CHAPTER 2 LITERATURE REVIEW The essence of organizational strategy is rooted in the foundation of organizational action. Therefore, a central characteristic of those theories that attempt to explain the strategic behavior of organizations is their perspective on action. Van de Ven and Astley (1981, pp. 429-433) and Astley and Van de Ven (1983, pp. 246-247) draw a distinction between deterministic and voluntaristic perspectives on organizational action. These two perspectives are quite well represented in the organizational literature. However, Pfeffer (1982, p. 5) argues that a third perspective that rejects the stimulusresponse perspectives of determinism and voluntarism in favor of an "unfolding Consequently, perspectives process" Pfeffer (1982, perspective pp. 5-10 also ) exists. offers three on action that are labeled as the intendedly rational, situational, and emergent perspectives. The study at hand proposes that the process by which an organization' s strategy emanates can be classified according to three models of action that are derivatives of Pfeffer's three perspectives on action: the traditional, dialectic, and spontaneous approaches to strategic management. Inasmuch, 29 this chapter proceeds to analyze the competing models of strategic management in order to understand the underlying premises that may facilitate or hinder the models' abilities to accurately portray the process by which strategy emerges. The first part of the chapter probes the traditional model that focuses on a formal approach to strategic management. The second part of the chapter then examines the spontaneous model that strategic management. advances an informal approach to The third part of the chapter analyzes the dialectic model that conditionally mediates the formal and informal influences of the strategic management process. Each of these discussions contains a survey of the theoretical foundations that underlie the strategic model as well as an inspection of the premises that underlie the model's approach to strategic management. After presenting these three models, the chapter returns to the Hrebiniak and Joyce (1985) framework. The traditional, spontaneous, and dialectic models are respectively tied to quadrant III, high choice and low determinism; quadrant IV, low choice and low determinism; and quadrant II high choice and high determinism. Moreover, the argument is advanced that the remaining quadrant of low choice and high determinism is predisposed to a culturally-based configuration of preceding three modes of strategic management. the 30 The Traditional Model The origins of the traditional model of strategic management are found in the seminal studies of industrial organization. These studies give great logical order of organizational action. emphasis to the The intent of this logical framework is to create the "rational" organization. Having perceived a rational nature to organizational action, some scholars (Scott, 1981, Chapter 3) refer to this progenitor of the traditional model as the "rational systems" perspective. The Rational Systems Perspective The rational systems perspective is exemplified by the machine metaphor of organizational action. In the same sense that a machine is an interrelated union of parts with narrowly defined functions that obediently and efficiently submit toward an overarching purpose, the organization depicted by the rational systems perspective is similarly constructed of organizational structures and systems that are intended to efficiently achieve prescribed outcomes. Definition The rational systems perspective defines an organization as "a collectivity oriented to the pursuit of relatively specific goals, and exhibiting a relatively highly formalized social structure" (Scott, 1981, p. 21). This definition 31 features two characteristics of particular significance to the rational systems perspective. These two characteristics concern the clarification of organizational purposes and the formalization of organizational actions. In regards to the clarification of organizational purposes, the definition indicates that the ends being pursued are explicit and specific. Goals provide the value premises from which alternative courses of action can be prioritized. Without clear preferences for the ordering of alternatives, rational decisions do not exist. In addition to establishing decision criteria, goals construct the framework around which the activities of the organization are planned. Organizations are, in essence, a hierarchy of objectives. Hence, the more explicit and specific the goals are, the more rational the organization is. The characteristic of formalization is equally central to the rational systems perspective. In this instance, formalization refers to the specificity of rules. Inasmuch, the rational systems ' definition notes that, in addition to a clarification of ends, rational organizations require a formalization of means. Formalization is desirable because behavior is made more predictable through standardization and regulation. Moreover, formalization makes more explicit- -and thereby more controllable--the structure of relationships and the system of principles that govern behavior. Likewise, the more explicit and specific the rules are, the more rational - - - 32 the organization is. Schools of Thought The rational traditional model systems of perspective, strategic derived from a unitary view. from management which draws, the is not Rather, the rational systems perspective is derived from a set of varied and historically distinct positions that are described here as schools of thought. These schools of thought include scientific management, classical management, and decision theory. As the generally regards industrial recognized to the revolution that management took organizations of shape, must operations. society change with Some scholars (Taylor, 1911) believed that this change could only come from the application of the scientific method' s logical framework to management management. problems- -hence, the label scientific The basis of this philosophy is to scientifically analyze tasks performed by individual workers in order to discover how to produce a maximum output with a minimum input of resources. Changes at the individual level of operations are a consequence of changes in management practice. scientific management movement Advocates of asserted that too much of management's work was being left to the workers. Operating decisions were being made by workers who drew upon personal preferences and rules of thumb. Proponents of scientific 33 management contended that workers should not have to make management's The use of the scientific method decisions. would direct the manager to the most efficient way that work should performed. Therefore, be management' s job was to establish standards and methods of work. Taylor's work on scientific management presents a view of the manager' s work which has had a profound impact on the rational systems traditional model perspective, and has of management. strategic extended into the Taylor' s principles advance that management should 1) study each job through application of the scientific method and determine the standards of performance related to the best method of operations, rather than operating through rules of thumb; 2) select and train workers who are capable of performing the designated tasks, and develop cooperation arising from a mutual dependence between management and workers, instead of encouraging individual efforts of workers; 3) monitor work to make sure employees are performing according to prescribed standards; and 4) assume all planning and organizing responsibilities, instead of allowing workers to choose their own methods (Taylor, 1911, pp. 36-37). Whereas focuses on individual the scientific increasing employees, management school of productivity through the classical the management thought work of school is concerned with how the organization as a whole should be managed. Conceptual development of principles of 34 administration and bureaucracy are the classical management school of thought. most strongly associated with the hallmarks of the These principles are works of Fayol (1949 translated) and Weber (1947 translated) respectively. Fayol' s (1949 translated) most fundamental contribution is that of identifying the functions of the manager. Fayol asserts that functions the of concept planning, of management organizing, encapsulates commanding the employees, coordinating activities, and controlling performance (1949, Chapter V) . The greatest emphasis is placed on the functions of