Mary Jo Hatch with Ann L.

Cunliffe

A BRIEF HISTORY OF
ORGANIZATION THEORY
Chapter 3
 Figure 3.1 The Organization in its Environment

ENVIRONMENT

ORG
Inputs Outputs

Hatch & Cunliffe: Organization Theory, 3rd edition

 Modernist Levels of the Environment

Interorganizational network

General environment

International environment

Hatch & Cunliffe: Organization Theory, 3rd edition

 Organizational Environment

Modernist theory, the environment …

lies outside the boundary of the organization.

provides the organization with resources and absorbs

its products and services.

imposes constraints upon and demands adaptation

from the organization.

Hatch & Cunliffe: Organization Theory, 3rd edition

 Organizational Environment

Symbolic-Interpretivists suggest environments …

are social constructions.

organizational members construct environmental

features they think are significant.

different organizations construct their environments

differently based on management’s interpretation.

Hatch & Cunliffe: Organization Theory, 3rd edition

 Organizational Environment

Postmodernists see environment as…

fragmented

boundaryless

image-driven

simulacra

Hatch & Cunliffe: Organization Theory, 3rd edition

 NETWORK

Fig 3.2
Organizations
operate within Regulatory
Unions
environments Agencies
comprised of
stakeholders and
competitors Suppliers ORG Customers

Partners
Special
Figure 3.2 interests

Competitors
 Managing the Environment

Buffering

Protecting the internal

organizational environment
from environmental shocks.

Example: Material, labour, or capital shortages.

Hatch & Cunliffe: Organization Theory, 3rd edition

 Managing the Environment

Boundary Spanning

– Environmental monitoring activities.

– Representing the organizational interests to the
environment.
• Public relations
• Advertising
• Sales
• Recruiting efforts

Hatch & Cunliffe: Organization Theory, 3rd edition

 Stakeholder theory

Organizations operate under a social contract

that guarantees certain rights to those who have
a stake in the organization’s activities or
outcomes. Those attending to stakeholder
demands will be more successful.

Hatch & Cunliffe: Organization Theory, 3rd edition

 Interorganizational Network

Stakeholders:
Any actor that affects or is
affected by the organization.

Network actors:
Investors, competitors,
employees, media, suppliers,
distributors, government, the
physical environment, etc.

Hatch & Cunliffe: Organization Theory, 3rd edition

 Figure 3.3 Interorganizational Network

Hatch & Cunliffe: Organization Theory, 3rd edition

 Figure 3.4 Sectors of the environment
General Environment

Figure 3.4

GENERAL
ENVIRONMENT
 Legal
Some trends in the Culture surveillance
General Environment pluralism

Physical
TASK ENV
Political global warming
terrorism
ORG

Social Economy
diversity globalization

Technology
broadband
Figure 3.5 One way to picture globalization

Figure 3.5

INTERNATIONAL
ENVIRONMENT
 International Environment

The economic, political, socio-

cultural, legal, technological, and
physical interconnections that
allow for permeable borders
between nations.

Hatch & Cunliffe: Organization Theory, 3rd edition

 Table 3.1 Contribution of Environmental
Sectors

Sector Contribution to Global Change

Technology Personal computers, internet, digital cameras, cell

phones, etc.

Economic Global capital markets, technology exchanges,

worldwide trade, etc.

Political/Legal Breakdown of nation-state authority, erosion of

territorial borders, etc.

Social/Cultural Global media coverage, popular culture,

consumerism, etc

Physical Population growth, loss of biodiversity, global

warming, etc.
 Modernist Theories

• Environmental Contingency Theory

• Resource Dependence Theory
• Population Ecology
 Environmental Contingency Theory

Successful organizations match their internal

structure to environmental characteristics
(dynamic or stable).

(Burns & Stalker, Lawrence & Lorsch)

Hatch & Cunliffe: Organization Theory, 3rd edition

 Environmental Contingency Theory

Stable Environments
• Routine activities
• Strict lines of authority
• Distinct areas of responsibility

Rapidly Changing Environments

• Flexibility
• Application of skill where needed
• Changing work patterns

Hatch & Cunliffe: Organization Theory, 3rd edition

 Environmental Contingency Theory

Information Perspective on
Uncertainty
Uncertainty is experienced by individuals
when they make decisions, rather than in the
environment itself.

Hatch & Cunliffe: Organization Theory, 3rd edition

Fig. 3.6 Environmental Uncertainty
Fig. 3.7 Links Between Conditions
 Responding to Uncertainty

The Law of Requisite Variety

(General Systems Theory)
For one system to deal effectively with another it must
be of the same or greater complexity.

Isomorphism
The organization takes
on the same form
as its environment.

Hatch & Cunliffe: Organization Theory, 3rd edition

 Resource Dependence Theory

Analysis of the interorganizational

network can help the organization
understand the power/dependence
relationships that exist between it and
other network actors.

Hatch & Cunliffe: Organization Theory, 3rd edition

 Power and Dependence

An organization depends on resources

controlled by the environment.

The environment therefore has power over an

organization and can influence decision
making.

