Tuesday, May 29, 2012

Power within organizations

Sociologists have been thinking about organizations in a careful, empirical way for decades. Here is a volume edited by Mayer Zald that results from a 1969 conference at Vanderbilt on the topic of "Power in Organizations" (Power in Organizations).  The cross-section of sociologists represented here provides a good snapshot of the ways that organizations were conceptualized in the late 1960s.  There are contributions by quite a few interesting sociologists, including Peter Blau, Richard Peterson, Charles Perrow, and Mayer Zald.

Perrow's contribution, "Departmental Power and Perspectives in Industrial Firms,"  is particularly interesting.  Here is how Perrow frames his research problem:
It is my impression that for all the discussion and research regarding power in organizations, the preoccupation with interpersonal power has led us to neglect one of the most obvious aspects of this subject: in complex organizations, tasks are divided up between a few major departments or subunits, and all of these subunits are not likely to be equally powerful. In industrial firms ... there are fairly clear divisions between the basic units of sales, production, research and development (or engineering), and finance and accounting. Equality of these groups is hardly insured by the fact that there is at least one person, the president, who stands above all these functional groups, and by the fact that each department is stratified into roughly equal levels of authority.... The question of which group dominates in industrial firms, then, will be the subject of this paper. (59-60)
Perrow's approach to the problem is empirical. His study depends on interviews with dozens of ranking employees in twelve manufacturing companies with at least 1000 employees, with 2633 individuals interviewed in total.

The study focuses on three primary groups and one "residual" group that could be identified in all the firms: sales and marketing, production and manufacturing, and research and development. The residual group is "staff services", including finance, personnel, legal, and the executive group.  The research question was to determine which group or unit had the most "power" within the firm.  The interview template asks a series of questions about how the interviewee estimates the power and discretion possessed by various groups within the firm.

Perrow notes that the concept of "power" conceals a range of complexities:
Do we mean actual or potential power, power derives from internal workings of the firm or the market place, power based upon the force of personalities or the logic of group functions, power today or power in the next quarter, and so on? (63)
There is a strong pattern to the results for the fundamental question, which unit has the most power? Perrow finds that "sales" is judged to have the most internal power in 10 out of 12 firms; production is generally second; "finance" is commonly third; and R&D is almost always last.

Perrow's next question is "why" -- why should sales be the most powerful unit within manufacturing firms? His answer turns on facts about the market economy.  The sales operation of a company is the interface between potential consumers and the product created by the firm.
As a result of this strategic position, sales is in a position either to exploit present company capabilities or force a change in these capabilities. The consequences for the other groups are manifold, but sales -- with few sunk costs (capital investment) and little interdependence with other functions that would require major changes in its own structure and operating procedures -- is capable of more flexibility. (65)
Perrow finds this result surprising for one category of firm -- those where design and production are "non-routine", or where the product is not yet commoditized. These are what we would today refer to as high-tech firms.
If respondents described their tasks as fairly nonroutine -- indicating frequent problems requiring analysis and uncertainty about the outcomes of their efforts -- then there would be little edge for sales. (66)
So Perrow expected that R&D -- the unit assigned to develop new products and solve problems -- would have greater power in an environment of technological uncertainty.  But the importance of R&D within such a firm does not cash out in terms of internal power, in Perrow's findings based on these twelve firms.  And this fact, in Perrow's assessment, comes down to a tactical advantage possessed by sales within the firm:
Neither of these [prior] analyses sufficiently takes into account the ability of those who once gain power to manipulate the source of uncertainty, at least over a span of, say, ten or fifteen years. The maintenance people in Crozier's study augmented their power by removing information from the files that might make their performance more predictable and less uncertain, and by keeping information secret from machine operators and other engineers. Similarly, I think that sales, or production, or R&D can use their power to maintain either a fiction of uncertainty, or to steer the organization into areas where the uncertainty will be in their hands. (67)
So Perrow highlights an important source of power within an organization: the power to shape or hoard information.

The impression we get from reading Perrow's essay today is that Perrow's conceptual framework moves back and forth between the business environment within which a firm exists and the tactical intelligence of actors within the firm.  The business environment gives an advantage to one group of actors -- those involved in sales; and the tactical actions selected by actors within that unit to maintain their advantage accounts for the persistence of the power of that unit.

What the analysis doesn't pay any attention to is the internal organization of the firm (beyond the functional division into the four units Perrow highlights).  The analysis doesn't make any effort to map out the internal working relationships between functional units, or the ways in which performance of actors within units is supervised, or the ways in which communications occur internally, or the ways in which individuals are recruited into roles, or the ways in which decisions are made.  The article does distinguish between levels of managers -- upper, middle, and lower -- but doesn't provide an "organizational" account of how these levels fit together.  This is partly, of course, a function of the question that Perrow posed for research: what is the perceived level of power associated with the major functional units in the decision-making of the firm? But perhaps it reflects as well the development of the field.  In his later writings Perrow is much more attentive to the "micro-organizations" and systemic interconnections that exist within large organizations such as FEMA or the NRC.

It is also interesting to highlight the time period in which this conference occurred: at the high-water mark of popular mobilization against the Vietnam War and segregation.  The contrast between organizational power and popular protest was a stark one.  And some of the organizations that are considered in the volume -- universities and medical schools, for example -- were at the center of this contrast.