FORMAL ASPECTS OF ORGANIZATION STRUCTURE;

A CASE STUDY OF A STATE OWNED

INSURANCE COMPANY

by

Cecilio Augusto Farias Berndsen

A Dissertation Presented to the

FACULTY OF THE GRADUATE SCHOOL

UNIVERSITY OF SOUTHERN CALIFORNIA

In Partial Fulfillment of the

Requirements for the Degree

DOCTOR OF PHILOSOPHY

(Public Administration)

June 1975 UMI Number: DP308/I5

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This dissertation, written by C ecilio Agusto Farias Berndsen ^ 'ASYA'S. i5 under the direction A.!?..... of Dissertation Com­ mittee, and approved by all its members, has been presented to and accepted by The Graduate School, in partial fulfillment of requirements of the degree of DOCTOR OF PHILOSOPHY

D ea n

DISSERTATION COMMITTEE

hatrman TABLE OF CONTENTS

LIST OF T A B L E S ...... iv

LIST OF F I G U R E S ...... vi

Œiapter I. INTRODUCTION...... 1

Purpose and General Background Problem Area Research Question Importance of the Subject Towards a Definition of Formal Organization Structure Organization of the Remainder of the Dissertation

II. REVIEW OF THE RELATED LITERATURE...... 14

Introduction •The Organizations' Environments A Sample of Recent Empirical Research Studies Alternative Structure Models to the Bureaucratic-Classic Model of Formal Organization Summary and Conclusions

III. RESEARCH PROCEDURES ...... 120

Introduction The Design of the Research Instrumentation Selection of Respondents Data Collection Procedures Characteristics of the Respondents Data Processing and Analysis Conclusion

11 Chapter

IV. THE STRUCTURE OF THE CALIFORNIA STATE COMPENSATION INSURANCE FUND — FINDINGS...... 138

Introduction The History of the Fund Fund Recent Structure The Environment of the Fund The New Structure of the Fund Integration Among the Groups of Respondents Conclusions

V. SUMMARY, CONCLUSIONS, AND RECOMMENDATIONS...... 256

Summary Conclusions Recommendations

BIBLIOGRAPHY...... 264

APPENDICES...... 294

111 LIST OF TABLES

Table \ Page

2- 1 Types of Workers' Participation ...... 43

2- 2 The Mix Model ...... 63

2- 3 Human Problems Confronting Contemporary Organizations ...... 89

3- 1 Respondents to Questionnaire ...... 130

3- 2 Means of the Age of the Respondents by Groups ...... 130

3- 3 The Sex of the Respondents ...... 131

3- 4 Time with the Fund ...... 133

3- 5 Orientation Towards Theories Y or X ...... 135

3- 6 Individual Orientation ...... 135

4- 1 Q. 45 — The Functioning of the Executive Committee Is Highly Effective . . 184

4- 2 Q, 46 — The Concept of the Executive Committee Is Very Adequate to the Fund . . 184

4- 3 Q. 47 — The Functioning of the Managers' Council Is Highly Effective ...... 190

4- 4 Q. 48 — The Functioning of the District Managers' Meetings Is Highly Effective . . . 194

4- 5 Q. 49 — The Functioning of the Standing Committees Is Highly Effective ...... 201

4- 6 Q. 50 — The Functioning of the Program Advisory Council (PAC) Is Highly Effective ...... 207

4- 7 Q. 51 — The Functioning of Special Task Forces Is Very Effective ...... 210

iv Table Page

4- 8 Q. 56 — There Is a Widespread Acceptance of Fund Policies Throughout the Organization ...... 21.3

4 - 9 Q. 57 — The Corporate Policy of the Fund Is Easy to Modify #ien Required . . . . 215

4-10 Q. 58 — There Is a Widespread Acceptance of the Corporate Policy at the Levels Below Management...... 215

4-11 Q. 59 — The Operating Policy in the Fund Is Widely Accepted in the Levels Below Management ...... 216

4-12 Q. 52 — The Concept of Programs Is Highly Applicable to the F u n d ...... 219

4-13 Q. 53 — The Formal Structure of the Fund Is Very Adequate for the Functions It Performs ...... 219

4-14 Q. 54 — The Formal Structure of the Fund Favors Innovation and Problem S o l v i n g ...... 220

4-15 Q. 55 — The Formal Structure of the Fund Enhances Employee Satisfaction . . . . 220

4-16 Results of Questions 31 Through 36 ...... 238

4-17 Results of Questions 37 Through 44 ...... 242

4-18 Chi-Square Test Results on the Answers Related to General Features Specific to the Fund Formal Structure...... 247

4-19 Chi-Square Test Results on Answers Related to Argyris Mix M o d e l ...... 252

4-20 Chi-Square Test Results on Answers Related to Burns Organismic Model ...... 253

V LIST OF FIGURES

Figure Page

4-1 California State Compensation Insurance Fund Organization Chart, 1 9 5 5 ...... 145

4-2 California State Compensation Insurance Fund Organization Chart, 1956 ...... 146

4-3 State Compensation Insurance Fund Organization Chart, 1967 157

4-4 Organizational Chart, 1969 ...... 177

4-5 Total Fund R e s p o n d e n t s ...... 227

4-6 Executive Committee...... 230

4-7 Home Office Managers ...... 232

4-8 District Office Managers ...... 234

4-9 Program Advisory Council Members ...... 235

4-10 Rank and File Fund E m p l o y e e s ...... 237

VI CHAPTER I

INTRODUCTION

This dissertation is an effort to add to the pool of knowledge concerning organization structure. It is also our interest to integrate some of the theories which relate to the way in which organizations are ordered. There are almost no aspects of the organization life that the struc­ tural aspects do not touch. Any effort to manage, control, or even interact with an organization probably requires the consideration of the structural aspects. It could be expected that planned change in organizations will be more successful if accompanied by structural change. This view seems to be supported by empirical evidence. The day to day practice is a good indicator of this, and the impor­ tance of the subject of structure goes beyond this aspect to intermediate itself with almost any aspect of organ­ izational life.

Purpose and General Background

For some time the bureaucratic classic model for the structuring of organizations has been a target of criticism. Recently, we begin to see alternatives to this model proposed. Several organizations broke loose from the mechanistic model and have attempted to structure themselves organically. This study on the formal aspects of organization has two purposes: (1) to survey the related literature to identify alternatives to the bureaucratic-classic model of formal organization structure; and (2) to study in detail

The California State Compensation Insurance Fund as the example of organization which differs significantly from the bureaucratic-classic model in its formal structure.

A related objective of this study is to determine the attitudes of the Fund's management and employees toward the management style, structure, and the corpora­ tion's operational policies. Implicit is the objective of determining problems and weaknesses inherent in the organization participation format.

Problem Area

Organizational problems to which this study is directed are those which typically develop from those organization structures that do not allow for the expres­ sion and satisfaction of employee needs in individual and social terms. As a result, the achievement of goals sought by organizations is compromised. Organization goals are often expressed in terms of efficiency, effec­ tiveness, accomplishment, organization survival, or

2 social satisfaction.

Organizational goal achievement can result in alienation of the work force, growing lack of motivation, sabotage, high turnover rates, absenteeism, scrap, com­ petition among departments, lack of innovation, resistance to innovation, resistance to change, and others.

Research Question

What are the main criticisms to the functioning of the bureaucratic model?

What are the alternatives to bureaucracy in formal organization structures?

VBiat are some of the criticisms to the functioning of an organization adopting a nonbureaucratic structure?

Can an organization structure serve as a tool for permanent organization renewal?

Importance of the Subject

"To obtain lasting change, one does not try to change people, but rather to change the organizational constraints that operate upon them" (Chappie and Sayles,

1961, p. 202). Katz and Kahn (1966) suggest that the most powerful approach to changing human organizations is

systemic change by manipulating those structural variables which give the change effort the best chances of success.

Drucker (1974) says that, "The wrong structure is indeed a guarantee of nonperformance, it produces friction and frustration, puts the spotlight on the wrong issues mountains out of trivia." Donnelly, et al., (1971) note that classical and behavioral theorists seem to agree that proper organizational design is necessary if a firm is to successfully grow and remain competitive. Unless some form of systematic structuring of an organization is developed, management theorists, in general, believe that uncoordinated and unsynchronized activities will become the rule rather than the exception. These negative con­ sequences of poorly structuring an organization can be minimized if some program of design is followed.

Perrow (1970) speculates that a person with a background in the area of organizational behavior will probably have two prejudices: First, organizational problems are people problems, and good leadership is the answer. Second, current work in psychology and sociology has demolished classical management theory and replaced it with new and true principles. Perrow tries to illus­ trate that many people problems and leadership problems are really due to organizational structure and, "... that while classical management theory is quite deficient, it does deal with important problems that the other ap­ proaches neglect." In Perrow's view the consideration for organization structure is very important, and in his opinion, the so-called behavioral approach, and other modern approaches, have not given the proper consideration

to this variable. While the second statement is highly

controversial, the importance of structure may be

reiterate. Leavitt (1972) in presenting his material on organization structure says, "This will be a short chapter because we know so little about what is important about organization structure." While a great deal has been written about the facts of organizational structure, we

seem to know very little about the effects of different kinds of structures on the behavior and performance.

Towards a Definition of Formal Organization Structure

The New Merriam-Webster Dictionarv (1971) gives

to the meaning of structure the following: 1. The manner of building; 2. something built (as a house or a dam);

also something made up of interdependent parts in a definite pattern of organization; 3. arrangement or rela­ tionship of elements (as particles, parts, or organs) in

a substance, body, or system. All these usages have some relevance but it is concept of arrangement or relationship of elements, that appears to be most important and also

so illusive. In the literature of organization and man­

agement, the variety of definitions of formal organization

structure is endless; the number of definitions is almost as great as the enumerable authors who attempt to define

it.

Chandler (1962, p. 14) sees formal organization

structure as the "design of organization, through which

the enterprise is administered"; and he adds, "This de­

sign, whether formally or informally defined has two

aspects. It includes, first, the lines of authority and communication between the different administrative offices and officers, and, second, the information and data flow through these lines of communication and

authority." He also considers that organization struc­ tures are responsible for integrating the enterprise's existing resources to current demand (p. 383). Chandler mentions two important aspects of formal organization

structures — components and processes. Other authors,

in their definitions, emphasize only the different com­ ponents of the structure, implying that formal structure is static. The process approach gives more relevance to cycles of events, and the dynamicity of the functioning of the organization without a major concern with the com­ ponent parts. Let us examine the process and component description.

Etzioni (1964, p. 31) provides a component de­

scription when he says, "Formal organization is the pattern of division of tasks and power among the organ­ izational position, and the rules expected to guide the

6 behavior of the participants, as defined by management."

Etzioni refers to both the division of labor and the

legitimization processes. Donnelly et al. (1971, p. 418) understand that formal organization structure is, " . . . the formally defined framework of task and authority re­

lationships. It is analogous to the biological concept of the skeleton." It is interesting how many times, in

literature, that organization structure is considered a base upon which the functioning of the organization is made possible. Blau and Schoenherr (1971, p. 8) agree that formal organization structure is, "... the sub­ division of the total responsibilities to simplify in­ dividual tasks and permit the application of expert knowl­

edge in the performance of specialized duties on one hand,

and the hierarchy of the official authority to effect the

coordination needed as a result of this subdivision, on the other." Luthans (1973, pp. 103-104) also assumes a

similar position by saying, "The structure serves as the

skeleton for the organization system. It is the frame­ work that allows the other subsystems, management processes and technology to operate." He adds, "Max

Weber's bureaucratic model best represents the classical organization structure." James Thompson (1967, p. 51) provides us with a more complete definition by empha­ sizing the different parts of the organizational structure.

As do many authors, he uses the concept of organization structure and organization design interchangeably, and to point that out he writes;

The major components of a complex organization are determined by the design of that organiza­ tion. Invariably these major components are further segmented or departmentalized, and con­ nections are established within and between departments. It is this internal differentia­ tion and patterning of relationships that we will refer to as structure.

It can be noted that besides the differentiation aspects,

the structure comprehends a pattern of relationships which is what we mean when we refer to process.

A number of authors consider the structure as a

regular pattern or process. A very important current of

thought in this direction is the open-systems approach.

Not all authors who consider the organization structure

as a process make use of the systems approach in their

analyses, but the adoption of the systems approach is

conducive to an interpretation of the structure as a process, a chain of events, a pattern that repeats itself.

In this sense the statement of Simon et al.

(1950. p. 85) is relevant, "by formal organization is meant the pattern of behaviors and relationships that is deliberately and legitimately planned for the members of the organization." The authors think it is possible to determine the essentiality of the notion of patterning by the definition of structure. This notion follows from the application of the cybernetics model to the analysis

8 of organizations, March and Simon (1958) treat organiza­ tions as process information entities that are character­ ized by a repetitive cycle of activities. They say, for instance (March and Simon, 1958, p. 197) that "organiza­ tion structure consists simply of those aspects of the pattern of behavior in the organization that are rela­ tively stable and that change only slowly." With addi­ tional elements, Argyris (1964, p. 35) approaches the subject in much the same way when he states that "units are integrated or organized in a particular sequence or pattern designed to achieve the objectives, and the re­ sulting pattern constitutes the organization structure."

He then continues, "organizations, therefore, have an initial or intended structure which is simply a static picture of the pattern of the units as planned by the creator in order for people to achieve the objectives."