planning and organizing, since the other functions conform to the framework designed by planning and organizing. Building proposes Among upon these 14 principles these principles functions of of management are several management, (1949, that these principles right to give necessary for Chapter IV). have relevance to the rational systems perspective. Fayol particular The first of is that of authority which states that the orders the and the power conducting of to exact obedience managerial work. is Another principle indicates the need for a scalar chain of hierarchal order which reporting. establishes Along this formal hierarchal lines order, of the authority principle and of centralization states that authority should be concentrated at the top of the scalar chain. Within this hierarchal order, individual interests must be subordinated to the common good of the organization. The initiative of employees should be 35 constrained within the bounds of authority. Like Taylor, Weber (1947 translated) reasons that an organization operates best . with definite, predictable methods, logically determined and established as rules. Like Fayol' s contributions translated) system of to the classical school, concept of bureaucracy supervision and Weber' s (1949 exemplifies an orderly subordination. To Weber, bureaucracy is a specific type of administrative structure which uniformly and consistently provides a rational system of order through strict rules and impersonal conduct. Weber' s conceptualization of bureaucracy contains several characteristics systems that perspective. have significance for the rational These characteristics consist of a formal system of rules, impersonality, division of labor, hierarchal structure, authority structure, career commitment, and rationality (1947, pp. 329-341). Hence, Weber's view of bureaucracy as the ideal type of organization in conjunction with Fayol' s view of management' s foremost principles have resulted in the classical school of thought that has produced a lasting effect on the management of organizations. From the decision theory school of thought, Simon (1957) as well as March and Simon (1958) elaborate on the concepts of administrative principles and bureaucracy. From the viewpoint of these scholars, a formalized structure supports rational decision making by subdividing responsibilities among participants and providing them with the necessary means to 36 accomplish these The responsibilities. organization's hierarchy is viewed as a formalized arrangement of ends-means chains that promote consistency of decisions and activities throughout the organization. This conceptualization emphasizes the classical school's assumption that individuals who work in rational organizations behave rationally. March and Simon's (1958) conceptualization adds a new consideration that acknowledges that the rationality of human beings is limited. Simon assumption optimize observes that the classical of an "economic man" decisions school' s earlier rationally attempting is impractical in real to administrative situations; therefore, Simon proposes an "administrative man" who is "intendedly rational." This school of thought suggests that managers seek to be rational, but within the limits of human capabilities. Thus, the manager usually seeks a satisfactory, but not necessarily optimal solution. This administrative behavior school of thought suggests that individuals generally make decisions by examining a limited set of possible alternatives, rather than by examining all available options. Moreover, decisions are made by using a limited set of criteria drawn from the decision maker's own set of rules and experiences. The decision-ma king process is nonetheless rational, even if somewhat less methodologically rigid than earlier conceptualizations of the rational systems perspective. 37 Summary The preceding survey of the rational systems perspective and its associated schools of thought reveals the foundation upon which the traditional model of strategic management is grounded. The fundamental characteristics of the rational systems perspective that prevail in strategic management' s traditional model are conspicuously rational with a formal and controlling nature. The following section introduces traditional model of strategic management, the and probes the approach' s essential qualities. The Traditional Approach To Strategic Management The traditional model of strategic management is based on the rational systems perspective that draws more generally on the scientific method. Some scholars have used the scientific method quite literally in their descriptions of organizational strategy. Landau (1973) contends that policies are translated into the equivalent of theories, plans to models, and programs to experiments. This notion of the scientific method has given rise to the principles of scientific management through which organizational processes are systematically controlled for achievement of objectives. In accordance with scientific principles, the traditional extraneous influence. the informal model attempts to control The organization's untamed culture- -or organization- -is seen as the irrational; therefore, the challenge is to control culture rationally 38 (Green, 1988, p. 121). Characteristics of the Traditional Model The traditional model of strategic management specifies a series of tasks to be performed by management. These tasks include the development of a mission statement, setting of objectives, formulation of a strategy, implementation of the strategy, and monitoring performance to detect needed strategic adjustment (Schendel & Hofer, 1979; also see Certo & Peter, 1991; Digman, 1990; Montanari, Morgan & Bracker, 1990; Pearce & Robinson, 1991; Thompson & Strickland, 1990; Wheelen & Hunger, 1990). The underlying tone of this model is formal, systematic control (Paul, Donovan & Taylor, 1978, p. 124) . Under such a system, power and communication are hierarchial. The formal strategic plan is seen as the most powerful of communication device since it is explicit (Scholz, 1987, p. 84). Management Increasingly, the top-management team (Ancona & Nadler, 1989) assumes the responsibility to determine the direction in which organizational resources will be marshalled, thereby determining the organization' s strategy. According traditional model, management defines to the the organization' s mission and sets the organizational objectives that will be used as the criteria in the making of decisions throughout the 39 organization. As strategies are drafted, the process may be comprised of a lone master strategist CEO, a collaborative effort on the part of the management team, the delegation of responsibility of to responsibility a planning to a staff, champion or within the the delegation organization (Brodwin & Bourgeois, 1984) . Yet, regardless of which of these options is employed, the dominant theme that underlies the traditional model is formal, systematic control. External and internal information is sieved by management in an effort to formulate strategies that optimize strategic success. In essence, once the strategy remains is to ensure is drafted, according execution all that to plan. If the right structure is Implementation becomes mechanical. in place and the right reward systems are being offered, then organization members will be adequately supported and motivated to take operational actions that are congruent with strategic objectives. additional information As implementation regarding external takes and place, internal environments is fed back to management for further adjustment to strategies. Premises of the Traditional Model Although the simplicity and logic of this model strong appeal, management implications the carries for traditional some approach assumptions viability. A that major to have has strategic serious assumption is 40 management' s ability to process a seemingly endless amount of information relevant to the formulation of strategy (Paul, Donovan & Taylor, 1978, p. 126) affects strategic tasks organization' s values. This assumption directly such as the development of an Attempting to identify the value set of an individual is difficult enough, but the task becomes exponentially more difficult as that value set must encompass a collectivity of individuals. The traditional model makes another assumption that helps to alleviate this burden. The traditional model assumes that all organizational members work as a unified hierarchy toward overarching organizational aims (Green, 1988, pp. 121-123). To work as a unified whole, organizational members must by necessity