Thursday, September 1, 2011

Do organizations have causal powers?

An organization is a meso-level social structure. It is a structured group of individuals, often hierarchically organized, pursuing a relatively clearly defined set of tasks.  In the abstract, it is a set of rules and procedures that regulate and motive the behavior of the individuals who function within the organization.  There are also a set of informal practices within an organization that are not codified that have significant effects on the functioning of the organization (for example, the coffee room as a medium of informal communication).  Some of those individuals have responsibilities of oversight, which is a primary way in which the abstract rules of the organization are transformed into concrete patterns of activity by other individuals. Another behavioral characteristic of an organization is the set of incentives and rewards that it creates for participants in the organization. Often the incentives that exist were planned and designed to have specific effects on behavior of participants; by offering rewards for behaviors X, Y, Z, the organization is expected to produce a lot of X, Y, and Z. Sometimes, though, the incentives are unintended, created perhaps by the intersection of two rules of operation that lead to a perverse incentive leading to W. For example: a farm supervisor may ask peach pickers to discard the bruised peaches rather than placing them in the basket to be weighed. But if the laborers' salaries are determined solely by the weight of the baskets they present for weighing, they will have an incentive to include the bruised peaches (at the bottom!).

Examples of organizations include things like these:

  • the Atlanta police department
  • a collective farm in Sichuan in 1965
  • the maintenance and operations staff of a nuclear power plant
  • a large investment bank on Wall Street
  • Certus Corporation (discoverer of the PCR process)
  • the land value assessment process in late Imperial China

The organization consists of a number of things:

  • a set of procedures for how to handle specific kinds of tasks
  • a set of people with skills and specific roles
  • a set of incentives and rewards to induce participants to carry out their roles effectively and diligently
  • a set of accountability processes permitting supervision and assessment of performance by individuals within the organization
  • an "executive" function with the power to refine / revise / improve the rules so as to bring about overall better performance

Let's take the nuclear power plant staff as an example. The tasks of the organization are to control the complex technology and its instruments over an extended time; to conduct inspections of the physical infrastructure of the plant to discover failures before they occur; to conduct routine maintenance of machines and other physical systems; to respond quickly to failures, both large and small; and to sometimes conduct major upgrades on the hardware of the system. We may imagine that there are detailed, written procedures for each of these activities, as well as procedures for action during times of malfunction or breakdown. The people of the plant represent a range of specialized skills and specialized tasks. Wainwrights maintain and repair machinery; computer technicians maintain computer systems; nuclear technicians oversee the measured functioning of the system (pressures, temperatures, power production); safety workers inspect various system; and supervisors assign tasks and monitor performance.

Failures of the system arise for several different kinds of reasons: technical failure (a device fails for unexpected technical reasons, such as a faulty weld); operator failure (an operator disregards or misinterprets a pressure warning, and a pipe explodes before corrective action is taken); training failure (staff are technically or operationally unprepared for performing their tasks routinely or in exceptional circumstances); system failure (two or more sub-systems function as designed, but in an unusual circumstance may interact in such a way as to bring about an explosion, a computer crash, or a release of energy or heat); supervisory failure (procedures were good but supervisors permitted deviation from the procedures); venality failure (individuals in a position to control purchasing decisions authorize bad contracts for faulty materials for their personal profit).

The idea of a principal-agent problem is highly relevant within organizations, at every level. The executive expects the supervisor to faithfully perform his/her tasks of supervision. But since the executive does not directly monitor the performance of the supervisor, it is possible for the supervisor to shirk his/her duties and permit faulty performance by those he supervises. Likewise, the supervisor expects that the operator will continue to monitor and control the machine throughout the day; but it is possible for the operator to keep a solitaire window open on the screen. Each level of accountability, then, requires both formal expectations and a basis for trust in the good faith of the participants in the organization.

Now we are in a position to address the central question here: do organizations have causal powers? It seems to me that the answer is yes, in fairly specific ways. First, the rules and procedures of the organization may themselves have behavioral consequences that lead consistently to a certain kind of outcome.

Second, different organizational forms may be more or less efficient at performing their tasks, leading to consequences for the people and higher-level organizations that are depending on them. For example, two tax-collection systems may be designed for the same goal -- to collect 10% of the grain produced everywhere in the kingdom. If one system is 75% successful in this task and the other is 50% successful, the state depending on the second system will be starved for resources.

Third, the discrepancy between what the rules require of participants and what the participants actually do may have consequences for the outputs of the organization. Police department regulations may require that each piece of physical evidence is separately bagged and catalogued with appropriate information about its collection. If police operatives are careless in the cataloguing of evidence it may be more difficult to convict the accused; this may lead to a rising disregard for the likelihood of conviction and a rise in the crime rate. Corruption (venal failure to perform one's tasks faithfully) may lead to large consequences: the company is less profitable, the city is discredited to its citizens, the Church is delegitimated by the self-interested behavior of its clergy.

Fourth, the specific ways in which incentives, sanctions, and supervision are implemented differentiate across organizations. We may find that organizations with supervision system X are on average more productive or more effective than those with system Y.

Fifth, the organization has causal powers with respect to the behavior of the individuals involved in the organization. By presenting its rules, sanctions, and rewards to its participants, it changes their behavior in specific ways. Google and Apple have organized their internal procedures and rewards in such a way as to encourage creativeness, teamwork, and confidentiality. These organizations look quite different in their functioning and their products from a steel company or a shoe company.

This means two things. First, we can say with some confidence that the way an organization is structured makes a difference to its performance; this is a causal power all by itself. And second, we may be able to discover that there are broad characteristics that differentiate organizational types, and it may turn out that these distinct types also have different performance characteristics. We might discover, for example, that one system of oversight and employee motivation is significantly more likely to permit theft and corrupt behavior by its agents than another. In that case, we might say that these two systems differ in their propensities for generating corrupt behavior. (This is an argument that Robert Klitgaard makes in Controlling Corruption.)

So far we haven't mentioned the familiar subject of "microfoundations" at all; we have considered an organization as a complex social entity. It is easy to specify the microfoundations of the causal powers we have identified. The organization's performance is determined by the behaviors of the individuals who fall within it, and the aggregate individual behaviors are explained by the rules and procedures embodied in the organization. So the causal powers having to do with efficiency, effectiveness, and corruptibility can be disaggregated into the incentives and behaviors of typical individuals. But here is the key point: we don't need to carry out this disaggregation when we want to invoke statements about the causal characteristics of organizations in explanations of more complex social processes. This is a case illustrating the point of relative explanatory autonomy developed in a prior post, and it also illustrates the point that David Elder-Vass makes in The Causal Power of Social Structures: Emergence, Structure and Agency.

These observations lay a basis for concluding that meso-level social entities have causal powers that can legitimately be invoked in social explanations.  Significantly, there are clear and convincing examples of sociological explanations that take the causal powers of organizations as fundamental to their explanations of important social outcomes -- for example, technology failure (Charles Perrow, Normal Accidents: Living with High-Risk Technologies; link), corruption (Robert Klitgaard, Controlling Corruption), and the use of common property resources (Elinor Ostrom, Governing the Commons: The Evolution of Institutions for Collective Action).


1 comment:

Anonymous said...

Very interesting post. I also was wondering whether for example system theories may explain some of these dynamics as well.