Thus, organizational analysis from the historically set by the founders, is bound to fail, given the dynamics of the situation.

A definition that clearly avoids the problem pointed gut by Argyris is the one offered by Katz and

Kahn (1966). They say that organization structure is an

"interrelated set of events which return upon themselves to complete and renew a cycle of activities." Pugh (1966, p. 239) depends on the same type of thinking when sug­ gesting, "all organizations have to make provision for continuing activities directed towards the achievement of given aims. Regularities are developed in such activities as task allocation, exercise of authority, and coordina­ tion of functions. These regularities constitute the organization structure." Filley and House (1969, p. 70) seem to agree that;

The structure of an organization is a prescribed pattern of relation between (1) various tasks necessary to meet the objectives of the enter­ prise and (2) the individuals who perform the tasks. It also determines to a large extent how available physical and financial resources are allocated to various phases of the work.

There also appears to be a tendency to identify organization structure with formal organization. The use of the expression formal organization structure may seem a redundant form when we take Pfiffner and Sherwood (1960, p. 53) definition that formal organization is, "... com­ posed of a set of relationships officially approved by those in ultimate authority." Mouzelis offers another element for the characterization of formality, the delib­ erateness or purposiveness of a structure. He says

(1971, p. 4), "formal organization [may be understood] as a form of social grouping which is established in a more or less deliberate or purposive manner for the attainment of a specific goal." To this form of organization he opposes the concept of neighborhood that is not estab­ lished in a deliberate way.

10 The conceptualization of structure involves a number of components and processes. So far, it seems that the definition advanced by

Thompson (1967) is the more comprehensive. We are going to use the expression "formal organization structure" in that sense. In the review of the literature, however, it is not possible to be bound by any single definition.

Many authors approach the subject in a special way, that although different, is relevant for our considerations.

So, in that sense, the usefulness of the concept is re­ duced. The terms — organization, structure, formal structure, structural design, design, formal organization

— are one time or another used interchangeably with the term formal organization structure.

Before we close this section, it is worth a word about the expression "bureaucratic classic." By bureau­ cratic classic, we mean the resultant model of the con­ vergence of the bureaucratic ideal type so well described by Max Weber and the notions about organization coming from authors such as Fayol and Gullick. Here, in this dissertation, their work is considered to be coming to­ gether in the organizations life. To this composite model, so popular as a structural form, is that we search for alternatives and examine for renewal.

11 Organization of the Remainder of the Dissertation

The work proceeds from here to more substantive parts. Chapter II provides an extensive treatment of formal organization structure as it is found in the lit­ erature of organization and management theory. The lit­ erature chapter provides the basis for the rest of the

study.

In Chapter III emphasis moves to procedures used in the case study of the California State Compensation

Insurance Fund. Here we give consideration to method­ ological problems encountered in the research and addi­ tionally provide data on respondents to the research instrument.

Chapter IV is the chapter on the findings in which we present the case study of the California State Compen­

sation Insurance Fund. The study on the organization

structure combines an historical approach with a survey of attitudes towards the Fund formal organization struc­ ture. This chapter also presents the results of the research. Three theoretical models are considered —

Likert Profile of Organizational Characteristics, Argyris

Mix Model of Organization, and Burns Organism Model of

Organization.

12 A summary of the findings in the dissertation with general conclusions and closing remarks make up

Chapter V, the final chapter.

13 CHAPTER II

REVIEW OF THE RELATED LITERATURE

Introduction

The purpose of this chapter is to review the re­ lated literature on the formal organization structure, including the bureaucratic-classic model. The classic and bureaucratic writers are grouped together because of the overall convergence of their ideas. This review will also address other currents of thought that relate to organization structure.

No attempt has been made to deal directly with the structural functionalism of Talcott Parsons except as reflected by authors closer to the management thought.

Management theory borrows much from sociology and psy­ chology, but this does not mean that management theory does not have a life of its own.

It is not intended that the review of the litera­ ture addressed in this chapter be a critique. The pur­ pose is to give a broad overview of what is available and, at the same time, provide a background for the empirical

study of this work.

14 Many authors do not examine the formal structure of organizations as a central theme of their work. For others the structural aspects are only relevant for a discussion that is detached of the rest of their work.

In these instances, it is sometimes difficult to extract connections and applicable generalizations.

The review largely takes an historic orientation, keeping in mind associations, communalities of approach, and similarity of ideas of the various authors. The re­ view of the empirical research literature is grouped by the variables considered in the works examined. As might be expected, there was not always a coincidence of ap­ proaches as conclusions often indicated contradictory results. Whenever possible, an attempt was made to cor­ relate and explain differences when appropriate original interpretation and suggestions are included in the text.

There is also a section dealing with the environ­ ment of organizations and the impact of these environments on the organization structure.

Following this introduction is a review of the related management literature. For didactic reasons, this review was subdivided as follows; (1) six categories dealing with the main authors and their works; (2) a presentation on the more recent empirical research reports; and (3) an examination on the main alternatives to the bureaucratic-classic model of organizations. A summary

15 and general conclusions close the chapter.

The Organizations' Environments

The importance of environment on organization life

became a focus of attention with the development of the

open-systems approach. The input-output model and the

environmental consequences began to be considered a legit­

imate topic for organization theory elaborations. Inkson

et al. (1967, p. 45) states that:

A more accurate understanding of the behavior of individuals and groups in organizations is surely attendant upon a more accurate description of the context in which the behavior occurs, i.e., the organizational environment.

Following this trend and developing a typology of

organization environments, Emery and Trist published a highly relevant essay in 1965. In order to study organ­

ization change these authors believe that organizations

can only be understood in its environmental context.

Emery and Trist, developing their ideas in accordance with

the open-systems approach, note a causal texture on the organizational environments. They classify four different types of environment related to their causal texture.

These four "ideal types" are: (1) placid randomized, (2) placid clustered, (3) disturbed reactive, and (4) turbu­ lent fields. Not only is the technological component changing at an increasing rate, but there is also rapid change in the values dimension. The authors utilize the

: 16] two cosmologies of McGregor (1950) — theories X and Y to explain some of this value shift.

Terreberry (1958, p. 523) extends the same set of ideas when she says: The theoretical and case study literature on organizations suggests that these systems are increasingly finding themselves in environ­ ments where the complexity and rapidity of change in external interconnectedness gives rise to increasingly unpredictable change in their transactional interdependence. This seems to be good evidence for the emergence of turbulence in the environments of many formal organizations.

She also says in conclusion of her study:

It is our thesis that the selective advantage of one intra or inter organizational con­ figuration over another cannot be assessed apart from an understanding of the dynamics of the environment itself. It is the en­ vironment which exerts selective pressure. Survival of the fittest is a function of the fitness of the environment. The dinosaurs were impressive creatures, in their day.

Here, as in Emery and Trist, the suggestion that the organization structure has to be in accord with the en­ vironment is present. The idea that there does not exist an ideal organization design is constant in many of the studies connecting organizations and their environments.

Terreberry advances two hypothesis: (1) Organ­ izational change is largely externally induced. (2)

System adaptability (e.g., organizational) is a function of the ability to learn and to perform according to changing environmental contingencies.

17 Burns and Stalker (1968) reached a similar con­ clusion, The same is true on the study of Joan Woodward

(1965), Her study focused on the type of production on the enterprises studied. The resultant typology cate­ gorizes enterprises in terms of production of small batches or units, large batches or mass production, and process production, of which the best example would be the oil industry. Woodward concluded that the organization structure that would best fit the organization would be one in accord with the organization's environment and in accordance with the organization's technology.

The convergence of other works dealing with the same theme is very impressive, J, Thompson (1967), re­ viewing the work of Dill, used his distinction of task environments in homogeneous or heterogeneous, stable or rapidly shifting, and unified or segmented. Thompson also mentions the work of March and Simon in their clas­ sification of environments in hostile or benign.

Elaborating on this theme, Thompson reaches the same conclusion; an organization needs to adapt its structure to its environment if it is to survive and to operate effectively.

The famous study of Lawrence and Lorsh (1967,

1969, and 1969a) points in the same direction. The two crucial functions in organization are differentiation, meaning that each part performs a different task; and

18 integration, the needed activity of assembling the end

result of the activity of all parts in a final product or service. The solution of these apparently contradic­

tory functions must be done in total harmony with the organization environment. This environment may be stable

or shifting, and the structure, as well as other organ­

izational variables must fit their environmental

conditions.

The empirical studies of Negandhi and Reimann

(1973), Duncan (1973), Sutherland (1974) are, to a certain

degree, replications and test of Lawrence and Losh's

ideas. They all seem to confirm the basic claims that

structure should follow the environmental pressures to

accomplish an effective goal attainment. There is no one

single structure able to fit all environment conditions.

So far, we have discussed the environments along

conditions generally dependent on one dimension; the

technological rate of change, but it is important to keep

in mind that the environment is a multidimensional factor.

Hutton (1969) suggests that it is helpful to think in

terms of sub-environments such as: the governmental or

legislative, the economic, the technological, the scien­

tific, the social, and so on. Hutton believes that in

responding to different pressures from different environ­ ments, organizations develop distinctive competencies in

relation to those environments and become different in

19 their ways of working.

Hellriegel and Slocum (1974) feel that the practice of management is specially affected by cultural setting, values system, political environment, and type of market, or the economic structure.

Donald Schon (1971) advances the idea that society and all its institutions are in a continuing process of transformation. It would be wrong to expect stable states to endure "forever." He states that, "There is a need to learn to understand, guide, influence, and manage these transformations" (1971, p. 30). People and institutions must become adept of continuous adapting and learning.

Institutions should not only be transformed to cope with new situations but must become learning systems, capable of continuously transforming themselves. These ideas are reaffirmed by Roeber (1973, p. 21), "when change in society is more rapid, more conscious processes of adapta­ tion may be needed by organizations."

In light of this discussion, it seems appropriate to examine the field for studies, essays, and reports of structural arrangements that are intended to assist organizations in achieving their goals.

Many authors have not recognized the importance of the environment which has not been the focus of man­ agement and organization theory until recently.

20 Review of the Theoretical Literature

Six major subdivisions are used to classify the work in our review of the theoretical literature. In utilizing such classification, there is a problem of oversimplification by failing to properly recognize the differences and details among several works and authors.

This problem is faced in an attempt to classify a rich literature which emerges from so many different backgrounds as does the literature of organization and management.

The feature of main interest in this review is the focus on organization structure that is so evident in some approaches and almost impossible to find in others.

The first group of these works reviewed are those belonging to the bureaucratic-classic model.

Classics

Frederick Taylor

The figure of Frederick W. Taylor is one of the first ones to be mentioned when looking at the history of management theory. He was one of the first to write and make recommendations on the various management methods in organizations. Taylor was concerned with efficient ways to accomplish work. It can be said that his concern was

21 for micro aspects of the organizational life rather than for broader issues such as organization structure. Even with this general frame in mind, it is possible to point out some aspects of interest to the matter.

Taylor, in his Principles of Scientific Management

(1911, pp. 36-37) states:

There is an almost equal division of the work and the responsibility between the management and the workmen. The management takes over all the work for which they are better fitted than the workmen, while in the past almost all of the work and the greater part of the responsi­ bility were thrown upon the men [fourth prin­ ciple of management].

From this, it can be surmised that Taylor had a conception of a clear distinction between management and functions of the workers. "Management should do the work for which it was best suited ■— planning, organizing, controlling, determining methods, and the like — and not push it off on labor's shoulders," says George (1972, p. 93) in describing Taylor's concepts.

Taylor believed in the use of the scientific method to bring about efficient functioning of the organ­ ization. This suggests: (a) specialization of tasks; each man should excell in the tasks he is best suited to per­ form, and (b) a methodical analysis of each task con­ sidering the time and the movements used to accomplish the task. The relevance of these ideas is clear. There is need, according to Taylor, to determine the one best

22 way to perform the organizational tasks. This way should be prescribed by management, and duly followed by the workers.

Henry Fayol

Henry Fayol is another base line figure whose ideas are important to mention. While the basic concern of Taylor was with the operative problems of the organ­ ization, Fayol addressed himself to the issues relevant to the functioning of the organization as a whole. Taylor directed himself to the task level and Fayol to the organization.

Norman Cuthbert (1970) says that Fayol developed a framework for a unifying doctrine of administration.

Fayol believed that general aspects of the organization prevail, be it governmental or private.

Fayol was the first to use the organizational chart according to Burns and Stalker (1968). His concern for the formal aspects of the organization are the corner­ stone of much of what was written afterwards on organizations.

Fayol (1949) listed the principles of management which he had most frequently applied: Division of Work,

Authority, Discipline, Unity of Command, Unity of Direc­ tion, Subordination of Individual Interests to the General

Interest, Remuneration, Centralization, Scalar Chain (line

23 of authority), Order, Equity, Stability of Tenure Per­

sonnel, Initiative, "Esprit de Corps." These principles were only exemplificative because Fayol believed in no

limit to the number of the principles, once experience

could confirm their usefulness. He recommended the man­

agement of organizations through a clearly established

structure. It was Fayol that presented functions of man­

agement; planning, organizing, commanding, coordinating,

and controlling, that later were widely used by other management theorists. He also suggested the division of

the industrial activity into six separate sub-activities:

technical, commercial, financial, security, accounting,

and managerial. This last sub-activity, managerial, was

to be performed by the planning, organizing, commanding,

coordinating, and controlling processes.