commit to the value organization 's system. Therefore, management decides on what values to instill in statements of organizational mission so between to form organization am appropriate strategic environment. However, this dependence on management' s ability to process the relevant match as and information and to determine the correct set of values seems to suggest, in light of bounded rationality, that these managerial abilities may be limited (Simon, 1957, pp. 38-41). Green (1988, p. 123) argues that differing value structures among organizational members makes management' s attempt to dictate values a futile endeavor. This same argument can also be made for the strategic task of setting organizational objectives. Given the myriad 41 of possible objectives that could be targeted, management may not select a set of objectives that appropriately fix the organization on a course toward competitive advantage. Another fundamental premise of the traditional model is that a formally structured approach to the formulation of strategy is desirable. The formal nature of such a process encourages a methodical approach to the gathering, organizing, and processing of information, and also provides a rationale for the decided upon strategy. However, the rigidity of a formal planning system can also be counteractive. The existence of organizational strengths and weaknesses as well as environmental opportunities and threats that somehow do not register in the mechanistic categories of a formal planning system will be overlooked or ignored. As with the task of formulating strategy, the task of implementing strategy is strongly affected by traditional model premises of control (Paul, Donovan & Taylor, 1978, p. 127) . Once the strategy has been determined with the appropriate supporting systems operating, management need only to control the system in order to implement the strategy. This assumption that control of the organization' s systems is critical to achieving results serves to constrain and/or punish behavior that is defined by the system as being deviant and therefore, dysfunctional. However, deviant behavior may not be dysfunctional when that behavior is directing attention and effort at addressing strengths, weaknesses, opportunities, 42 and threats that were overlooked, ignored, underestimated, overestimated, or operationalized ineffectively or inefficiently by the formal planning system. This tendency to inhibit unplanned behavior can lead to implementation problems. Green (1988, p. 124) contends that formal systems are not enough to ensure implementation due to an unseen need for change, or political resistance to change. Alexander (1985) presents ten implementation problems that at least 50% of the organizations in his study experienced. The source of these problems seems to be found in assumptions of the traditional model. implementation these Peters problems (1978, p. 8) would explain as being caused by an underestimation of time requirements, an overdetermination on management' s abilities as we11· as on formal planning and control systems, and an underdetermination of organizational members' capabilities. Since management dictates the those responsible strategy, determines and for operational implementation have minimal ownership of the strategy and outcomes. Therefore, minimal attention and effort are given by those responsible for operational implementation to bridging the problematic gaps. Summary The traditional model of strategic management is a logical and systematic approach to strategy formulation and implementation. The simplifying reductionist approach of this 43 model has assuredly been a strong factor in this model's widespread appearance in the strategic management literature. Yet, in spite of the pervasiveness in application of the traditional the literature, model has been criticized because of the model's inflexibly bureaucrati c practices which do not respond quickly to change. Yet again, Landau (1973) would contend that these failures of the traditional model occur because organization's are not bureaucratic enough. Nevertheless, due to a logical and controlling nature, the traditional model shows some promise as a paradigm by which management may attempt to create and execute the organization' s strategy. The Spontaneous Model The spontaneous model of strategic management descends from a body of seminal literature that originally surfaced as a repercussion to the assumptions of the "rational" management movement. This literature posits that organizations are more than a set of formally mandated rules. are collectivities personal interests; Indeed, organizations of human beings who work according to yet, these self-interests are best explained through social needs rather than economic needs. Even though this stream of literature has its beginnings in the perceived failings of rational management, the theories developing from this more humanistic literature have grown into a perspective of their own. Some scholars (Scott, 1981, 44 Chapter 4) have labeled this collection of views the "natural systems" perspective. The Natural Systems Perspective The natural systems perspective can be typified by using the metaphorical case of a living organism. Not unlike the spontaneous manner by which life forms come into being and attempt to exist, organizations are growing and evolving systems formed of interlocking but ever-changing interests, values, and behaviors of individual members. Organizations exhibit a perspective of action that is naturally purposeful and without formal design. Definition According to the natural systems perspective, "an organization is a collectivity whose participants are little affected by the formal structure or official goals but who share a common interest in the survival of the system and who engage in collective activities, informally structured, to secure this end" (Scott, 1981, p. 22). This definition of an organization explicitly diverges from that of the rational systems perspective. The perspectives dimensions along differ are at the fundamental which the two level of both philosophies. These dimensions are the nature of goals and the formality of structures and systems for accomplishing goals. 45 Concerning the nature of goals, this definition offers that organizations are more than instruments for attaining narrowly defined goals. Organizations are multifaceted social systems. As complex social systems, organizations experience a variety of needs. of the One of these needs is the accomplishment organization's authorized goals which aids the organization in adapting to environmental influences; however, another type of need is the satisfaction of desires that are internal to the organization. Given the requirement of attending to these powerful and sometimes opposing needs, the primary purpose of the organization becomes survival. The drive operational for concerns distortion of Therefore, the the survival produces that result may organization's natural systems an in the formally perspective emphasis on neglect or stated goals. observes the distinction between an organization 's announced goals that are officially sanctioned and actual goals that are revealed through the actions of organizational members. In addition to organizational ends, the definition also addresses the composition of organizational means. If this definition suggests that organizations are more than devices for pursuing artificially designed goals, then this definition also emphasizes that organizations are more than a set of prescribed rules for achieving those goals. Organizations are formed of individuals who have personal values, expectations, agendas, and abilities. This quality of organizations gives 46 substance to the notion of social forces that informally influence behavior. As the formal nature of the rational organization has raised doubts as to its effectiveness, increased attention has been given to the concept of the informal organization. In this sense, the formal nature of organizational action is described as the normative structures and systems designed by management. behavior Formal structures and systems are those norms and patterns that exist without regard to the characteristics of the individual participants. Conversely, the informal organization is described as the operative structures and systems that enable the uninhibited behavior of participants. Informal structures and systems, therefore, are those based on the characteristics or resources of the deny the individual participants. The natural systems perspective does not existence of highly formalized