begins with the understanding that organizational structures and behaviors vary over time and organizations are embedded in environments. To illustrate, the sociological imperative was central to Max Weber’s observation that modern bureaucracies emerged from the historical transition to capitalist economies and democratic forms of government.

On the other hand, the managerial imperative produces knowledge that has implications for practical problems internal to organizations such as effectiveness, efficiency and productivity. Although these problems may have their origins in the environment, the primary focus is on how to solve them by modifying the internal strategy and structure of organizations. The managerial imperative also requires that managers give primacy to short-term outcomes. Although the managerial imperative may include the study of long-term outcomes, its gives primacy to the short-term because the failure to achieve short-term goals has important consequences for the survival of organizations and the careers of its managers.

The distinction between sociological and managerial imperatives cannot be equated with organizational research in sociology versus management departments; the sociological imperative informs much research conducted in management departments. Further, an argument can be made to pursue the sociological imperative and teaching it to prospective managers because they must understand organizations in order to effectively manage them and sociological theory provides the analytic tools to understand organizations.

The managerial imperative is only a problem for organizational theory when it directs researchers’ attention away from the larger historical processes and social forces that effect organizational structures, processes, and outcomes. Unfortunately, the managerial and sociological imperatives have been intertwined since the early 20th century and the sociological imperative has often been secondary to the managerial imperative. To illustrate, the rational model in organizational theory was heavily influenced by Taylor, Fayol and other early advocates of the managerial imperative who focused on constructing organizations to increase efficiency. In contrast, the rational model gave limited attention to Max Weber’s concern with the implication for social organization and society when people adhered to formally rational principles to increase efficiency. Similarly, drawing on Durkheim’s theory, early human relations theory focused on informal characteristics of organizations and work groups within organizations. However, as the human relations perspective developed, it focused on how to manipulate the group in ways that increased motivation, efficiency, and productivity. Another illustration of the predominance of the managerial imperative is principle-agent analysis, which does not pay sufficient attention to the larger social processes and the organizational structures in which principles and agents are embedded.

In short, the separation of management programs from the sociology of organization can be understood as the manifestation of the conflicting agendas between the sociological and managerial imperatives. Rather than lament this development, from a social scientific perspective where theory development is primary, this separation is an opportunity for each field to assess their strengths, build on those strengths, and develop more integrated organizational and managerial theories with distinct disciplinary foci.

One implication of the conflicting agendas of the managerial and sociological imperatives is the absence of an integrated sociological theory of organizations. Instead, there are numerous competing perspectives that give theoretical primacy to a concept to explain organizational phenomena. To illustrate, population ecology gives primary to fit with the environment, resource dependence gives primacy to resources, neo-institutionalism gives primacy to culture, and transaction cost analysis gives primacy to efficiency. The narrow scope conditions of each perspective limit the questions that can be asked and answered.

More importantly, the separation of organizational phenomena into different perspective creates obstacles to developing a theory capable of explaining (1) relational complexity between organizational entities (e.g., divisions, subsidiaries, and partnerships) and the implication of these internal organizational arrangements for society, and (2) the interconnections among organizational characteristics such as fit with the environment, resource dependence, culture, and efficiency enhancing initiatives. What is needed therefore is a theory capable of identifying the most salient characteristics of organizations and employing them to explain historical variation in organizations and the meaning of those changes for society.

A sociological theory of organization should begin with specifying the conditions within which organizational behavior occurs and how behavior changes over time. Contemporary organizational theorists could benefit by reconsidering Weber’s conception of ideal types, which identifies the most salient features of a phenomena. Among the prevailing perspectives, the evolutionary perspective has the most potential to develop a more inclusive and integrated organizational theory. Although it gives primacy to organizational change, strengths of the evolutionary perspective include incorporating concepts from other perspectives and examining multiple levels of analysis.

The narrow focus of the prevailing perspectives in organizational sociology can explain why so few organizational sociologists anticipated the 2007-2008 financial crisis even though most of the behaviors that caused the crisis occurred in organizations. As we now know, this was one of the most significant events in the last century. In contrast to the prevailing perspectives, building on the classical tradition (Marx, Weber, Durkheim, and Polanyi), organizational political economy examines how organizational and political-legal arrangements emerge and affect managers’ behavior. My research in this area concluded that the organizational and political-legal arrangements that emerged in the 1980s and 1990s permitted the emergence of capital structures similar to those that preceded the Great Depression and if another financial crisis occurs it will adversely affect a large proportion of the middle and working classes (Prechel 2000:265). In addition, prior to the financial crisis, journalists and public intellectuals exposed the widespread use of complex financial instruments, and the difficulties tracing financial transactions in the emergent corporate structures.

An organizational theory that conceptualizes organizations as part of society and examines historical variation and multiple levels of analysis will also direct researchers’ attention toward organizational types as they emerge and spread. Several contemporary organizational types have important implications for society, but receive little attention from organizational sociologist. Although political sociologists have given some attention to political action committees (PACs) and 501(c)4s, organizational sociologists have given little attention to how these organizations are expanding their influence over domestic politics and society. Similarly, foreign sponsored nongovernment organizations (NGOs) are rapidly increasing in numbers and size in less developed countries where they fulfill government functions. The emergence and spread of these kinds of organizations have important implications for society because their managers yield a substantial amount of power over the distribution of resources controlled by them. Although heath care organizations are rapidly expanding, they also receive little attention from organizational sociology.

One important characteristic of theory is that it provides a history and memory of knowledge that has been acquired. More inclusive theories provide a more comprehensive memory of acquired knowledge. This memory is important because it provides direction for future research and the bases to develop more complex theories with wider scope conditions and greater explanatory power. An integrated theory of organizational sociological specifies, for example, the conditions under which organizations remain stable, when change occurs, when organizations mobilize political to change their environment, when organizations change their structure, and what conditions are associated with high-risk managerial behavior. These topics are not new to organizational sociology. However, incorporating them into a more inclusive theory would represent a significant shift in organizational theory and provide a basis to revitalize and strengthen the field.

Harland Prechel is Professor of Sociology and College of Liberal Arts Cornerstone Fellow at Texas A&M University.