It is worthwhile to underline the principles,

functions, and activities offered by Fayol with special

aspects of organization structure.

Fayol's concept of "Unity of Command," together with the observations on the scalar chain, and the "gang plank" are manifestations that favor hierarchical organ­

izational structures, formalism, and predictability.

Planning was translated from the French prévoyance.

which means also to forecast. To govern is to foresee,

says Fayol (1949), meaning the need to draw a plan for

action with precision, continuity and flexibility built in.

24 On specialization:

Specialization belongs to the natural order; it is observable in the animal world, where the more highly developed creature the more differ­ entiated its organs; it is observable in human societies, where the more important the body corporate the closer is the relationship be­ tween structure and function. As society grows, so new organs develop destined to replace the single one performing all functions in the primi­ tive state. (Fayol, 1949, p. 20)

Here, it is a clear manifestation of the need for the division of labor.

Organizing, for Fayol, was to build up the mate­ rial and human structure of the organization (Pugh et al.,

1973). To perform this organizing function well, the manager needs a clear plan that can be followed with ease.

In summation, it can be said that Fayol has gained world-wide acceptance of his theories. His influence appears to have been considerable. No student of manage­ ment theory can ignore the ideas of Fayol. Cuthbert

(1970, p. 122) says that "Fayol's view of management theory contains weaknesses of analysis and assessment, his principles and duties overlap; and there is a vague­ ness and superficiality about some of his terms and definitions." He continues to say, "nevertheless Fayol's contribution to management theory is unique and valuable. '

Not many organization writers have had as broad ranging conceptions as those of Fayol, and few of them have re­ mained pertinent in as many ways for as long a time.

25 Mouzelis (1971, p. 89), in analyzing the general framework of the "universalist theories," of which Fayol is an example par excellence, says:

, , , The main concepts generally used are those of authority and function. Vertically, the organization is conceived as a hierarchy which is created by the delegation of authority and responsibility from the top to the bottom of the organization. Horizontally, the differ­ entiation is analyzed in terms of functions.

Max Weber

Weber is an author of major importance in the study of formal aspects of organization structure. His work is the starting point for many other studies in bureaucracy. He developed the position that the bureau­ cratic organization supposedly offers the "highest degree of efficiency" (Weber. 1947).

It is important to examine Weber's characteristics of the Ideal Type of Bureaucracy because the search for alternatives to this model is one of the goals of the present study. Weber departs from the position that authority may be based only in rational, traditional or charismatic grounds. On the other hand, bureaucratic structure is based in the legal authority with the maxi­ mization of rationality. The effectiveness of legal authority rests on the acceptance of the validity of the following mutually interdependent ideas (Weber, 1947, p.

329) . What follows is not a verbatim quotation but rather

26 an attempt to synthesize thoughts relevant to the subject matter: ^

1. That any given legal norm may be established by agree­

ment or imposition, grounded on expediency or rational

values, or both.

2. That every body of law consists essentially in a con­

sistent system of abstract rules which have normally

been intentionally established.

3. That the person in authority occupies an "office" sub­

ject to its own "office" rules, that are impersonal

and orient the actions of the person occupying the

"office."

4. The obedience due to this "office" occupant is re­

stricted to the (a) membership status of the persons

who obey, (b) legal limitations imposed by the

"office."

5. Obedience is due to the person in authority not as an

individual, but to the rational impersonal order.

Weber goes on in establishing the fundamental categories of rational legal authority that gives a clear view of structural details of the Ideal Type of Bureau­ cracy. Here is a synthesis of the basic points touched upon:

1. Continuous organization of official functions bound

by rules.

27 2. A specified sphere of competence, involving: division

of labor, being the incumbent provided with the

necessary authority to carry out functions, with the

means of compulsion clearly defined.

3. Organization of offices follows the principle of

hierarchy. This means that each lower office is under

the control and supervision of a higher one, and there

is a right of appeal from lower to higher offices.

4. The conduct of an office is regulated by technical

rules or norms. Specialized training is necessary

for full rationalization of functioning.

5. Complete separation of property owned by the admin­

istrator and the property required as means of pro­

duction or administration.

6. Complete absence of appropriation of his official

position by the incumbent.

7. Administrative acts, decisions, and rules are formu­

lated and recorded in writing.

8. The administrative staff is appointed in a free selec­

tion based on their competence proved either by

examination or diploma. This appointment constitutes

a career where promotion is secured by seniority or

achievement depending on the judgment of superiors.

9. The compensation of this personnel is done monetarily

and depends on the position occupied in the hierarchy.

28 Webèr (1947, p. 340) presents what are the "more general social consequences of bureaucratic control":

1. The tendency of "leveling" in the interest of the broadest possible basis of recruitment in terms of technical competence. 2. The tendency to plutocracy growing out of the interest in the greatest possible length of technical training. 3. The dominance of a spirit of formalistic im­ personality, sine ira et studio, without hatred or passion and hence without affection or enthusiasm.

Pugh et al. (1973) says that most of the studies of the formal and structural characteristics of organ­ izations over the past two decades have started from the work of Max Weber. The breadth of his thought goes beyond the characteristics of bureaucracy and a broad post-

Weber i an sociological literature is available for the interested student.

Other Authors of the Bureaucratic- Classic School

The convergence of the ideas of Taylor, Fayol, and Weber is considerable. There are several other authors of importance whose ideas are similar to the above examined. The writings of this group are commonly designated as classics, and sometimes, as scientific, due to their maximization of rational aspects of the organiza­ tion. What follows is a brief list of such authors with some of their contributions.

29 Lyndall Urwick (1944) is a management writer who

tries to synthesize the work of Taylor, Fayol, and Mooney,

He was concerned with the gap between the physical and the

social sciences, and he thought that the scientific ap­

proach would be helpful. He took the works of the above

mentioned authors in an effort to integrate them into a

scientific management model. He was also convinced that

a logical structure would yield more efficiency and morale

than one allowed to develop around personalities. He also

carried away the distinction between line and staff

activities.

Luther Gullick (1937) elaborates Fayol's list of

management functions (planning, organizing, command, co-

ordination, and control) with the acronym POSDCORB, which

stands for planning, organizing, staffing, directing,

coordinating, reporting, and budgeting. Here the overall

orientation is the process of administration rather than

the structure of the organization. It can be seen,

however, that these functions imply an organization with

a structure in accordance with the classic postulates,

including a well-defined chain of command and clear rules

and functions.

Gullick and Urwick are just two additional ex­

amples of a relatively large number of authors whose works

may be included in the category of classics. Other such

classicists are Henry L. Gantt (1916), Frank and Lillian

______30 Gilbreth (1924) , James Mooney, and Alan Reiley (1931),

These men extend the line of thought initiated by Taylor,

Fayol, and Weber,

The remainder of the authors included in this re­

view of the classics may be controversial. Herbert Simon,

for example, is known for his anti-classic position. It

is important to keep in mind that this review of litera­

ture has as its objective the review of structural aspects

of organizations. Herbert Simon, as far as formal

structures are concerned, follows the ideas of the other

classicists very closely. His views, as well as those of

other authors here included, represent only minor changes

in ways of conceptualizing organization structure.

Barnard, Chandler, and Sloan are the other influential

contributors who fall into a similar category. Many

others could also be included. An important group of

authors are those who subscribe to quantitative approaches

to management.

Chester Barnard

Chester Barnard wrote The Functions of the Execu­ tive (1938) and his ideas have not only remained of great

interest to organization students but have also influ­ enced major changes in the study of organizations.

Departing from the concept of formal organizations

as "a system of consciously coordinated activities or

31 forces of two or more persons," Barnard tries to determine the various conditions needed for a maximization of re­ sults on the attainment of the organization purpose. He analyzes the functioning of organizations and lists the functions of the executive: (1) The maintenance of organ­ izational communication; (2) the securing of essential services from individuals; and the formulation of purpose and objectives for the organization. These are the func­ tions needed in order to keep the organization running,

Barnard considers very seriously the formal and informal aspects of the organization structure. He ad­ vocates a symbiotic relationship between these two aspects of organizations. His statement, "formal organ­ izations arise out of and are necessary to informal organization; but when organizations come into operation they create and require informal organizations," is typical of such line of thinking.

He is considered by Perrow (1970, p. 17) to be a member of the movement for Human Relations in Organization

Theory. On the other hand, Silverman (1971) considers him to be concerned only with the efficiency of bureau­ cracies. Later, Perrow (1972) writes that, "it would not be much of an exaggeration to say that the field of organizational theory is dominated by Max Weber and

Chester Barnard, each presenting different models."

Perrow suggests that many of the "dramatic, simplified

32 dichotomies," such as mechanical versus organismic systems are the result of the contrast of the models of Weber and

Barnard, Although it is difficult to subscribe to such a position, it is possible to see a certain logic in this reasoning, except for the structural considerations that overlap in many instances. Herbert Simon follows and develops Barnard's theories.

Herbert Simon

With the review of the work of Herbert Simon a new phase is started. From this point on, many of the authors reviewed are still alive and writing. The review of their work represents their more characteristic books and writings but may not, at times, coincide with what they currently believe in. While this poses some prob­ lems, it is challenging to attempt to report on repre­ sentative ideas that are in flux.

The importance of Simon on organization theory is enormous. He represents a new way of looking at organ­ ization theory and his influence on the field is still very strong. As far as the formal structure of organiza­ tions goes, Simon does not have particularly innovating ideas. Rather, his contributions raise the possibility of study of formal structures of organizations under new dimensions and approaches. To some extent, it can be said that there is no unveiling of new structural formats

33 with Simon, but rather an in depth study of organizations, as formerly conceived, from new vantage points.

In 1945, Simon surprised the administrative world with his Administrative Behavior. In this work, he cen­ ters the study of organizations in a new unit of analysis; the decision making process of the administrator. The administrator is no longer an optimizer, but a satisficer.

Mouzelis (1971, p. 125), commenting on this aspect of

Simon's work, says, "the decision maker does not search for the optimal decision in the economic sense, but simply for a satisfactory one. He is not the maximizing man of economics but the satisfycing man." The reason for this is due to the various limitations of the rational process.

These limitations are; incompleteness of knowledge, the value system of the decision maker, his habits, group processes. In the case of the value system of the deci­ sion maker, what is involved is the means-ends relation­ ship. Although they do not entirely coincide with the dichotomy fact-value, the means-ends relationship serves to explain some of the dichotomy fact-value because the decision maker does not have a complete choice of means for the achievement of the ends, this same achievement is restricted in range.

In the works of Smithburgh and Thompson, Simon

(1971) reviews the concern with issues related to central­ ization and decentralization. He also discusses the

34 recurrent issue of span of control for which he criticized

Gullick. The relationship of formal and informal aspects of the organization are present in his works in a similar tone to that of Barnard, i.e., reconciliation of the opposing or, at least, discrepant forces.

Etzioni (1964, p. 25) considers Simon a Neo-

Classic in the sense that Simon refines and makes more sophisticated considerations around the formal structure of organizations. Perrow (1972, p. 175) corrobates this line of thinking in the sense that the Weberian model gains strength and complexity by the analysis of Simon

(1945), and March and Simon (1958). If we consider that

Simon expands from a line of thought established by

Barnard, this position does not appear to be completely logical. What may be a partial explanation may be the fact that Barnard himself did not represent such a radical departure from the bureaucratic-classic model, but was more of a conciliator.

In another work, Simon comes close to offering a model of organization structure. Simon (1960) gives two reasons why complex systems should generally be hierar­ chical. First, because hierarchical systems, composed of subsystems, are the most likely to appear through the evolutionary processes. Second, among systems of certain size and complexity, the hierarchical systems require much less information transmission energy among their

35 parts than do other types of systems. His discussions on decentralization are also very much along the lines of the classical postulates. He anticipates that organizations of the future will be constituted in three layers. The bottom layer will be a system of physical production and distribution processes. The second layer is of programmed and, very probably, automated decision making processes for the government of routine day-to-day operation of the physical system. Third and last, the layer of non­ programmed decision processes for monitoring the two previous systems and for redesign of the system.

More recently, Simon (1973a and b) has defended the position of man as a rational man, as opposed to being self-actüalizing. Again, the appeal of the rational power emerges. Even disguised under the concept of bounded rationality, the fact is that the attractiveness of the rational-economic man model is very strong. Simon, a pioneer in adapting quantitative methods of administra­ tion, does not move very far away from his origins.

Admittedly, Simon is a very influential innovator in organizational theory. As far as structure of formal organizations goes, however, he has not added much to the concepts generated in the classics.

36 Alfred D. Chandler. Jr. Chandler presents work from the private enterprise point of view. His interest is largely historic, and the title of his 1962 book. Strategy and Structure, with chapters on the "History of the Industrial Enterprise," tells something about its contents.

Chandler defines strategy as the determination of the basic long-term goals and objectives of an enterprise, the adoption of courses of action, and the allocation of resources necessary for carrying out these goals. Struc­ ture is defined as the design of organization through which the enterprise is administered. "This design," says Chandler (1962, p. 14), "whether formally or infor­ mally defined, has two aspects. It includes, first, the lines of authority and the communication between the dif­ ferent administrative offices and officers and, second, the information and data that flow through these lines of communication and authority." These definitions imply an intimate relationship and interdependence between strategy and structure.