structures and systems within organizations; however, this perspective does question the importance and impact of these behavior of participants. systems perspective is formal approaches on the The quintessence of the rational that behavior is conducted and regulated through informal structures and systems. Schools of Thought The natural systems perspective, from which the spontaneous model of strategic management is drawn, springs 47 from a diverse array of empirical and theoretical works. The common thread throughout the schools of thought which comprise the literature of the natural systems perspective, however, is an inherently spontaneous quality of organizational action through which organizational members instinctively function. The specific schools of thought selected for review are the human cooperative systems, and institutional relations , schools. The human relations movement provided an impetus for the natural systems perspective. The Hawthorne studies (Mayo, 1945; Roethlisberger & Dickson, 1939) are generally considered to be the initiation of the human relations movement. Several findings of the Hawthorne studies conducted at the Hawthorne plant of AT&T's Western Electric Company challenge some basic assumptions of scientific management. point to a complex model The Hawthorne of worker motivation studies based on a social-psychological conceptualization rather than an economic conceptualization of human behavior. The first of these findings was that, although changes in task conditions such as lighting had no effect on productivity of the participants being observed, the reactions of the participants to being observed had a significant affect on productivity. to be The presence of this condition which has come known as the participants' "Hawthorne Effect" level of productivity complex socio-emotional reaction. was suggests that the the result of a Because the participants 48 had been singled out for special study, they had developed a group pride that motivated them to improve their performance. This observation provides a basis for concluding that the human factor has a profound effect on organizational behavior. A second significant finding Hawthorne studies organization. The was the discovered during the importance of the informal researchers established a piecework pay system for the group working in the bank-wiring room. pay system was expected to encourage higher This levels of productivity with the inducement of greater economic benefit to the workers. However, the researchers observed an informal organizational structure that enforced expected standards or norms of behavior that discouraged variation in the level of productivity. In effect, the group's informal organization established a level of acceptable output for members. Generalizing from the Hawthorne studies, members of organizations do not behave as "rational" economic beings, but rather as complex social beings with multiple values and motives. These values and motives are as much- -if not more- -a reflection of feelings as they are reasoning. Finally, the Hawthorne study intimates that organizational members do not work as isolated individuals; they perform as interrelating members of social groups exhibiting commitments and loyalties beyond personal self-interests. The theoretical work of Barnard (1938) also takes exception with the classical school of management by proposing 49 a theory of cooperative systems. Barnard views organizations as social systems that require employee cooperation. Barnard advocated that the classical concept of authority which takes for granted the acceptance of top-down control needs revision. The acceptance of authority by members is essential to management effectiveness. Therefore, managers must encourage cooperative efforts to garner acceptance of their authority. This concept of acceptance suggests that organizational members can exert a will of their own on the organization, thereby urging the natural systems perspective. with the Barnard's framework work of the addresses natural systems the two In harmony perspective, fundamental issues of organizational survival and of the informal organization. In Barnard' s organization is point of dependent interdependent conditions: view, upon the two survival of interrelated an and effectiveness, the accomplishment of the cooperative purpose; and efficiency, the satisfaction of individual motives (1938, pp. 60-61) Barnard acknowledges that the primary goal of organizations is to survive. And to survive, the organization must satisfy internal as well as external needs. With regards to these needs and their manner of being met, Barnard identifies organizations: the organization. formal two components organization and of the social informal Barnard defines the formal organization as "a system of consciously coordinated activities or forces of two -- 50 or more persons" (1938, p. 73). The informal organization is defined by Barnard as "the aggregate of the personal contacts and interactions and the associated groupings of people [whose relationships are not a part of or governed by the formal organization ]" (1938, p. 115). Barnard' s conceptualization contends that the informal organization is not a subordinate part of the formal organization, coexisting occurrence that has but rather great a separate, significance for organizational performance. Since their inception in the Hawthorne studies and the theory of cooperative systems, the foundational concepts of operative goal orientation and informal organization have been extended through many studies including studies of group dynamics and leadership. which contributes perspective is One particular extension, however, substantially the work of to the Selznick natural (1948; systems 1957) on institutional theory. Selznick views organizations as adaptive organisms shaped in reaction to the characteristics of participants as well as to influences from the external environment. In the face of hostile environments, organizational members may disregard or modify professed goals in an effort to increase their own security. This view of organizations seeks to explain the processes that underlie changes in organizational goals. Selznick recognizes that survival is a goal of uppermost concern, and proposes that survival is an extension of 51 maintaining values survival and becomes a distinctive matter of Therefore, identity. "institutionalizing" the organization's values and character. To institutionalize is to "infuse with value beyond the technical requirements of the task at hand (Selznick, 1957, p. 17) . According to Selznick, the process of institutionalizing involves the informal emergence of interest groups within the organization values. that However, espouse and support various competing Selznick contends that, to be effectively institutionalized, organizations require the talents of an institutional leader to harmonize the diverse interests of these varied coalitions. Selznick states, "The main practical import of this effort is that policy will gain spontaneous and reasoned support" (1957, p. 150) . Summary The preceding survey of the natural systems perspective and of the literature recapitulates the from origins selected of the schools of spontaneous thought model of strategic management. The cardinal elements of the natural systems perspective that continue to live in the spontaneous model of strategic emergence of succeeding section management both strategic management, arise from organizational ends introduces the an and spontaneous instinctive means. model The of and examines the components of that model to enhance understanding of its potential viability as 52 a mode of strategy formulation and implementation. The Spontaneous Approach To Strategic Management Arising from the natural systems perspective organizational action, the spontaneous model management exhibits an of of strategic improvisational perspective of the manner by which strategy emerges. In sharp contrast to the orderliness of the traditional model, the spontaneous model of strategic management thrives on chaos. Some (Cohen, March & Olsen, 1972, p.l) refer to organizations that exemplify the spontaneous model as "organized anarchies." Rather than being goal directed, rational, and mechanistic, organizations are best described as being "quirky and merky" The spontaneous (Deal & Kennedy, 1983, p. 498). model argues that strategies are formulated and implemented through heterarchal processes, rather than through the hierarchal process of the traditional model. Whereas the traditional model uses formal planning processes to control the culture of an organization, the spontaneous approach treats the uninhibited, natural culture as the process by which strategy emerges. Therefore, instead of being created and executed through a controlled, linear sequence of formal tasks, strategy is manifest as informal activity--uninhibited culture. 