Hatch & Cunliffe: Organization Theory, 3rd edition

 Fig. 3.8 Applying Resource Dependence Theory

Hatch & Cunliffe: Organization Theory, 3rd edition

 Other Dependence Management
Strategies

• Vertical integration
• Horizontal integration
• Developing personal
relationships
• Establishing formal ties with
other firms *Your job as a manager: find the right mix of
counter-dependencies you can create with
• Lobbying those on whom you depend for critical, scarce,
non-substitutable resources.
• Marketing

Hatch & Cunliffe: Organization Theory, 3rd edition

 Population Ecology

Organizations within an ecological niche are competitively

interdependent and compete for survival.
Study how & why some
organizations survive.

• Variation
• Selection
• Retention
• Operation at the level of
the environment

Hatch & Cunliffe: Organization Theory, 3rd edition

 Population Ecology

The portion of the environment studied by population

ecology is an ecological niche. Consisting of the
resource pool upon which a group of competitors
depends.

*Your job as a manager is to help your

firm find a pool of resources over which it
can compete successfully with other
firms for its survival.

Hatch & Cunliffe: Organization Theory, 3rd edition

 Darwin and Organizations

Darwin’s survival of the fittest principle helps

to explain the dynamics of populations of
organizations:

Variation: Entrepreneurial innovation that gives birth

to new organizations as well as adaptation of existing
firms.
Selection: Organizations that best fit the needs and
demands of their niche are supported with resources.
Retention: Organizational survival and fitness are
maintained through the flow of resources.

Hatch & Cunliffe: Organization Theory, 3rd edition

 Symbolic-Interpretive Theories

Institutional Theory
The Enacted Environment
Ambiguity Theory

Hatch & Cunliffe: Organization Theory, 3rd edition

 Institutional Theory (Selznick)

Organizations adapt to both the values of

the internal groups and external society

Hatch & Cunliffe: Organization Theory, 3rd edition

 Institutional Theory (DiMaggio & Powell)

An organization is institutionalized by the

following contexts:

1. Technical, Economic, or Physical

e.g. production and exchange of
goods in a market

2. Social, Cultural, Legal, or Political

e.g. conforming to norms, values, rules,
and beliefs upheld by society.

Hatch & Cunliffe: Organization Theory, 3rd edition

 Institutional Pressures

Coercive: Pressure to conform that comes from

the government in the form of rules or laws.

Normative: Pressure from cultural

expectations.

Mimetic: The desire of one organization to

look like another. Usually used as a response to
uncertainty.

Hatch & Cunliffe: Organization Theory, 3rd edition

 Social Legitimacy

Institutional environments reward organizations for adopting

acceptable practices and structures. Without this acceptance,
organizations can be driven out of business.

Your job as a manager is to to help your firm mimic practices indicated by the
institutional environment through coercion or normative expectation in order to
ensure its social legitimacy.

Hatch & Cunliffe: Organization Theory, 3rd edition

Fig. 3.9 Social Legitimacy as an
Organizational Resource
 Enacted Environment (Weick)

The conditions of the environment

cannot be separated from managers
perceptions of those conditions.

When decision makers respond to

their perceptions they enact the
environment they anticipated.

Hatch & Cunliffe: Organization Theory, 3rd edition

 Ambiguity Theory

Encouraging multiple interpretations of goals,

vision, and actions to produce different
strategies.

Hatch & Cunliffe: Organization Theory, 3rd edition

 Postmodern Theories

Deconstruction
Trace discursive and non-discursive influences
over time
Fragmented environment

Hatch & Cunliffe: Organization Theory, 3rd edition

 Burns’s Three Phases of Industrialization

Phase 1:
Simple manufacturing – British textile factories

Phase 2:
Complex manufacturing – clothing, food, chemical
processing, iron and steel factories

Phase 3:
Supply outstrips demand, competition increases, search
for global markets puts focus on consumer, all employees
must contribute to economic success

Hatch & Cunliffe: Organization Theory, 3rd edition

 Phases of Industrialization (Burns)

Phase 1:

The Factory System -

Productivity through machines and routinization.

Hatch & Cunliffe: Organization Theory, 3rd edition

 Phases of Industrialization

Phase 2:
Greater product variety, more
complex production processes,
growth in bureaucracy

- Control, routine, and specialization.

- Development of management structure

Hatch & Cunliffe: Organization Theory, 3rd edition

 Phases of Industrialization

Phase 3
Production overtakes domestic
demand
- customer sensitive
- stimulated consumption
- internationalization
- technical developments

Hatch & Cunliffe: Organization Theory, 3rd edition

 Post-Industrialism (Bell)

Society is organized around

the creation of knowledge
and uses of information.

Society is shaped by its

method of acquiring and
distributing knowledge.

Hatch & Cunliffe: Organization Theory, 3rd edition

 Avoiding Hegemony

Hegemony is the practice of interpreting

the interests of the ruling class as
universal.

- Surface language that implies the dominance

of one group over others.

- Give voice to others.

Hatch & Cunliffe: Organization Theory, 3rd edition