Chandler analyzes the development and expansion of four of the major American corporations, and concludes that there are four stages that are typical to the large

American industrial enterprise. These phases are: the initial expansion and accumulation of resources; the

37 expansion into new markets and lines to help assure the continuing full use of resources; and finally, the devel­ opment of a new structure to make possible continuing effective mobilization of resources to meet both changing short-term market demands and long-term market trends.

These observations reveal that, although the author is very impressed by the importance of internal structural aspects of enterprises, he does not ignore the weight of the environmental pressures. It is clear that, in

Chandler's view, structure follows strategy and both are dependent on the environment.

The success of an enterprise can no longer be measured by the "decreasing unit costs, increasing output per worker, and long-term return on investments"

(Chandler, 1962, p. 396). These measurements are too narrow. There is a need to evaluate performance in broader social and human terms. Since the large enter­ prises play a significant role in the allocation of the nation's economic resources, the importance of their structure is great. The wasteful use of resources could be the result of inadequate structures. The seriousness of the subject is clear.

Alfred P. Sloan

Alfred P. Sloan was another neo-classicist. He served as president of General Motors, the largest corpor­ ation in the world. One of his main concerns was the 38 centralization and decentralization balance, Sloan (1963)

looked for the best combination that would allow necessary

freedom to the divisions and the needed control for the head of the corporation. He also was concerned with the

line and staff relationships, the eternal dilemma of large

corporation chiefs.

Another stream of thought emerged in the early

thirties. This was the Human Relations movement, which

represented the first real cry of resistance to the

classical theory and management science. The great debate

of ideas, that is far from finished today, had begun.

Human Relations

Mayo. Roethi sberger and Dickson

The value of the work of E. Mayo, F. J. Roethiis- berger, and W. J. Dickson is in the reorientation it

represents of the direction of organizational studies.

Mouzelis (1971, p. 99) says about the work of

Mayo and his associates, "At the early stage of the re­

search the approach does not differ much from Taylor's.

The investigators want to relate the workers performance

to such variables as illumination, fatigue, and so on."

Later, Mouzelis continues:

The results are inconclusive and confusing, and the investigators, after two years of research, turn their attention to the psychological and sociopsychological factors determining organ­ izational behavior.

______39 As it can be seen, the focus of their study was not the formal structure of the organization, but behavioral aspects of selected groups at Hawthorne.

This multi-year study started a serious interest for empirical research on organizations by people in the areas of psychology, social-psychology and sociology. The well-known "Hawthorne effect" received its name here.

The broad conclusions that may be drawn from

Hawthorne are of great importance to the study of organ­ izations. They do not present a complete view of the organization world, but emphasize aspects which, up to that time, had not been properly confronted by the liter­ ature .

French (1974, p. 27) sustains the opinion that the basic conclusion of Hawthorne was the conceptualization of the industrial organization as a social system. To sub­ stantiate his statement, he quotes from Roethlisberger and Dickson (1939, p. 551);

The study of bank wiremen showed that their be­ havior at work could not be understood without considering the informal organization of the group and the relation of this informal organ­ ization to the total social organization of the company. The work activities of this group, together with their satisfactions and dissatis­ factions, had to be viewed as manifestations of a complex pattern of interrelations. In short, the work situation of the bank wiring group had to be treated as a social system; moreover, the industrial organization of which this group was a part also had to be treated as a social system.

40 The research at Hawthorne pointed to the impor­ tance of two aspects not previously studied by organiza­ tion theorists. One was the importance of the inter­ personal relations developed in the work group. It is one of the first times that a distinction was made between formal and informal organizations. Sometimes, as sug­ gested by the Hawthorne researchers, the relationships among workers will be of greater strength than those gen­ erated by the organization in a formal way. This

"informal" set of relationships constitutes the informal organization and effective dealing with its manifestations will determine the success of the organization. A second finding in these studies indicated that workers have the need for security and recognition. These needs are very often satisfied by the small work group.

Mayo's work (1933 and 1945) does not concern organization structure in a direct way, but it was the first of the human relations studies that dealt with structural aspects in an innovative way. The Hawthorne studies represent a definite departure in the studies of organizations from the bureaucratic-classic writings.

Industrial Democracy and Democratic Theory

In many cases, students of the field of democratic theory show a concern for central issues like the nature of participation, control, ownership, collective bargain­

______41 ing, management by colleges of workers. These authors tend to be critics of the bureaucratic-classic model of organizations. They could be classified as organization theorists instead of management theorists, if it is pos­ sible to draw a boundary line between these two fields.

Paul Blumberg

Paul Blumberg tries to establish a sociology of participation. He starts by reinterpreting the Hawthorne experiments and establishing the origins of the pioneer studies in the sociology of participation. Blumberg sees participation as a tool often used to decrease the effects of alienation. He carefully reviews some representative pieces of research on the subject of participation, giving considerable attention to the Workers' Management System of Yugoslavia. Blumberg's account is comprehensive and accurate, showing the successes of the Yugoslav experience side by side with its problems.

Adapting from Shuchman (1957), Blumberg (1968, p. 71) presents a chart with the different types of workers' participation — cooperation and codetermination with several sub-types. An examination of the chart re­ veals some gradualism from management control to the other extreme of workers' control. Blumberg makes a case for an alternate group in control, in which the merging of the two control groups would be more productive.

42 TABLE 2-1

TYPES OF WORKERS' PARTICIPATION (Blumberg, 1968, p. 71)

COOPERATION (Workers influence decisions — except in No. 1 below Where this is nominal but are not responsible for these decisions)

Workers' Role

1. Workers have the right to receive information passive 2. Workers have the right to protest decisions negative 3. Workers have the right to make suggestions positive 4. Workers have the right of prior consultation but their decisions are not binding on management positive

II CODETERMINATION (Workers control decisions and are responsible for them)

1. Workers have the right to veto negative (a) Temporary, after which management (i) may implement its decisions passive (ii) must negotiate with workers positive (b) Permanent

Workers have the right of co­ decision positive

Workers have the right of decision positive Ichak Adizes

What would happen if the law required that industrial organizations be managed "demo­ cratically"? Directors, as well as those in administrative positions, would be elected for a stipulated term by the members of each organ­ ization. Administration would not be allowed to hire, fire, or discipline anyone. Instead, these functions would be performed only as discretion of the general membership or its elected committee. Furthermore, salaries, bonuses, and production norms would be estab­ lished by the general membership through a democratic vote. A similar system is in oper­ ation in Yugoslav industry; it is called "self­ management." (Adizes, 1971, p. 3)

In a well-detailed study, Adizes gives a clear picture of the industrial experiment in Yugoslavia.

Adizes' treatment of the data is largely of a case study of two organizations. The theoretical importance of his work is not very great, but it is relevant in the sense of being an accurate account of this giant experiment.

His approach is anchored in managerial, and not socio­ logical or political literature.

Adizes employs the classification of vertical and horizontal organization structure. The Yugoslav experi­ ment uses the horizontal mode. He relates the viability of a less vertical organization structure to a certain degree of affluence of the society where the organization studied is located. Once the organization is relatively relieved from economic pressures, it may devote itself to

"activities which may yield postponed results, such as participation in decision making [it is assumed that] if

44 participation and economic efficiency correlate, the process will occur within a time lag" (Adizes, 19 71, p. 242).

Adizes does not address himself to the problems of organization structure, effectiveness, or productivity.

He does deal with problems of adaptivity to the environ­ ment and the satisfaction of the needs of the individual workers. To both of these problems, he thinks that the

Yugoslav proposal is both satisfactory and wanting. In other words, the Yugoslav experiment has positive and negative aspects but, on the whole, it is highly competi­ tive with the American model.

Carole Pateman

Democratic theory is a very broad and complex sub­ ject. It occupies a substantial central position in the political thought. Participation, one of the most impor­ tant elements in a democratic system, is of growing interest to contemporary studies. Carole Pateman (1970) relates democratic theory and participation to the field of industrial democracy. The work covers recent demo­ cratic theory writers such as Berelson, Sartory, Eckstein and Dahl and goes deep into an analysis of classicists like Rousseau, John Stuart Mill, and G. D. H. Cole,

Pateman presents her position by using the Yugoslav experiment and selected cases from Great Britain.

45 Pateman (1970, p. 67) takes issue with some

"modem" democratic theorists in their limited enthusiasm over broad participation in the system. If she is critical of contemporary democracy theory, she also has some dif­ ferences of opinion with management writers such as

Likert and McGregor, largely because they do not go far enough in their definition of participation.

Pateman (1970, p. 17) quotes Shumpeter's (1943, p. 250) definition of the classical democratic method as,

"that institutional arrangement for arriving at political decision which realizes the common good by making the people themselves decide issues through the election of individuals who are to assemble in order to carry out its will." Pateman (1970, p. 21) argues that from this inter­ pretation of the classic theorists it is easy to reject their ideas on the grounds that they were conceptualized from small-scale prototypes and from anachronic social backgrounds. Pateman agrees with this interpretation and defends the classics, ". . . whose theories provided us with the basic postulates of a theory of participatory democracy."

When Pateman reviews Cole's work, she points out the classification of political structures in terms of horizontal and vertical orientations. The function of the horizontal structure being to give expression to the

"communal spirit of the whole society."

46 "The theory of participatory democracy stands or falls on two hypotheses: the educative function of par­ ticipation, and the crucial role of industry," says Pate­ man (1970, p. 44). These are the main concerns of her work. From here on, Pateman analyzes the sense of polit­ ical efficacy and participation in the workplace, par­ ticipation, and democracy in industry and the workers' self-management in Yugoslavia. She concludes that, "We can still have a modern viable theory of democracy which retains the notion of participation at its heart"

(Pateman, 1970, p. Ill).

In her view, there is no decrease of efficiency or other sensible damage brought on by democratic prac­ tices utilized in the British and Yugoslavian experiments.

On the other hand, participatory democracy in industry is a powerful tool which decreases alienation and increases stability and satisfaction of social needs.

Open Systems Approach

The employment of the open systems approach in social sciences, in general, represents the adoption of a powerful analytical tool and a fresh methodology for study.

Concepts of the environment, information, and energy flows, system boundaries, equifinality, and sub­ systems provide a new vocabulary and permit us to look at

47 social structures with fresh eyes. The systems approach

was borrowed from the physical and natural sciences

although the level of complexity of the social fabric is probably higher in the social sciences than the range of phenomena in the physical and natural sciences.

Three authors who use the open systems approach

are discussed. They were selected because their work

represents a broad array of thinking — Thompson, Organ­

ization Theory; Katz and Kahn, Social Psychology; and

Buckley, Sociology.

James Thompson

The main concern of Thompson (1967, p. 159) is with the uncertainty with which organizations must deal.

This uncertainty is the "... essence of the administra­ tive process." Thompson reviews the literature on organ­ izations from a tripartite classification; closed

systems, open systems, and the problem solving approaches to the study of organizations.

It is Thompson's opinion that, the first (closed

systems) is best represented by the convergent ideas of scientific management of Taylor, bureaucracy of Weber, and administrative management of Gulick and Urwick. The approach of (open systems) is exemplified by the Hawthorne studies and by more recent research projects like Selznick

(1949) on the Tennessee Valley Authority and the famous

48 Chester Barnard's The Functions of the Executive (1938).

The best example of the third approach is Simon's word of

rebellion on the Administrative Behavior (1965), followed

by March and Simon (1958) and Cyert and March (1963).

Thompson (1967, p. 10) himself uses an electric approach,

"We will conceive of complex organizations as open sys­

tems, hence indeterminate and faced with uncertainty, but

at the same time, as subject to criteria of rationality

and hence needing determinateness and certainty."

Thompson considers the structural dimension of

organizations as related to two factors; technology and

task environment. In terms of technology, the structure

is conditioned by three types of interdependence. Pooled

interdependence is coordinated by standardization,

sequential interdependence is coordinated by planning, and

reciprocal interdependence is coordinated by mutual adjust­

ment. The latter is the most demanding in terms of the

effort required, and the other two are decreasingly de­

manding. Thompson (1967, pp. 64 and 65) says that, "Under

norms of rationality, organizations' group positions to

minimize coordination costs, localizing, and making con­

ditionally autonomous; first, reciprocally interdependent

positions, then, sequentially interdependent ones, and

finally, grouping positions homogeneously to facilitate

standardization." The existence of hierarchy is justified because first groupings do not handle the interdependence

49 questions entirely. The need for coordination efforts

creates the hierarchy.

The influence of the environment on the structure

is very high. Thompson considers that the dimensions of homogeneity and stability to be the most important when

analyzing the organization task environment. The degree

to which both are developed will cause serious impact on

the organization structure. The main arguments on organ­

ization structure presented by Thompson are that organ­

izations are constrained in their technologies and task

environments. Given the differences of these, for various organizations, there is no "one best way" to structure

complex organizations. Secondly, bounded by these con­

straints, complex organizations seek to minimize contin­ gencies and to handle necessary contingencies by the

isolation of them. There is a large variety of structural ways to deal with contingencies. Thirdly, where there are many contingencies to be dealt with, organizations tend to cluster capacities into self-contained units, fully equipped to face the contingencies. Also the tensions due to the, sometimes, opposing forces of the technology and the task environment tend to divide the organization.

These problems, sometimes, emerge under the form of line and staff conflicts. The need for integrative approaches in these cases is very high, and structural conditions may help or hinder the case.