53 Characteristics of the Spontaneous Model The spontaneous model of strategic management advances the notion that strategy emerges from the pattern of unfolding decisions made and interactions engaged in by the informal organization. To the extent that the traditional model of strategic management mission is comprised of tasks, i.e. , develop statements, set objectives, formulate strategies, implement strategies, and monitor results; the spontaneous model takes shape in the form of relationships, i.e., the process of connecting people though information (Wheatley, 1992, p. 38). emerges Strategy through a fluid process of interrelationships among organizational members, instead of appearing by means of a discretely ordered sequence of well- defined constructs. The spontaneous model embraces the concept of "huddling." Herein, huddling is a "temporary, intimate, work-oriented encounter between two or more people. Huddlers draw together informally and confer, 'nestling' to get results where organizations fail. A huddle is the source of considerable information, the locus of significant decision, the setting for power transactions, the place where many responsibilities get defined, and the impetus for motivating people to get things done" (Merrell, 1979, p. 6). conceptualization of strategy The spontaneous model' s emergence suggests that utilizing personal skill development through huddling with respect to interpersonal and group communication skills is 54 essential, since the power of individuals to act autonomously implies an equally powerful social force that facilitates the ability of individuals to create and share organizational vision with other members. This spontaneous process appears chaotic, since the strategy is not arrived at deductively with a formal hierarchy of goals and roles. Instead, the strategy is arrived at inductively through the collective of innately shared values among individual members. Barnard (1938, Chapter IX) speaks of the informal organization as the indefinite and shapeless interactions of society. The informal organization performs via unconscious processes- -as opposed to the conscious processes of the formal organization. Peters (1978, p. 14) proposes that organizations operate concepts of unconscious processes on inertia. These and inertia seem to be referring to what could be called the innate culture of an organization. This conceptualization of uninhibited culture offers that culture is not an artifact to be developed and installed by management- -culture evolves as individuals carry out their daily work (Deal & Therefore, from the standpoint Kennedy, 1983 , p. 502). of the spontaneous model, culture can be considered as the interlocking behaviors of the members of a collectivity (Weick, 1969) . As chaos theory illustrates, this seemingly emergence of strategy actually does have an order. chaotic That order is created through shared meanings within the innate culture 55 of the informal organization. As organizational members go about making decisions and engaging in ordinary interactions, strategy is being implemented. As strategy is implemented through these nondirected processes, strategy is also being formulated. Framed in the spontaneous model, strategy is manifest as what the organization does posteriori as opposed to what the organization says a priori. Premises of the Spontaneous Model Like all models, the spontaneous model of strategic management embraces some specific assumptions that influence the extent to which this model can accurately portray the process of strategy emergence. The most fundamental assumption of the spontaneous model is that the members of a collectivity are able to informally arrive at shared meanings. This concept of shared meaning suggests a certain level of coherence which is organically formed. Shared meanings among members give rise to a common agreement as to the accepted methods of information gathering, reasoning, and taking action . Even so, the assumption has implications for members being blinded to the need for change due to an informally implanted cultural bias, not unlike the managerially implanted cultural bias discussed with the traditional model. This assumption of shared meaning has significant impact on the manner by which values and objectives are agreed upon. The process is entirely informal. Values and objectives are 56 emergent rather than imposed, and are best understood retrospect of decisions. In other words, objectives of the autonomously make decisions and organization are the values revealed sense of the environment actions. However, by its reflective nature, the spontaneous model as in and members through their autonomous and lends itself to after-the-fact rationalization of strategic choices. These strategic choices are themselves based on the spontaneous model's assumption that the informal organization can adequately process information through an informal and unstructured approach implementation. management to strategy formulation The model does not, however, makes no formal plans. Brunsson and assume that (1989, p. 7) argues that in some organizations formal processes exist for political purposes, i.e., to show the organization acts with "rationality, decency, and fairness," while informal processes actually "generate coordinated action. " The spontaneous model merely suggests that these efforts at formal planning have no--or relatively strategy-in-use. little--effect on the organization's Schwartz and Davis (1981, p. 37) submit that the risk surrounding organizational change arises from the immutability 5 of culture. Since culture is unchangeable, formal strategy must adapt to the culture in order to even 5 In this framework of the spontaneous model, this usage of the term "immutable" means the inability to be changed by formal processes. 57 have the appearance of an effect. Therefore, without a hierarchally imposed set of objectives or strategies, the strategy- in-use becomes the shared ways respond to environmental perceptions. process of strategy experienced making in which members Again, this collective appears chaotic. If actually in practice, this chaos may induce a sort of "paralysis of action" brought about by the inability to make choices which (Barnard, 1938, p. is drawn from organization can make information is perspectives, the 118) . Although, assumption sense of that themes, and i• e that the inference the informal act on environmental • patterns I and/or will emerge from the. variety of individual decisions and actions. With regards to implementation, the issue of control or the seeming lack spontaneous model. of it is a central assumption to the The question could easily be asked who guards the guardians? In essence, this model advocates that work in organizations is accomplished entirely through the informal organization. process by use of Therefore, any attempt to control this formal systems will only result in unfulfilled potential of the informal organization and, in turn, sub-par performance. Peters (1978, p. 20) writes of how organizations experience a growth in performance during a period of transition from one form of structure to another, after which results will plateau or decline. Perhaps, increased performance during the periods of flux is because of 58 the unrestrained nature of the informal organization. Additionally, an equally potent explanation for the success of an organization is the informal organization' s exercise of leadership. requires management, Whereas the the informal formal organization organization is better served by leadership (Greenleaf, 1977, p. 60) The spontaneous model would indicate that the most prevalent and effective type of leader is leader" described as an indispensable person who is there when they are needed (De Pree, 1987, p. 46). a "roving Roving leadership is an essential part of the participative process in which organizational members take ownership of problems and influence the employment of resources for solving those problems. The behavior of members is checked by mutual accord rather than by command or rule (Deal & Kennedy, 1983, p. 502). The informal network watches over the values and substance of the organization. Within the assumptions of the spontaneous model, efforts continual among members to establish and reinforce credibility