X Factor for Organizational and Environmental Change: Coevolution of Macro and Micro Organizational Environments

X Factor for Organizational and Environmental Change: “Δ = ƒ (Ɵ x μ)”

Adaptation Perspective and Luhmannian Autopoietic Social Systems

I believe, both Greiner’s and Mintzberg’s arguments and insights remain cohesive to Luhmann’s Autopoietic Social Systems theory by way of Hannan & Freeman’s “Adaptation Perspective”, i.e. “According to the adaptation perspective, subunits of the organization, scan the relevant environment (and decrypt information based on the self-reference of meaning) for opportunities and threats, formulate strategic responses, and adjust organizational structure appropriately (Hannan & Freeman, 1977). Based on this reasoning, Greiner’s dominant themes (i.e. creativity, direction, delegation, coordination, and collaboration) and Mintzberg’s seven driving forces of organizations (i.e. direction; proficiency; efficiency; innovation; concentration; cooperation; and competition) and their corresponding forms (i.e. entrepreneurial; professional; machine; adhocracy; diversified; ideological; and political) are all actionable corollaries of meaning processing of organizational subsystems as defined by Luhmannian Autopoietic Social Systems.

Institutionalism

However, thus far the macro and micro environmental models this paper hypothesized (i.e. Ɵ = ƒ (P x Ec x S x T x E x L x n), μ = (Fμ + Cμ,) x ƒ (t)) overly simplifies and does not comprehensively define the integral correlation in-between. Despite the fact that these philosophizes emphasize organizational adaptation, variation and the role of environmental factors as catalytic forces influencing organizational behavior (Kraatz & Zajac, 1996), consciously (or subconsciously) they lean towards classical institutionalism, where the focus of attention is upon the overreliance of environmental forces to drive organizational change (Jacoby, 1990).

Furthermore, this growing business literature view on organizational behavior, characterizes organizational environments as the sources of norms and values that permeated organizations and influenced action, in particular by informing the ‘‘taken-for-granted’’ assumptions regarding the behaviors, organizational forms, and processes that are seen as legitimate (Ashworth, Boyne, & Delbridge, 2009).

In sharp contrast to the empiricism of classical institutionalism, neo-institutionalism takes a more holistic approach to understanding organizational behaviors. It moves beyond environmental and technical forces with a more inclusive approach that seeks to understand the role of actors within institutional systems (Lawrence & Suddaby, 2006). In effect, the new institutionalism – the institutionalism of Oliver Williamson and of Douglass North – rejects a view of mankind as a 'cultural puppet' in favor of a view of mankind as mankind as a 'rational chooser' (Mayhew, 1989).

For example consider Google, provider of the internet’s most popular search engine, which continues to adapt and evolve along with the Internet. Rather than being a rigid service, Google is continually adding technological features that create a better service by accretion. At any time, Google’s site features several technologies in development so that engineers can get ideas and feedback from users. Some large businesses have entire departments charged with monitoring the external environment and find ways to adapt to or influence that environment (Daft, 1992).

Institutional isomorphism and Environmental Evolution

Although, most scholars in strategy and organization theory employ a single theme for describing how and why organizations tend to become isomorphic with their environments through processes of either adaptation or selection; they less frequently examine how organizations systematically influence their environments and how organizational environments (comprised of other organizations and populations) influence those organizations in turn (Lewin & Volberda, 2005). Yet, ever so increasingly todays organizations are creating value for their shareholders, customers and employers, while well informed- managers shaping their organizations and organizations are shaping all our lives (Daft, 1992).

Here, institutional isomorphism becomes the master bridging process at the center of this proposition by incorporating institutional rules within their own structures, organizations become more homogeneous, more similar in structure, over time" (primarily within a particular institutional environment and context) (Scott, 1998). This process results from coercive (i.e. when an organization is compelled to adopt structures or rules), mimetic (i.e. when one organization copies another, often because of uncertainty ) and normative (i.e. when the organization adopts forms because professionals in the organization claim they are superior) isomorphic pressures perceived to be legitimate (DiMaggio & Powell, 1983).

Ultimately, coercive, mimetic and normative isomorphic pressures drive institutional change by means of following five propositions (North, 2004);

1.               The continuous interaction between institutions and organizations in the economic setting of scarcity and hence competition becomes the key to institutional change.

2.               Competition forces organizations to continually invest in technologies, innovation skills and knowledge to survive. The kinds of skills and knowledge individuals and their organizations acquire will shape evolving perceptions about opportunities and hence choices that will incrementally alter institutions.

3.               The institutional framework provides the incentives that dictate the kinds of skills and knowledge perceived to have the maximum pay-off.

4.               Perceptions are derived from the mental constructs of the players (i.e. self-referencing).

5.               The economies of scope, complementarities, and network externalities of an institutional matrix make institutional change overwhelmingly incremental (i.e. improvements are realized slowly and incrementally) and path dependent (i.e. yesterday's choices are the initial starting point for today’s).

The implications of these principles are that organizations replicate and retain successful routines, benchmark competitors’ best practices and actively manage the updating of internal routines (micro-macro coevolution), leverage and extend past competencies and develop a coherent path-dependent strategy.

However, in highly competitive environments a core competence can become a core rigidity hindering survival, change and growth. Therefore, successful organizations must be designed and managed as dynamic, agile and learning organizations;

§  While safeguarding unique competencies to achieve a ‘good fit’ with the environment and

§  Maintaining the discretion and the strategic capacity to select, enact, and shape their environments.

Determined by this logic, hypothesis of “Δ = ƒ (Ɵ x μ)” elaborates the critical functional interdependence and coevolution between the macro and micro environments. Figure 3 illustrates this interdependence that is impelled by dynamism of time.

In summary, interdependence and coevolution of macro and micro environments is a dynamic process subject to both organizational action and environmental forces. There are multiple ways in which organizations interact with their environments through the process of mutual adaptation between the organization and its environmental domain. Specifically, organizations select the environment in which they should compete, design the organization structure that best fits this environment, actively shape and enact this environment, determine the performance criteria for measuring success, and design the strategies which will maximize organization performance (Lewin & Volberda, 2005).