50 Thompson (1967, p. 160) in his concluding remarks

says:

Although frequently cited as symbolic of complex organizations, the monolithic authority network with centralized decision making is not typical of complex organizations in modern societies, for it is appropriate only when closed-system conditions are approximated. The apparent trend in modern complex organizations with sophisticated technology and heterogeneous and high-speed task environment is towards structural decentralization and the creation of semiautonomous subsystems that are able to assure the bounding of rationality for the internal processing of uncertainty.

Daniel Katz and Robert L. Kahn

Katz and Kahn (1966), quoting F. H. Allport, de­

fine social structure as an ". . . interrelated set of

events which return upon themselves to complete and renew

a cycle of activities. " VBiat is important in this

definition is the notion of a complete self-closing cycle

of events with a good probability of repetitivity. Of

course, there is no need for an identical repetition of

events for the characterization of a structure in this

acception but some regularity is required for a character­

ization.

The work of Katz and Kahn is very commendable in

the sense that they avoid common traps. They intelli­ gently consider and use the environmental influence on organization life. They move away from the individual psychology and interpersonal problems so utilized in some

51 texts on organizational psychology. And they show that there are ways to analyze the individual organization under one overall framework.

Katz and Kahn conceptualize organizations' struc­ ture as subject to two processes; internal development and adaptation to the environment. The consideration of the phenomena of equifinality, that the property systems have to achieve similar goals through different paths, is rele­ vant to the study of organization structure because it shows the possibility of several different structures functioning effectively, depending upon specific factors such as environment, technology, and task.

An interesting parallel was drawn by Lyden (1969) when discussing the subsystems proposed by Katz, Kahn, and Parsons, suggesting the existence of four subsystems in working organizations. Production is the subsystem that attends the task demands of the environment. Sta­ bility and predictability are provided by the maintenance subsystem. The adaptive subsystem provides for external monitoring and internal change. Finally, compromise, con­ trol, and survival are made possible by the functioning of the managerial subsystem. Lyden shows the functioning imperatives indicated by Parsons, as follows:

52 Katz and Kahn Parsons

Production Adaptation

Maintenance Pattern Maintenance

Adaptive Goal Attainment

Managerial Integration

A closer analysis will show a difference. The

Katz and Kahn model is concerned with the adaptive sub­

system, a function of learning and creating knowledge,

while Parsons' function is associated with the achievement

and assessment of societal goals.

Walter Buckley

Buckley (1967) asserts that structure can be re­

garded as a stabilized set of relationships only "...

at a given point in time." This is due to the continuous

shifts the organization goes through by which means they

are only temporarily stabilized in response to survival

needs.

The challenge to the modern systems theory is to

develop a social science methodology related to the methodology used in the natural sciences, but that avoids

the analogies of mechanical closed systems or biological

organisms. Buckley points out that doing the reverse may have been the sin of so many modern theoretical efforts

in sociology, psychology, and related fields.

53 Applied Behavioral Scientists

In this section, we review the work of some ap­

plied behavioral scientists. They draw heavily from

psychology, sociology, and anthropology. The main con­

siderations that are pervasive in their work are human

psychological and sociological needs as they relate to the

organizations' functioning.

At time, the work of behavioral scientists is com­

pared to the Human Relations movement. Some critics go

as far as to say that their theories are the Human Rela­

tions movement revisited, a return to Elton Mayo and

associates.

This position does not seem accurate. There are

many original ideas being presented by the behavioral

scientists. Most of their recommendations are non-

manipulative, an assertion that is not easy to make in

the case of the Human Relations movement. They make

intelligent use of the open-systems approach and consider

the environmental pressures in proper perspective. Much

of their work in theoretical terms is the result of

empirical studies, and years of consultation and adminis­

trative experience. If, at times, their work seems more

normative than scientific, it is also true that they try

to make their recommendations alive by the practical

application and experimentation of their ideas. It is

1 ^ ^ difficult to find pure theorists among the behavioral

scientists.

Under the rubric of applied behavioral scientists,

we group such authors as Likert, Argyris, Burns and

Stalker, McGregor, Herzberg, and Maslow.

Rensis Likert

The research results from the Institute for Social

Research of which Likert was the director for many years,

are the basis upon which many behavioral science concepts

are currently drawn from and being developed. From this

bulk of research, Likert conceived an organization model

which maintains some of the features of the bureaucratic-

classic model, but provides for substantially more par­

ticipation. By following this model, Likert says, organ­

izations will become effective and be able to turn higher

profits. It is possible to refer to this organization as

the participative group based organization.

The features of this participative group based

type of organization are discussed in two works by Likert

(1961 and 1967) with emphasis on management theory. From

the structural point of view, one feature of interest is

the so-called linking pin. This term refers to a person who participates in two groups of different hierarchical

levels within an organization. It is also possible to

conceptualize a linking pin participating in two groups

55 of the same hierarchical level in a horizontal relation­

ship. To assure the proper functioning of the concepts, open communications, mutual trust, shared responsibility,

shared goal setting, and consensus decision making are required.

Likert (1961 and 1967) presents four systems of management that may be found in organizations. The first

is the exploitive authoritative system. Management in this system is mostly responsible for all decisions and the use of fear and threats is present for organizational discipline. The second is called the benevolent author­

itative system. This system of management is somewhat milder than the first system where there is a pervasive paternalistic climate in the organization. The third is the consultive system. In this system, there is consid­

erably more participation and communication upwards and downwards throughout the organization, but the management has the final say in most matters. Management consults

and then decides. Narrow and more specific matters are permitted to be decided by lower levels. The fourth and.

last system is the participative group based management

system. Here there is full participation in all levels of the hierarchy. The linking pin concept is used; rewards are in a positive sense; internal control data

are for self-evaluation and not for punishment or dis­ cipline; there is minimal or no discipline; and there is

56 minimal or no discrepancy between the formal and informal organizations. The reason being that the formal organ­ ization satisfies the needs usually satisfied by the informal organization.

In Likert's model, the fourth system (4) of man­ agement is used by the most successful managers and organizations. This system, according to Likert's re­ search findings, will reduce much of the dysfunctions brought about by rigid application of the principles of classic management and bureaucracy. The effective organization operating under system (4) will have higher productivity with less losses due to labor turnover, waste, scrap, tardiness, excessive labor union activism, and dysfunctional adherence to obsolete formal rules.

The assumption of Likert is that this modified organ­ ization structure will provide satisfaction and motivation for the participants, and yield positive results for the organization.

The achievement of this ideal organizational stage should be monitored through a system Likert calls human asset accounting. Likert points out that most organizations have arf on-going monitoring process for their material components such as accounting and inventory systems. There is no control to measure the employee value to the organization. And there is no assessment of the general climate that dominates the organization

57 and will affect this employee value. For the first prob­ lem, Likert recommends a variety of measures that will assess the value of each employee for the organization.

These measures can be exemplified; quality of leadership, quality of decision making, capacity to achieve effective coordination, level of training, and others. To determine the general climate in the organization syntonically with the feelings of its membership, Likert developed the

"Profile of Organization Characteristics." This instru­ ment measures several organizational dimensions such as leadership, motivation, communication, decision making, goal setting processes, and use of internal control data.

The questionnaire to measure these variables was presented in the book. Human Organization (Likert, 1967) and it has more than fifty questions. In this study, a shorter form was used to measure the managerial style of The California

State Compensation Insurance Fund, the organization serving as our case study. A facsimile of the question­ naire can be seen in the Appendix. Each question can be graded in a scale from one to twenty. The twenty degrees from five to five represent a different managerial sys­ tem, from system (1) exploitive authoritative, to system

(4) participative group based.

58 Chris Argyris Argyris' thoughts converge with the general trend

of many who believe in the use of behavioral science to

solve organizational problems. This orientation relies

on assumed psychological principles and searches for a betterment of the organization through the process of

attending to the social and psychological needs of

organization members.

In his Personality and Organization (1957),

Argyris developed his thesis regarding the difference

between human and organizational needs. He then suggests

that there are ways to bring these lines to a point of

satisfaction, or in other words, convergence. Argyris' positions are not without controversy. As recently as

1973, Argyris (1973a and 1973b) and Herbert Simon (1973a

and 1973b) engaged in a polemic concerning ordering the

needs of men and organizations. The contentions are

stimulated in great measure by one's view of man. Do we have a basically rational man or do we have a self-

actualizing man? The first would be able to cope very well with most of the organizational needs. The self-

actualizing man with stronger personal psycho-social

needs requires a redesigned organization. Tlie survival

of both, organization and man, is very much related to

the satisfactory solution of this dilemma. Argyris' line

59 of thought naturally follows the self-actualizing position,

Argyris gives a more complete development of his ideas in Integrating the Individual and the Organization

(1964). The theoretical background of Personality and

Organization is enlarged and there is a profuse presenta­ tion of research reports supporting Argyris' proposals,

Argyris views classicly structured organization as an effort to direct human energy to achieve specific goals. The peculiarity of this effort is that it follows

"principles" of administration, and basic elements of

Weberian ideal type of bureaucracy. Among other things, most organizations require specialization of work, chain of command, unity of direction and span of control. This structure places demands on individuals in terms Of dependence and submissiveness and requires only part of their abilities and intellect. Dependency and submis­ siveness requirements usually increase as one descends the hierarchical chain. To compound this problem, there are conflicts between the culture and the realities of an industrial organization.

To support his views, Argyris (1964, p. 81) quotes some observations from Goss (1958, p. 476):

1. Each job should be looked upon as a step to something better. But: In the factory there are few clear-cut sequences of progressively more skilled, better paid jobs.

60 2. The corporation provides a "pyramid of opportunities from the bottom toward the top." But: Executives and technicians are increas­ ingly recruited from well-trained college and technical school graduates rather than from the ranks of factory labor. In the factory the narrow range of wage rates sets a low ceiling on possible advancement.

3. Initiative and ability inevitably lead to promotion and advancement. But: Carefully 1aid-out time-studied jobs in a highly ration­ alized industry provide little opportunity to display initiative of ability.

4. Success depends primarily upon each individual's efforts and capabilities. But: Advancement within the factory is increasingly collective in character.

In order to cgpewith such a hopeless environment, organization members very often engage themselves in be­ haviors that are not functional for the organization.

These adaptive efforts are exemplified by: absenteeism, high turnover, quota restriction, goldbricking, slow downs, trade unions, increasing emphasis on material factors and decreasing emphasis on human factors, non­ involvement, withdrawal from work, and alienation

(Argyris, 1964, p. 92).

Talking about the bureaucratic characteristic of impersonal work relations, Argyris predicts that the re­ sult is (1964, p. 109): (1) an increase in not owning, not being open, not taking risks; (2) an increase in con­ formity, dependence, external commitment; and, (3) an increase in organizational defenses, interdepartmental

61 rivalries, and less effective decision making.

To overcome all these problems, Argyris proposes

a "mix-model" that would not only be conducive to satis­ fying individual personal needs, but would also be ex­

tremely helpful for the achievement of organizational

effectiveness.

Table 2?2 of the Mix Model is very clear. There

are trends that are conducive to the achievement of the mix model with its essential properties and trends that

are contrary to the direction of the essential properties.

Argyris presents four basic organization struc­

tures that, depending on specific characteristics, may be the most adequate to a given situation. The struc­

tures are: (1) The Pyramidal Structure, (2) The Modified

Formal Organization Structure, (3) Power According to

Functional Contribution, and (4) Power According to

Inevitable Organizational Responsibilities. Argyris does

not go into great detail to describe each of these organization structural models but tries to give a number of situations in which each one would be the most appro­ priate. He makes a case for administration according to the situation or contingency management. Characteristics of the Modified Formal Organization Structure relate

closely to concepts espoused by Rensis Likert.

In explaining other dimensions on the mix-model organization, Argyris recommends special care in staffing

62 TABLE 2,2

THE MIX MODEL (Argyris, 1964, p. 150)

Away from the Essential Properties Toward the Essential Properties

1. One part (subset of parts The whole is created controls the whole. and controlled thru interrelationships of all parts.

2. Awareness of plurality of Awareness of pattern parts. parts.

3. Achieving objectives re­ Achieving objectives lated to the parts. related to the whole.

4. Unable to influence its Able to influence internally oriented core internally oriented activities. core activities as "it" desires.

5. Unable to influence its Able to influence externally oriented core externally oriented activities. activities as "it" desires.

6. Nature of core activities Nature of core influenced by the present. activities influenced by the past, present, and future.

63 and job design. An enlarged job range is, according to

Argyris, an important tool to combat some of the negative requirements of formal organizations. Argyris specifies types of managerial controls, rewards and penalties, and incentive systems which may help maximize psychological success and organization effectiveness.

In more recent works, Argyris develops more ex­ plicit ways to achieve better structured organizations.

In the case of his Intervention Theory and Method; A Be­ havioral Science View (Argyris, 1970), he goes as far as proposing specific steps that make possible the smooth transition from a more traditional organization structure to a more effective one. In this dissertation, which examines the California State Compensation Insurance Fund, the mix model will be used to test some of that organ­ izations' operations.

Tom Burns

Tom Burns and G. M. Stalker's publications (1963 and 1968) are based on research studies done with tradi­ tional Scottish firms that were attempting to introduce sophisticated electronic hardware in the production processes.

Considering environmental challenges to organ­ ization lives, the authors come up with two "ideal types" of working organizations. One, the "mechanisties," being

64 adapted to relatively stable conditions; the other,

"organismic," oriented to more turbulent environments.