perform the function of control. The informal organization hinges on trust and confidence in other's abilities to carry through on commitments (Pacanowsky, 1988). De Pree (1987, p. 37) refers to these commitments as convenantal relationships credibility that transcend that the derive from contractual intimacy and relationships employed by the traditional model. If credibility does not exist for a particular member, that member is then effectively 59 "controlled" by the interactions of other organizational members. Summary The spontaneous model extreme contrast to the of strategic management traditional is in model. In fact, the spontaneous model should probably not even be attached to the more traditional term "strategic management". The use of the term strategic management suggests too much of a hierarchal control. Instead, the spontaneous model might be best associated with a term such as "strategic empowerment". In this sense, strategic empowerment suggests that members have empowered themselves through shared meanings discovered in the organizing processes that shape the organization's strategy. Thus, strategy is shaped and acted upon by the decisions and interactions of members as they engage in routine activities. In this way, strategy is synonymous with the autonomously enacted culture of the organization. Perhaps though, the greatest argument for advancing the spontaneous odel as the strategy- in-use is also the toughest argument against this model as an accurate representation of the origin of an organization's strategy. Although the concept of empowerment is at the heart of this model, not all members want or will accept empowerment. 60 The Dialectic Model The dialectic model of strategic management is gleaned from scholarly work that recognizes a need for balance between formal and informal organizational action. According to this literature, formal and coexist, but inherently in opposition informal action to each other. are Nevertheless, a product of organizational action emanates from the dialectic occurring between the formally sanctioned actions which are accepted and rejected and the informally practiced activities which are accepted and rejected. As a result of perceiving this dialectic nature which indicates that organizational processes are subsystems within social systems, some scholars (Scott, 1981, Chapter 5) speak of this viewpoint as the loosely coupled perspective of open systems. The Loosely Coupled Systems Perspective The loosely coupled systems perspective is represented by the metaphor of organizations as open systems. Boulding (1956) identifies several classifications of systems in which, if considered incorporates hierarchally, the features of each the higher lower level level system systems. Approaching the highest level system is the social system of which social organizations are an example. At a lower level of the systems classification is the open system which would delineate social organizations as being interactive with their environments. The interactive nature of such an open system --------1 61 is best described as loosely coupled, rather than being tightly coupled as is the case with closed systems, e.g., the rational systems perspective and the natural systems perspective. Definition As an open system, "an organization is a coalition of shifting interest groups that develop goals by negotiation; the structure of the coalition, its activities and its outcomes are strongly influenced by environmental (Scott, 1981, p. 22-23). This factors" definition suggests that the open system level of social systems allows for the analysis of organizations from a variety of perspectives. The open system level of analysis can be concerned with the external environment as between competitive forces and organizational strategic content, or with the internal environment as between formal and informal organizational processes. The perspective that best expresses the dialectic between formal and informal organizational processes is the loosely coupled perspective. One of the main contributions of the loosely coupled perspective is the recognition that many systems- -especially social systems- -contain propelled by elements autonomous actions while being interactions. From organizational members have great that are compelled simultaneously by dependent the natural systems perspective, latitude for autonomous behavior. Yet, from the rational systems perspective, the 62 autonomous behavior of organizational members has little if any impact in unilaterally changing the organization's superstructure. Hence, from the loosely coupled perspective, organizations are viewed not as a hierarchal machine nor as an organic entity, but as a loosely linked coalition of shifting interest groups. As one group grows to dominance and establishes formal organizational ends and means, other groups form as antagonists and pursue informally acknowledged ends and means. Therefore, a dialectic takes place between the formal power of the dominant coalition and the informal power of the recessive coalition, which results in a synthesis of the two powers. Schools of Thought The loosely coupled systems perspective, from which the dialectic model of strategic management draws, is primarily composed of critical works. The literature constituting the schools of thought which represent the loosely coupled systems perspective are concerned with the inherent tension between formal and informal organizational processes. The following discussion focuses on two positions designated as the structuralist and structuration schools of thought. The structuralist school of thought combines the rational systems perspective and the natural systems perspective to create a synthesized view. Etzioni (1964) argues from the -- 63 viewpoints of Marx (1954 tr} and Weber (1947 tr} that regardless of the best efforts of managers and workers, their economic and social interests are inevitably in conflict. Thus, power and control become the central issues of organizational action. Etzioni' s view gives equal attention informal structures of power and control. to formal and The primary focus is on the interactions and accompanying tensions that occur between the formal and informal structures. the basic organizational dilemma the Etzioni takes as inevitable strains between organizational needs and personal needs, rationality and nonrationality, discipline and autonomy, and formality and informality. The thesis to this school of thought is that these conflicts can be reduced but not diminished. Moreover, Etzioni' s structuralist school of thought gives credence to the position that the rational systems perspective and the natural systems perspective are complementary. The structuration school of thought presented by Giddens (1976; 1984) also begins with the premise that tensions exist between the actions of members and the structural features of the organization. Members of organizations are active, reflective thinking human beings who possess the power to choose how to behave. Yet, the structures of social systems both enable and constrain how humans choose to interact. Herein, certain coalitions of the organization' s membership are at an advantage for articulating policies due to the 64 structures of power and control, whereas other coalitions are placed at a disadvantage. Growing from this first tension, however, is a second tension concerning stability and structures of power and control. organizational change related to the Rather than considering action to be determinate or emergent, the structuration school of thought attempts to account for action as a product of the tensions between both forces. of thought distinguishes Systems are the organizations. between empirical Structures organization to create relationship between systems and structures. patterns of are the the systems. systems This school behavior within rules and used The by the interactive structures is what constitutes structuration. Specifically, "Structuration is the process through of producing members' and application reproducing of social generative systems rules and resources ' (Poole, Seibold & McPhee, 1986, p. 247). Therefore, as organizational member s act on certain formally prescribe d or informally ascribed rules, these rules become reified. As rules are not acted upon, organizational members the change rules by which they interact. The structuration school of thought has particular significance to the loosely coupled systems perspective in that formal and informal structures are concurrently being acted upon, serving to produce processes. and reproduce