The main features of a mechanistics system of management are (Burns and Stalker, 1968);

A mechanistics management style is appropriate to stable conditions. It is characterized by:

1. The specialized differentiation of func­ tional tasks into which the problems and tasks facing the concern as a whole are broken down.

2. The abstract nature of each individual task, which is pursued with techniques and pur­ poses more or less distinct from those of the concern as a whole,

3. The reconciliation, for each level in the hierarchy, of these distinct performances by the immediate superiors.

4. The precise definition of rights and obligations and technical methods attached to each functional role.

5. The translation of rights and obliga­ tions and methods into the responsibilities of a functional position.

6. Hierarchic structure of control, author­ ity, and communication.

7. A reinforcement of. the hierarchic struc­ ture by the location of knowledge of actualities exclusively at the top of the hierarchy.

8. A tendency for vertical interaction between members of the concern to be, i.e., between superior and subordinate.

9. A tendency for operations and working behavior to be governed by superiors.

10. Insistence on loyalty to the concern and obedience to superiors as a condition of membership.

65 11, A greater importance and prestige attaching to internal [local] than to general [cosmopolitan] knowledge, experience and skill.

The organismic form is appropriate to changing conditions, which give rise constantly to fresh problems and unforeseen requirements for action which cannot be broken down or distributed auto­ matically arising from the functional roles de­ fined within a hierarchic structure. It is characterized by;

1. The contributive nature of special knowl­ edge and experience to the common task of the concern,

2. The realistic nature of the individual task, which is seen as set by the total situation of the concern,

3. The adjustment and continual redefinition of individual tasks through interaction with others,

4. The shedding of responsibility as a limited field of rights, obligations and methods. [Problems may not be posted upwards, downwards or sideways.]

5. The spread of commitment to the concern beyond any technical definition.

6. The network structure of control, authority, and communication.

7. Omniscience no longer imputed to the head of the concern; knowledge may be located anywhere in the network; this location be­ coming the center of authority.

8. A lateral rather than a vertical direction of communication through the organization.

9. A content of communication which con­ sists of information and advice rather than instructions and decisions.

66 10. Commitment to the concern's tasks and to the "technological ethos" of material progress and expansion is more highly valued than loyalty.

11. Importance and prestige attach to affiliations and expertise valid in the in­ dustrial and technical and commercial milieu external to the firm.

Characteristics of the ideal type mechanistic organization are very similar to the bureaucratic-classic formal structure. Burns and Stalker see very slim pos­ sibilities of a natural transition of an organization from mechanistic to organismic.

Most of the mechanistic organizations studied in

Great Britain developed pathologies that take several forms. Three of the most common pathological developments are; the ambiguous figure system, the mechanistic jungle, and the super-personal or committee system. In the ambiguous figure system, the habit to consult and, in other words, to develop upwards is developed to extremes leaving superviserai and managerial positions powerless.

The mechanistic jungle is a name for the exaggerated creation of more branches of the bureaucracy hierarchy in the name of specialization. The third example is the attempt to solve every unusual problem by the creation of a special task force that tends to persist and never accomplish its stated mission, contributing for the gen­ eral ineffectiveness of the mechanistic organization.

67 Burns (1968) adverts that one organization is the simultaneous work of at least three social system: The authority system, the career structure system, and the political system. The analysis of an organization as simply a formal structure is a naive consideration that will yield inaccurate conclusions. The interrelation­ ships of all the social subsystems must be kept in mind at all times.

As far as the organismic idealization is con­ cerned, the convergence and overlapping of several views opposing the bureaucratic-classic model is evident. Here, seem to be fused the ideas of many authors critical of bureaucratic structures. Burns and Stalker offer a new model for organizations in general.

Douglas McGregor. Frederick Herzberg, Abraham Maslow

The works of McGregor, Herzberg, and Maslow are not directly related to the concern with organization structure, but are concerned with problems of motivation, satisfaction from the work environment, models of man, human needs, and general psychological traits of relevance for management theory. Nevertheless, their ideas serve as a philosophical base for deeper discussion of organ­ ization structure.

Douglas McGregor (1960) presented two sets of assumptions about people in organizations that seem to

68 be typical. He decided to call these two sets of assump­ tions theories X and Y, The assumptions of Theory X

(McGregor, 1960, p. 33) are: 1. The average human being has an inherent dislike of work and will avoid it if he can.

2. Because ot this human characteristic of dislike of work, most people must be coerced, controlled, directed, threatened with punishment to get them to put forth adequate effort toward the achievement of organizational objectives.

3. The average human being prefers to be directed, wishes to avoid responsibility, has relatively little ambition, wants security above all.

Another set of assumptions is Theory Y. McGregor

(1960, p. 47) synthesizes the assumptions:

1. The expenditure of physical and mental effort in work is as natural as play or rest.

2. External control and the threat of punishment are not the only means for bringing about effort toward organizational objectives. Man will exercise self-direction and self- control in the service of objectives to which he is committed.

3. Commitment to objectives is a function of the rewards associated with their achievement.

4. The average human being learns, under proper conditions, not only to accept but to seek responsibility.

5. The capacity to exercise a relatively high degree of imagination, ingenuity, and creativity in the solution of organizational problems is widely, not narrowly, distributed in the population.

6. Under these conditions of modern indus­ trial life, the intellectual potentialities of the average human being are only partially utilized.

69 The practical application of these two sets of

assumptions will produce very different results in organ­

izational life. While under the assumptions of Theory X,

one organization would be structured very much according

to the principles of the bureaucratic-classic model, the belief that the assumptions of Theory Y would result in

an organization of a freer form of a highly flexible

structure. The consequences of the adoption of these different cosmologies goes beyond structural consequences,

of course. The criteria for a successful achievement of

organizational goals will depend not only on the proper

choice of assumptions about people as proposed by

Theories X and Y, but on managerial strategies, tech­

nology affecting the concern and environmental conditions.

The importance of McGregor’s approach to mana­ gerial problems is that it allows for an adaptation of

organization needs to the assumed psychological inclina­ tions of individual members, and not the other way around.

For instance, in designing an organization, one would

think not only of tasks, environment, and technology, but also in terms of human needs.

In a later work, published posthumously, McGregor

(1967) makes it clear that to survive, modern organiza­ tions need to adopt the Theory Y modes. He goes as far

as providing examples of organizations with which he was

involved. His work serves as a starting point to analyze

70 organizations from a fresh angle and offers excellent provocative ideas to be tested through appropriate re­ search.

The work of Frederick Herzberg bears a relation­ ship to McGregor's. Herzberg (1959) states that man can be seen both as Adam and as Abraham. These two biblical figures express different orders of needs: the animal-

Adam with his tendency to avoid pain from the environ­ ment, and the human-Abraham who seeks growth and develop­ ment from the tasks he must accomplish. From research conducted with accountants and engineers, Herzberg and his colleagues built the so-called "Herzberg Two-Factor

Theory," which deals mainly with motivation to work, but has implications for the study of organization structures.

Herzberg and his research associates (1959) concluded that some variables relate to job content, or content factors, and others to the job context or context factors. The content factors are the "satisfiers" or the "motivators" in a job situation; the context factors are the "dissat- isfiers" or "hygiene" factors. In the satisfiers or motivators category, there are: achievement, recognition, work itself, responsibility, advancement, and growth.

The context, environmental or hygiene factors, are the dissatisfiers. These factors are influenced by company policy and administration, supervision, working condi­ tions, interpersonal relations (with superiors, sub-

71 ordinates, and peers), salary, status, job security and personal life. Unless hygiene factors are satisfied, employees will be dissatisfied. Meeting hygiene needs will not result in a higher degree of motivation. They are factors sine qua non for employee motivation. If they are not present, problems will arise and satisfac­ tion will decrease. On the other hand, the satisfiers are very important for employee motivation. The more these factors are satisfied, the better the employees will be motivated. For analysis, it is important to observe which of these factors are related to organiza­ tion structure. The job content factors present aspects directly related to the formal structure of organization.

The possibility to feel achievement is very often con­ nected with structural features. The same is true for developments in the areas of responsibility, advancement, and growth. The organization structure will determine, to a large extent, what the individual possibilities will be. The adoption of the proper organization structure in consonance with the tasks requirements, technology requirements, and social variables, has to conform with psychological needs of organization members.

Stating that motivation is an internal trait and that it cannot be imposed on the individual, Abraham

Maslow (1954 and 1965) developed a theory of behavior based on the hierarchy of needs. The individual's lowest

72 needs would be physiological needs, followed by safety needs, the need to belong and love, the need for esteem and finally, the need for self-actualization. He stated that a satisfied need is no longer a motivator of be­ havior, and that there is a constant shift of the priority of the needs according to the degree of need satisfaction.

Maslow recognizes that self-actualization is not a need for everybody. The self-actualizing person feels satis­ fied in terms of lower level needs, a very difficult

stage to achieve. Self-actualization is achieved in peak experiences. Creative people are able to find new goals and new ways to express themselves in a self- actualizing way. It is clear, if one accepts Maslow's hierarchy of needs, that the structures of organization that are designed only to achieve organization goals will not satisfy legitimate human needs. On the other hand, where socioeconomic conditions make the satisfaction of lower needs difficult, the adoption of authoritarian and mechanistic organizational structure, which permits the

satisfaction of those lower needs, will be accepted.

Critics of the Bureaucratic- Classic Model

As Gouldner (1955) observed, the concern of too many authors is not to propose new and better ways to organize, but to discuss the maladies that presently

.73 exist. He notes:

Wrapping themselves in the shrouds of the nineteenth century political economy, some social scientists appear to be bent on resurrecting the dismal science* Instead of telling men how bureaucracy might be mitigated they insist that it is inevitable.

This statement may be applicable to several of the authors

reviewed in this section. The value of their work is

very important for a study like ours. Let us examine

their message.

Robert Michels

As Mouzelis (1971) points out, Michels was in­

terested in the internal politics of large-scale organ­

izations. From his studies of the Socialist Party of

Germany, Michels drew the so-called "Iron Law of Oli­

garchy, " which suggests that large organizations are

oligarchic by nature. In these studies, Michels observed

that large organizations go through a goal-displacement

process. The aim of the German Socialist Party, as a

group of trade unions studied by Michels, was to democ­

ratize the political, economic, and social environments

of the worker. These organizations provided positions

of power for the leadership. The leaders developed an

attachment to the advantages which came to them and

developed strategies for self-maintenance in the posi­

tions. The auto-preservation strategy involves a system

of "selective" information to be provided by leaders to

______74 their constituency and means for the elimination of

potential new leadership which might challenge the in­

cumbents. This way, according to Michels (1962), the

original goals are increasingly subverted. Leaders be­

come more interested in self-preservation and fight the

revolutionary ideals which could endanger their positions.

To some extent, large structures become an instrument of

oppression rather than liberation for the participants.

The "Iron Law of Oligarchy" phenomena has been documented

repeatedly (Etzioni, 1964).

One can follow the development of the "Iron Law

of Oligarchy" from a democratic endeavor when the activity

is confined to a bureaucratic organization. With a goal

of overall efficiency and a bureaucratic structure

operating in tandem, the displacement of goals may be

inevitable. The possibility of the goal displacement in

a bureaucracy is very real as is the tilt toward a

charismatic or even traditional form of authority fore­

seen by Weber.

James G. March and Herbert A. Simon

The work of March and Simon (1958) provides one

of the most serious assessments of the bureaucratic

structure of organizations and its dysfunctions. This

work does not present a totally new approach to the

problem but it synthesizes in a very clear way the work

______75 of Merton (1940), Selznick (1949), and Gouldner (1954).

The choice of these three studies by March and Simon is very valuable because they give an idea about the most

important aspects in this area.

The underlining theme of these works is that the use of the bureaucratic-classic model, that is denoted

"machine" model, results in both anticipated and unantici­ pated consequences for the organization.

Merton examines the demand for control from the top hierarchy in the organization. The demand takes the

shape of increased emphasis on reliability of behavior

inside the organization. The consequences that follow this increased checking and close supervision are:

1. A reduction in the amount of personalized relationships.

2. Internalization of rules of the organization.

Rules, originally devised for the achievement of organ­ izational goals, get a life of their own that may or may not be independent from the aimed objectives.

3. The decision-making process is performed mostly through categorization and consequently stimulates the tendency to reduce the number of categories and the search for alternatives. To some extent, this phenomena is similar to increased functional rationality at the expense of substantial rationality.

76 These factors result in rigidity of behavior of

the organization participants. The increased emphasis on prescribed role relationships causes a very strong "esprit

de corps" that tends to close the organization to outside pressures of any kind, including legitimate client claims.

Such particularism contributes to rigidity of behavior.

Behavior of this type often satisfies the top of the

organization's demands on control and reliability. A

second aspect is the increased defensibility of individual

action.

The work of Selznick provides similar conclusions

to those of Merton, although the departure point is dif­

ferent. Selznick sees the need for increased delegation

of authority, given the demands for control made by the

top of the hierarchy and in turn an increase in the amount

of training in specialized competencies. Specialization

creates increased attention and interest in a reduced

area of action. Emphasis on specialized areas creates

conflicts among departments, a situation similarly noted by Lawrence and Lorsch (1967) by emphasizing differentia­

tion. Under such conditions, there will be little

internalization of organization goals. Subunits will

create their own ideologies and these sub-goals will be

internalized by participants.

The third study reviewed by March and Simon (1958)

is Gouldner's model (1954). Coming from the same basic

77 need of increased control, Gouldner suggests those at the hierarchical top tend to make use of general and imper­

sonal rules. If norms are held in terms of equality and

equity, one of the consequences will be the reduction of

tension as well as reduced visibility of power relations.

So far, the model describes the anticipated consequences.

The use of rules increases the general knowledge about

the minimum acceptable behavior tolerated by the organ­

ization. Given a low level of internalization of organ­

izational goals, there is a natural trend to achieve a

level in accordance with the minimum acceptable behavior.

This level of achievement is not satisfactory for manage­ ment that resorts to close supervision in order to in­

crease the level of productivity. Close supervision is

a known factor to increase interpersonal tension between

superiors and subordinates.

These three examples give a clear picture of what

Crozier (1964, p. 177) calls the "vicious circle" of bureaucracy. In the words of this author (p. 182);

These three examples, the most striking of human relations researches on bureaucracy, demonstrate a substantial moving away from the original Weberian model. These three authors give more and more place to the routine and oppressive aspects of bureaucracy that finally become an autonomous parallel system of human causation.

Here, there is one opinion that would place these sociol­ ogists side by side with the psychological orientation of the Hawthorne group. The importance of this study, in

______78 reporting the findings of these authors, is that a strong

trend in the organizational studies destined to find dys­

functions in the functioning of bureaucratic organizations

is initiated. The results of these studies are very

plentiful in the literature. This review focuses on a

few selected authors.

Victor Thompson

Two of the books of Victor Thompson (1961 and

1969) are devoted to the analysis and critique of * bureau­

cratic organizations. Thompson tries to identify the

real consequences of bureaucratic organization.

Thompson coined the expression "bureauphatic

behavior" to design the negative and pathological aspects

produced in a typical bureaucracy.

Thompson (1961, p. 155) says, "The hierarchical

structure with its monopoly of 'success' is a potent

source of anxiety." This means that the monocratic

aspects of a bureaucratic-classic organization requires

the superior to depend upon and to be responsible for the

subordinates performance. This increases the require­

ments for control over the subordinates in terms of

"automaton conformity," which tends to be highly deper­

sonalizing and frustrating for the subordinate.

The resulting organizational climate creates a

self-reinforcing circular behavior in which the superior

attempts to reduce his own anxiety and produces employees ______79 responses that tend to increase his anxiety. When this happens, the superior calls for more control, supervi­

sion, and measurements, that again do not result in higher compliance by the subordinates. To the contrary, the actions may result in deviation of behavior that requires more control.

One common consequence of circular behavior is

exaggerated dependence upon regulations and quantitative

standards. The strict adherence to rules produces rigidity of behavior. The observance of quantitative

standards is dangerous in the sense that only measurable variables tend to get observed even though there is no guarantee that these will be more relevant ones.

Another phenomenon likely to be observed in organizations is an excessive emphasis on impersonality of the relations. This problem can arise in two forms: internally producing a definite obstacle for establish­ ment of an effective work team, where the strength comes from the ideal combination of different skills and specializations; and externally, where a great distance from the clientele precludes the organization to better sense preferences and needs of the clientele.

Resistance to change, among a variety of other causes, may be the result of the structure of the organ­ ization. Thompson refers to the fact that the feudal organization was replaced by the bureaucratic, sometimes

80 by revolutionary action because the organizations them­

selves were unable to change. This fate may now await

the bureaucratic organization.

"Bureauphatic behavior" sometimes emerges when

employees insist and tend to overemphasize rule? and

regulations. This behavior is found in many bureaucratic

organizations where officials insist on formalistic,

official, and nontechnical aspects of relationships and

suppress the technical and informal.

Certain problems that emerge in bureaucratic life

appear to be directly related to the organization struc­

ture. One of these problems is the rigidity that grows

out of prolonged role enactment, resulting from bureau­

crats becoming insensitive to the needs of clients. In

a related dimension, the slow pace of change of hier­

archical rights, as compared with the fast pace of change

resultant of the technological advances, means that new

specializations and skills are not acquired as needed.

Since knowledge and skill are elements of legitimization

of bureaucratic authority, change, which threatens the knowledge base, threatens change itself. Thompson

describes pathological behavioral characteristics which may be caused either by organization structure or the

psychological immaturity of the actors. The seriousness

of the influence of the structure upon individual be­ haviors, Thompson believes, is very marked.

81 A final observation in Thompson's work can be made from his work, Bureaucracy and Innovation, in which he analyzes the lack of innovative thrust in bureaucracies in general. This is caused, in his interpretation, by the return to the Tayloristic mood of the efficiency- economy ideal. The use of PPB system of budgeting is indicated as an example illustrating this return. In the activity of conflict suppression by the bureaucratic structure, the spark of innovation is often extinguished.

This is expanded in a later publication of Thompson

(1970).

Michel Crozier

Crozier's book. The Bureaucratic Phenomenon

(1971), is a very comprehensive volume that develops two case studies of French organizations. The book provides a view of bureaucracy that enables the scholar to affirm that the "bureaucratic phenomenon" is not the exclusive domain of the American and British environment.

One concept emerging from the Crozier analysis is that of the "vicious circle" that tends to trouble bureaucratic organizations. The first one is the extent of the development of impersonal rules. Impersonal rules govern competitive examinations and seniority applied to promotions. Individual personalities of employees, their past achievements and sacrifices for the organization are

82 ignored in the interest of keeping the competition system intact. The direct result of "rules to cover every occa­ sion" leads to the loss of power of the superiors. The management group becomes a mere rule applicator. Discre­ tion and independent decision making are reduced.

Likewise, the bargaining possibilities of subordinates are almost extinguished so that both higher echelons and rank and file experience loss of power.

A second element involves the separation of deci­ sion centers from the field of operations. The price the organization pays for this phenomenon is rigidity. Thus, there is also a tendency to isolate each hierarchical stratum from every other. The development of imperson­ ality and centralization results in a separation between hierarchical levels. There is a lack of communication among groups, Crozier observes that concomitantly there is a development of 'ësprit de corps" and ritualism within each of these groups. The development of local or re­ gional loyalties within the organization works in opposi­ tion to the general goals and objectives. The increase of ritualistic practices transforms the members of the organization into semi-robots who do not act in an inde­ pendent, creative way. Bureaucracies also engage in the impossible effort to eliminate areas of uncertainty. The effort to enforce every act or decision prescribed in the rules of the organization is too ambitious and utopian.

83 There is, almost always, a need to solve new problems with specialized knowledge.

By design, bureaucracies should have more exper­ tise available the higher one looks at the hierarchical scale because those in the upper echelons supposedly possess more knowledge. In reality, this does not happen because higher in the hierarchy there are many adminis­ trative tasks to be performed and the latest developments in the field of specialization are likely to be followed closely by those who are specialists but who are without formal power in the organization. Development and growth of expertise does not coincide with hierarchy. This paradoxical situation reveals another flaw in the func­ tioning of the bureaucratic organization.

Finally, Crozier elaborates on the failure of bureaucracies to correct their own failures. This is explained in three steps; (1) There is the inherent rigidity caused by the various facts mentioned; (2) change usually comes in response to critical situations in which case it often will be imposed top down without any considerations given to the inputs from the field; and (3) the resulting long delays in responding to reality may prove deadly for the organization, and detrimental to the clientele.

84 Peter Blau Blau does not belong to the managerial tradition but is a sociologist with more global interests. Blau considers the general bureaucratic structure adequate for the job of efficient goal attainment. The consequences of the increasing bureaucratization of society are among his major preoccupations.

Blau (1963) also poses some paradoxical relation­ ships between bureaucracy and democracy. On one hand, bureaucracy permits the existence of democracy by the deliverance of goods and services to members of a given society. Bureaucracy makes possible the application of the law without distinctions and by merit systems that allow the social elevation of less-privileged citizens.

On the other hand, bureaucracy is an authoritarian struc­ ture that in the name of efficiency negates the rights of disagreeing minorities, or for that matter, even majorities, because the concept of legitimate authority overrides the will of subordinates. To save democracy, it may be necessary to abolish bureaucracy but the results could be fatal for democracy itself. Blau does not at­ tempt to solve this paradox, but lets his readers know that contemporary democratic societies owe much to bureaucratic structures.

85 Peter Blau uses the functional approach for his analysis of bureaucracy. Following the tradition of

Merton, Blau redefines the concept of dysfunction and proceeds in his analysis using the methodology of Merton,

Warren Bennis

Bennis' works may be classified in three cate­ gories: (1) critique to bureaucracy, (2) an alternative model, and (3) process technology for achievement of an ever-changing organization. This last group includes the writings of planned change and organization development.

Bennis (1966, p. 6) presents an interesting catalog of criticisms to bureaucracy. Here follows a synthesis of the catalog:

1. Bureaucracy does not adequately allow for personal growth and the development of mature personalities.

2. It develops conformity and "group-think."

3. It does not take into account the "informal organization" and the emergent and unanticipated problems.

4. Its systems of control and authority are hopelessly outdated.

5. It has no adequate judicial process.

6. It does not possess adequate means for resolving differences and conflicts among ranks and, most particularly, among functional groups,

7. Communication [and innovative ideas] are thwarted or distorted because of hierarchical divisions.

86 8. The full human resources of bureaucracy are not being utilized because of mistrust, fear of reprisals, etc.

9. It cannot assimilate the influx of new technology or scientists entering the organiza­ tion.

10. It will modify the personality structure such that man will become and reflect the dull, gray, conditioned "organization man."

It is clear in the thesis of Bennis that the accelerated pace of change, technological or other forms, has made obsolete the bureaucratic tradition.

Bennis indicates in several of his works that a more democratic form of organizing is inevitable. He pro­ poses this interesting question (1966, p. 21): "If democracy is an inevitable consequence of perpetual change, why then have we not seen more dramatic changes in the structure of industrial organizations?" He tries to answer his own question with two points. In the first place, the fast pace of technological change makes a man's knowledge become obsolete before he has begun the career for which he was trained. The second reason is that the existence of dysfunctional tendencies within the bureau­ cratic structures does not automatically bring about its disappearance.

Bennis, (1968, p. 68) in a work with Philip E.

Slater presents a chart of human problems confronting contemporary organizations. This chart that may be seen

87 below in Table 2-3 is an excellent categorization of several problems that the bureaucratic form of organiza­ tion cannot cope with.

The way organizations deal with all these problems will determine the survival possibility of the enterprise.

Bennis (1968, p. 55) lists four relevant threats to bureaucracy: (1) Rapid and unexpected change; (2) growth in size where the volume of an organization's traditional activities is not enough to sustain growth; (3) complexity of modern technology where integration between activities and persons of very diverse, highly specialized competence is required; and (4) the psychological threat springing from a change in managerial behavior.

George Berkley

Berkley (1971 has a very lively book. The Admin­ istrative Revolution in which he examines some of the major administrative trends. He illustrates his work with examples from public and private organizations from the United States and abroad. Berkley predicts that bureaucracy as it is known is collapsing, the organization man is an endangered species, and there is a strong growth in the employees participation trend. The reasons for the collapse are both internal and external. Internally, bureaucracy has problems such as difficult communications processes and a suffocating hierarchical structure.

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G ^ fP • rH -P 1 m 13 G P -P rH P ■p > i 0 P G G G b u G 0 •H g en rQ P 13 »'H-1 -P A G ^ •H rH 3 0 U H-) g G 0 P P •H g P p A l3 P 0 0 P en ^3'. 1 G U •H 0 G •H • rH -p •H rQ ## -P u 13 G -P -p P en m p P N G ■p 0 P G G «# (31 G •H N •H •H Di g > P P •H g -P 13 p p -P •H «••G rH Di G G P G 0 •H > m (31 G P • rH -P 0 rQ P -P G p p -P •ri ^ b A A U "H P •H m 0 •H rH G 0 G m > G rP P G U P G 0 P 13 u G 0 G G G A < A -P G H < m H-) A Q 13 90 Berkley devotes a good portion of the book to explaining

environmental changes that make life of bureaucratic

structures very difficult and increasingly impossible.

One environmental factor is a trend towards income

equality. The use of progressive taxation reinforces this

trend. There are more educational opportunities, more people being educated who then have higher aspirations.

The number of individuals whose assumptions are along the

lines of McGregor's Theory Y continue to increase.

Basically, this set of attitudes reflects belief in posi­

tive aspects of human being in the sense of independence,

achievement, diligence.

Summary of the Review of the Theoretical Literature

For the purposes of the present study, we have placed writers on organization theory in six different groups.

The first group is the classics; here is seen a

convergence of views among authors like Taylor, Fayol,

Urwick, and Weber. These authors are the pioneers in the field of organization theory who have conceptualized and described the bureaucratic-classic model for which we seek

alternatives. Bureaucracy, as a means of organizing for mutual endeavor, dominates organizational life and is a point of departure for many empirical studies and designs

91 of organizations that are presented under the sophisticated new clothes of modern technology. Needless to say, this model still has defenders.

Simon with his revolutionary views about the classic management theory is very difficult to classify.

Here, there is a paradoxical situation: Simon's views are radically divergent from the approach of the classics as far as principles of administration are concerned around the issues of hierarchy and formalization. The movement started by Simon is supported by the development of the physical sciences and mathematic formulations and repre­ sent a flourishing field today. The quantitative approach to management, the application of systems analysis and operations research to management and the adoption of electronic data processing methodology are some of the manifestations of this trend* Very often these quantita­ tive methods appear to be just sophisticated forms of a developed scientific management where rationalization is maximized.