organizational standards and 65 Summary The preceding presentation of the loosely coupled systems perspective along with the presentation of affiliated schools of thought furnish the foundation upon which the dialectic model of strategic management is based. In particular, the dialectic model of strategic management draws from the loosely coupled exists systems among perspective an ever-present organizational processes. The tension next that section introduces the integral aspects of the dialectic model, and analyzes the premises that influence the model' s viability as an effective mode of strategic management. The Dialectic Approach To Strategic Management Alongside the two approaches of the traditional model and the spontaneous model is a third competing explanation for the manner by which strategy emerges. This third approach signifies the loosely coupled perspective of organizational action, and can be described as a dialectic model of strategic management. Mintzberg (1987a; 1987b) contends that in some instances the exclusive presence of either "deliberate'' or •emergent" processes is strategy. insufficient to produce a viable Therefore, Mintzberg describes a more apt strategic process that is manifest tension between through the the presence of both "deliberate" and •emergent" organizational action. This dialectic model proposes that strategy emerges as a synthesis from the friction between formal and informal 66 strategic processes.6 The process is neither controllable as with the traditional model nor uninhibited spontaneous model; rather, the process as with the is one of managed culture wherein strategy is negotiated. Characteristics of the Dialectic Model Under the dialectic model of strategic management, formal and informal strategy management is occupied processes with are fully formally at work. Top developing mission statements, setting objectives, and drafting strategies. membership informally However, of the organization organizing and The is also at the same time enacting a rather than being carried out natural oblivious culture. to the existence of the other, each of these two dimensions, the formal and the informal, draws from and contributes to the other. The dialectic model suggests that organizational activities will produce and reproduce organizational processes (Giddens, 1976; McPhee, 1985; Poole, Seibold & McPhee, 1986). The formal activities of the formal organization' s planning 6 Mason and Mitroff (1981) advance an approach to strategic problem solving which they refer to as the "dialectical inquiry system.• This system (not to be confused with the dialectic model noted by this study) is a formal approach to the surfacing and testing of strategic assumptions. Nevertheless, even through conducted with formal rigor, the dialectical inquiry system as a conceptual framework does intimate the confrontational nature which can exist between formal and informal processes. 67 process and the informal activities displayed by the informal organization' s patterns of behavior create a composite means of strategy creation and strategic action. formal strategic planning process and By acting out the by acting on the formally articulated strategy that is derived from the formal process, members of the organization reify that means of formulating and implementing strategy. Similarly, by not subscribing to certain aspects of the formal planning process or of the content coming from that formal process, members of the organization effectively operate to change or reproduce the organization' s strategy-making processes. Concurrently, informal strategy processes have an affect on the formal planning processes. As behaviors of the informal organization are formally recognized and found to be effective, the formal organization reifies these informal strategies and incorporating the informal these previously strategy unofficial processes activities by into official plans and procedures. Yet, as informal strategies and strategy processes remain foreign to the formal organization, regardless as to the effectiveness of these strategies and processes, the formal organization will not condone such actions which are considered destructive to the official status quo. disruptive and 68 Premises of the Dialectic Model As with the previously discussed models, the dialectic model of strategic management operates under certain assumptions that have strong bearing with regards to the extent that this model accurately captures the process by which strategies emerge. Here again, the manner in which information is processed reappears as a core assumption. The dialectic model of strategic management encourages, in the ideal form, utilization of all organizational capabilities, both formal and informal, to create organizational strategies. Thereby, the organization employs greater interpretive complexity to translate environmental complexity. Even while utilizing a richer combination of interpretive capabilities, the organization will no doubt still operate from a bounded rationality and cultural bias; the attempt to involve various and diverse dimensions in the task of environmental scanning seems to make substantial advances toward more complete information processing. This form of information processing has implications for the way by which values and objectives become known. Management drafts statements of mission and objectives based on management' s interpretation of the organization' s environment, both internal and external (Green, 1988, p. 126) . Members of the organization then act on these values and objectives based on these member's interpretations of the internal and external environment. By acting on certain 69 values and objectives, members assign meaning to and thereby strengthen the charter of these strategic constructs. Those values and objectives not given meaning by organizational members become null and void. Another assumption underlying this model of strategic management involves the amount of structure needed in the collecting and processing of strategic information. Whereas the structure of the traditional model is tight and the structure of the spontaneous model is loose, the structure of the dialectic model has properties that are simultaneously tight and loose (Peters & Waterman, 1982, Chapter 12). Management utilizes formal planning systems in order to make sense of environmental conditions. By nature, these formal planning systems are tightly structured, scanning the environment for certain predetermined classificatory signals that can be processed systematically. On the other hand, the informal organization utilizes a loosely structured process of environmental sense making. individually, and Members gather information process collectively interpret meaning informal organization has as they through interactions. The that no information predetermined method of information collection or processing. Through this dual approach to structure, a friction occurs. In the ideal form of the dialectic model, this friction brings about a synthesized or "negotiated" strategy. However, this notion of a negotiated strategy implies a 70 willingness on organizations behalf of the to negotiate. formal Without and the this informal willingness, strategy would seem, by necessity, to emerge from either the traditional model or the spontaneous model. The notion of negotiation not only raises the issue of willingness, but also abilities. Power to negotiate becomes an important assumption . In the dialectic model of strategic management, control over the strategy emergence process is handled through a balance of power between the formal and the informal organizations. Management has the "legal" power to create systems of formalization and socialization. By introducing formal strategies and socializing employees into a "corporate way of thinking," management is, in essence, setting boundaries to the organization. The ability to set such boundaries can place management in a very powerful position. These boundaries, published rules or policy, act as a guide to appropriate organizational behavior. a welcome tool for which are operationalized as Even though formal policies can be standardization and regulation, the formalization and socialization of such policies can serve to constrain organizational responsiveness in undesired ways. Under these conditions, boundaries become barriers. The informal organization balances this legal power of management with the innate power to produce and reproduce policies through informal interactions. The metaphor of the spider' s web seems especially appropriate (Geertz, 1973). As 71 the informal organization interactions, this constructs of web management' spins a is web anchored of meaning and to s device. certain formal However, not all of management' s formal policies are seen as appropriate anchoring devices. Therefore, anchor the web the informal organization will to those of management' s policies that do seem appropriate, and if necessary, go beyond those policies to find more suitable anchors. The dialectic model of strategic management suggests, though, that management recognizes the innate power of organizational culture, and will attempt to shape the culture in order to create and execute strategy (Green, 1988, p. 123; Schwartz & Davis, 1981; p. 31). Whereas the traditional model is one of controlled culture and the spontaneous model is one of uninhibited culture, the dialectic model strategic management portrays a managed culture (Green, 1988, p. 121; Peters, 1978, p. 8; Tichy, 1982, p. 71). Bettinger advances that the of challenge is (1989) to strategically manage the organization' s culture to tap its strengths in order to achieve superior performance, and to identify its weaknesses in time to overcome them before they can do serious damage. Sometimes the most come in the form of a strong culture. culture can be a serious of weaknesses can That is, a strong powerfullyresistant force to strategic change (Schwartz & Davis, 1981, p. 31). A strong culture can torpedo strategic thought and action; therefore, culture should not be left to evolve, but instead culture -- 72 should be managed by focusing on central, functional values (Reimann & Wiener, 1988) . Summary The dialectic model of strategic management argues for the emergences of strategy from the friction between the formal and the informal organizations. This friction is fueled by differences in the way information is gathered and processed, in the degree of tight and loose structures, and in the use of legal versus innate power. The richness in this model of strategic management is found in the formation of a composite of formal strategy processes and informal strategy processes. However, a substantiative disadvantage that could arise from this model as it appears in use is that rather than emerging from a composite, strategy may emerge from a compromise that does not draw from the full potential of the model. The Need for Requisite Variety The Hrebiniak and Joyce (1985) framework presented in Chapter One has been offered paragon of strategic content. by its conceptualizers as a The developers submit that the four quadrants of the framework correspond to Porter's (1980) and Miles and Snow's (1978) generic strategies. Quadrant I, low strategic choice and high environmental determinism, is representative of an organization that would dominantly employ 73 Quadrant II, a "low cost producer" or "defender" strategy. high strategic choice and high environmental determinism, would depict an organization that dominantly employs a "focus" or "analyzer" strategy. Quadrant III, high strategic choice and low environmental determinism, illustrates an organization that dominantly pursues a "differentiation" or "prospector" strategy. Finally, Quadrant IV, low strategic choice and low environmental determinism, exemplifies what Porter portrays an organization (1980) refers to as being that "stuck in the middle" and what Miles and Snow (1978) refer to as being "reactors." However, whereas this framework has functioned as a template for the study of strategic content, the Hrebiniak and Joyce (1985) framework would seem equally suited to function aa a useful manner as archetype strategic of strategic content is processes. In the related to the same trade-offs between managerial and environmental influence, the strategic process of an organization are associated with the interaction between manager ial and environmental forces (e.g., Lawrence & Lorsh, 1967) . Hence, the modes of strategic management that have been presented in this chapter directly correspond to three of the quadrants forming the Hrebiniak and Joyce (1985) framework. Quadrant III, high strategic choice and low environmental determinism, suggests a condition in management has a strong influence on organizational performance. Management' s 74 considerable level of influence is further enhanced by the absence of environmental complexity. In this context, the organization is able to maintain a linear, hierarchal process of strategic action. strategic management Therefore, the traditional model of would correspond to the dynamics of quadrant III. As the environment becomes more complex and exerts an influence equal to that of management--such as is depicted in quadrant II, confusion arises within the organization. The organization struggles in its attempt to come to grips with what is controlled by management versus what is controlled by the environment. Opposing organizational factions take shape, with differing views of the organization's problems and how to solve them. Consequently, the organization' s strategy results from a process of perceptual tensions between position and of the organization the formal the challenges to that position by informally recognized positions. Therefore, the dialectic model of strategic management corresponds to the dynamics of quadrant II. Under circumstances in which management is able to exercise little influence despite the presence of an equally benign environment, such as is presented in quadrant IV, the organization' s strategy is shaped through the emergent pattern of activities Therefore, the engaged in spontaneous by model organizational of strategic members. management exemplifies the process of strategic action in quadrant IV. 75 Quadrant I of the Hrebiniak and Joyce (1985) framework presents a circumstance of low strategic choice and high environmental determinism. This relationship reveals a setting in which the organization's performance is controlled by external forces. With external forces increase in the extent to which they determine organizational performance, the perceived complexity of the external environment by the organization also increases. The concept of environmental complexity suggests that the external environment places an expanding variety of demands on the organization. An expanding variety of external demands necessitates that an organization must match the external complexity with . a requisite variety of internal processes. This assertion is supported by Ashby's (1969, p. 135) law which stipulates that "only variety can [conquer] variety." Consequently, to survive, the variety of organizational processes must be as extensive as the variety of environmental demands. This reasoning leads to the conclusion that an organization that embodies the conditions of quadrant I, low strategic choice and high environmental determinism, would be predispo sed to a complex configuration of strategic management processes. Specifically, an environmentally determined organization would utilize a complex, culturally configured set of traditional, spontaneous, and dialectic processes. 76 Conclusion This chapter has proposed three models of the strategic management process. These three models are presented as paradigms that are distinctly separate from each other with regards to their perspectives traditional model planning. from on strategic action. The relies on a formal process of rational The spontaneous model exhibits action which springs natural and emergent behavior. The dialectic model advances a perspective of organizational action that results from the inherent tension between formal and informal processes. Although each of these strategic modes holds a distinct perspective on action and is therefore amenable to application under contingent conditions, the assertion is made that all three modes would environmentally be present determined within the organization. context The of an reasoning suggests that the complexity gained from the simultaneous presence of the traditional, spontaneous, and dialectic modes would offer a requisite variety to the organization's internal processes that would match the complex variety of the external forces. This study poses two related research questions. First, given the trade-offs along the dimensions of strategic choice and environmental determinism, by what mode(s) of strategic management does strategy emerge? first question is culturally Further, derived, given that the how does the 77 organization's culture create and maintain the observed strategic process? The next chapter presents the methods of the study, revealing the study's subject organization and research design.