Other authors were examined also under the heading of the classics. These like Simon are more correctly con­ sidered neoclassics. They are: Barnard, Chandler, and

Sloan. Their views in several other aspects of organiza­ tion may be different, but as far as organization structure goes, they are very much alike.

92 The second group is the Human Relations apologists.

Mayo and his colleagues brought attention to such phe­ nomena as informal organization and stimulated the con­

sideration of social aspects in the work place. It is important to consider, sometimes, the additive character of critical movements. Elton Mayo and his associates had such an effect especially if we consider the impact of their ideas on organization structure. There were no specific proposals from the authors of the Human Relations movement as far as changes in the basic model advanced by the classics. The Human Relations movement just proposed some relaxation of instruments of control and greater autonomy for work groups.

The writers of Industrial Democracy and Democratic

Theory form the third group. These authors do not always have linkages with management theory, but their work is especially relevant because it attempts to combine bureau­ cratic requirements, such as hierarchy, with democratic elements such as participation. The industrial democracy current of thought is very disparate and not easily clas­ sifiable at this time. There is, however, a growing literature in this field, and our review samples it.

Our fourth group includes authors that use the systems approach. These authors present a relatively high level of sophistication. The similarity of their approach from a general system methodology does not assure

93 a similarity in their views on organization structure and organization problems in general. Sometimes the systems approach is very similar to the structural functional approach and some critics affirm that the systems approach is a new name for the old functional approach. It is our view that this is not true. The power and usefulness of the system approach for the understanding of organization phenomena is quite evident. The traditional weakness of the functional approach in dealing with conflict and change is satisfactorily resolved in the systems approach.

The system approach is very rich and its uses are well spread in the social sciences. Many authors, whose preoccupations are psychological and social, benefit from the application of the systems approach. This is the case of some of the applied behavioral scientists. This group represents the development and practical application of the humanistic psychology current to the theory of organiza­ tions. These authors, besides the similarities of their ideas, have many things in common, such as experience as consultants, academic background, and a special taste for empirical studies. Many of their ideas are widely sup­ ported by empirical studies and experimentations. They assume a critical attitude towards classic bureaucracy and offer viable alternatives. This constitutes our fifth group. The empirical research developed in the case study on the California State Compensation Fund tests elaborates

94 on the theories of McGregor, Likert, Argyris, and Burns and Stalker.

The sixth group of authors concentrates its atten­ tion on problems in the bureaucratic structure itself.

Here, there is a concern with dysfunctions and inadequacies of the bureaucratic praxis, but rarely do these writers give indications of alternative ways. Their usefulness lies in making students of bureaucracy aware that there are definite problems with the use of purely rational methods and the social evolution continues to pose chal­ lenges to old ways of organizing.

Final conclusions are presented at the end of this chapter. Now, our attention is directed to recent research on organization structure and we will search for commu- nalities on these varied empirical efforts available in the current literature.

A Sample of Recent Empirical Research Studies

This section represents an effort to systematize and examine representative research reports available in the current literature. Much of the research addresses facets of the traditional bureaucratic structure. This is easy to explain since the alternative forms of organization structure are not widespread making comparative studies difficult.

95 From examining organization structures, it becomes apparent that the ideal type of bureaucracy, as conceived by Weber, evolved from a monocratic form to several dif­ ferent variants. The research efforts on organization structures may be divided, in a first approximation, in two categories: (1) those studies where the so-called antecedent conditions to organization structure are ex­ amined; and (2) those where structural variables are studied in cause and effect relation to other organiza­ tional variables. The first type of studies contemplates the influence of the environment, technology, and size on the organizations formal structure. The organization structure is considered dependent, or at least, a variable associated with them.

In the opening of this chapter, we discussed the various approaches to the study of organization environ­ ments and the consequences on organization structure derived from these environments. Following this analysis, we focus on studies referent to organization size and technology as factors of relevance to organization struc­ ture. After this, we focus on the influence of organ­ ization structure on the other organization variables.

96 Relationships Between Size and Organization Structure

Studies of problems of scale have provided a pop­ ular approach for the analysis of organizations. The number of employees in a given organization is a variable easy to measure, and therefore considered of empirical value. Related to the concept of span of control, the study of Entwisle and Walton (1961) revealed a small posi­ tive correlation between the size of the organization and the size of the span of control. From this study comes the indication that the size of an organization may affect internal structural variables such as the span of control.

Meyer (1968, pp. 211-218) published a study re­ lating decision making processes and the formal structure of bureaucratic organizations as they relate to central­ ization and decentralization of authority. Here again, the controlled variable was the organization size. Meyer states that the decision making authority is more highly centralized as the number of subunits in an organization increases. On the other hand, his data seem to indicate that there is a greater decentralization as the number of levels of supervision grows, with a concomitant prolifer­ ation of rules that specify criteria to guide decisions.

Meyer's study is very interesting because of the importance of the concept of authority for bureaucratic

97 organizations. Meyer established the distinction between two types of authority — functional and hierarchical.

Hierarchical authority, or the proliferation of super­ visory levels, a vertical development of the organization structure, results in increases of delegation of decisions to lower levels. The paradox involved stems from the in­ crease of functional differentiation, the number of special types of tasks that seems to produce more central­ ized decision making systems.

Blau (1971) and Blau and Schoenherr (1971) state:

Increasing organizational size generates dif­ ferentiation along various lines at decelerating rates; and differentiation enlarges the adminis­ trative component in organizations to effect coordination.

From these two basic propositions, the authors draw nine generalizations based on their research on employment security agencies in the United States. As do many of the research reports that are being examined in this section, this study "centers attention on the social forces that govern the interrelations among differentiated elements in a formal structure and ignores the psychological forces that govern individual behavior" (Blau, 1970, p. 203).

The final finding, that the advantages of increased size, such economy of scale, are offset by the increased admin­ istrative overhead, is crucial. This conclusion, derived from the examination of several organizations of different sizes, is enough to alert students to the vital importance

98 of the size to both structural aspects of organization and to effectiveness and survival considerations.

Meyer (1971) and Hummon (1971) raised some doubts on the methodological values of the work of Blau and

Schoenherr. Blau (1971) rejoins in a reasonably satis­ factory way to which is an independent study by Mayhew et al. (1972) expresses serious criticism. Using a com­ puterized algorithm that enumerates all possible struc­ tural forms for each size, Mayhew and his associates, say that it is very difficult to state any principle on the causality of any effects of size on structural differ­ entiation.

Meyer (1972) in a different study seems to come to the rescue of Blau in the sense that he states, "ap­ parent relationships among parameters other than size vanish when size is controlled." Meyer (1966) surveyed

194 city, council, and state departments of finance.

Based on his findings, he believes that it is impossible to underestimate the impact of size on other organiza­ tional variables. He believes that in a one-way causality, other organizational parameters have almost no effect on size.

Hall (1972) in a very comprehensive study states that there is a relationship between size on one hand and structural dimensions, professionalization, the administrative component, and workflow on the other.

______99 Inkson et al. (1970), from the Aston University group, in a replication of their studies on organization context and structure, concluded that the structuring of activities was primarily related to organization size and to a lesser extent to technology. This and other studies by the Aston group are based on the theory of bureaucracy, and the Weberian dimensions are taken seri­ ously for measurement. The comparison of many organiza­ tions with very similar characteristics is developed in a quite sophisticated fashion. Their worry is mainly methodological and generalization from their conclusions is difficult.

Child (1973) in a study from a sample of British business organizations, supplemented by findings from

British labor unions, engineering firms, and the Aston sample of varied work organizations has relevant conclu­ sions. He states the size remains the major predictor of decentralization, but that, at this time, it is im­ possible to demonstrate that size itself is the major determinant of formalization.

Hinings and Bryman (1974) in a recently published article on size and the administrative component in churches find some relationship between the two variables.

It seems that the findings having applications in work organizations are somewhat valid in voluntary organiza­ tions too.

100 The general trend one can draw from these several

studies, if that is possible at all, is that there appears

to be a relationship between organizational size and the

administrative component, span of control, decision making

centralization, degree of differentiation, and structuring of activities.

Most of the studies have methodological aspects

that are subject to criticism. The indication of rela­

tionships are vague and loose. It is evident that the

search for understanding must continue.

The Influence of Technology on Organization Structure

The influence of the technological component upon organization structure is not clearly understood yet by organization theorists, but a few empirical studies have addressed the issue. Technology is a component that antecedes the formal structure. This precondition will, together with the environment, the size and other vari­ ables, help to shape the formal organization structure.

Hickson, et al. (1969) in an attempt to measure the relationship between technology and organization structure presented the concepts of operations technology, materials technology, and knowledge technology. They found no significant relationship between organizational technology and organization structure. Operations

101 technology, defined as the equipping and sequencing of

activities in the workflow, was associated with some variables of organization structure. This study on a

stratified sample of diverse organizations in the English midlands indicated that the;

Smaller the organization the more completely its structure is pervaded by the immediate effects of this technology; the larger the organization the more these effects are confined to variables such as the proportions employed in activities that are specifically linked with workflow, and technology is not related to the wider adminis­ trative and hierarchical structure, (Hickson et_al., 1969, p. 378)

With this conclusion, they think that there is a compro­ mise between the classic management writers that would give to technology the first priority in the design of organizations and the behavioral scientists that favor the satisfaction of human and social needs first. Two

important aspects seem to be important to mention here.

First, that again the size of an organization seem to

influence its structure. Second, that previous studies may need a reinterpretation such as the famous socio- technical studies of Emery and Bamforth (1951), and Emery and Trist (1960) . In the same level are the studies of

Blauner (1964) , and the previously discussed work of

Woodward (1965) , in need of a reappraisal, if the findings of Hickson and his associates are valid.

To challenge the validity of the Hickson findings,

Aldrich (1972) published a reexamination of these findings

102 and through the use of causal path-analysis concluded

for the reinstatement of technology as a variable of

importance in the organization context in general and

in the formal organization structure in particular.

Hage and Aiken (1969, p. 366) in an investigation

with data from sixteen social welfare and health organ­

izations in a midwestern metropolis found that: "The

social structure of organizations with more routine work

are found to be more centralized, more formalized, and to

have less professionally trained staffs, but no relation­

ship with stratification was found."

In the same trend, Mohr (1971) concluded that

there is not a great deal of reliable evidence that

social structure of organizations is strongly affected

by technology. A similar conclusion was reached by

Hrebiniak (1974). Freeman in 1973 found some influence

of technology on the organization structure but only as

a function of organization reaction to environmental

change.

Susman (1970) in a study with more normative con­

tent recommended that differentiated formal positions in

autonomous work groups may have negative consequences for work group performance. In other words, too much atten­

tion to technological requirements may be dysfunctional

for the organization structure and performance.

103 If there is a conclusion to be drawn from the

empirical studies of the influence of organization tech­

nology on the formal organization structure, it is that

both concepts are not unidimensional but are heteroge­

neous. This means that the validity of studies that

oversimplify the complexity of these variables are bound

to provide very limited power of generalization.

Variables Affected by the Formal Structure of the Organization

In the previous section, we examined some reports

on empirical evidence of factors that antecede or condi­

tion the organization structure. Size and technology

were considered in some degree associated with the shapes

and intensity a formal structure may assume. In this

section, we discuss some organization variables and their

relation with organization structuré as empirically

studied. This time, the organization structure is con­

sidered antecedent and causal to these dimensions.

Decision Making and Formal Organization Structure

The question here is: #iat, if any, is the rela­

tionship between organization structure and the decision

making processes in practice in organizations?

Some studies dealing with this problem offer

ideas about how complex the issue is. Hage and Aiken

______:______104 (1967) in a study of power distribution in sixteen health

and welfare organizations found that participation in decision making is a better predictor of other structural properties than hierarchical authority. In a similar

study with managers of eight different companies, Blanken­

ship and Miles (1968) draw a different conclusion. Hier­ archical position was found to be the most important determinant of the decision behavior. They state:

No other phase of decision behavior appears to influence a manager's total pattern of decision as strongly as does his perception of whether he has the right of final choice on an issue, (p. 119)

Becker and Baloff (1969) experimented with organ­ ization structure and complex problem solving. Their research hypothesis was:

In solving a complex business game, the division of labor form of organization would be superior to both the hierar­ chical and the committee forms of organ­ ization with respect to quality of solution [achieved levels of profit] and time [number of trails] required to solve the game. (p. 264)

The hypothesis tested with a group of more than one hundred studentsvolunteers was strongly supported. This represents empirical support for the use of a given structure for the accomplishment of a determined task; in this case, differentiation of specialization proved to be the best structure for the problem solving task.

105 On the same line of inquiry, Carzo and Yanouzas

(1969) experimented with tall and flat structures. Their results indicated that tall structures were superior in two measures — profits and rate of return on revenues.

Tall structures took, in general, longer time to reach decisions, but their decisions were more accurate. These findings would be of more interest for our study if Hummon

(1970) had not come with some serious observations about the methodology used that made evident a series of prob­ lems challenging the study.

Again, the research does not indicate a clear trend that formal structure of organizations effects the decision making and problem solving capabilities of the organizations.

Communications and the Struc­ ture of Organizations

There have been many studies investigating the effects of social structures on communications. The famous studies of Bavelas (1951) and Leavitt (1951) have served as an empirical paradigm and point of departure for many studies. These classic reports indicated a relationship that is of central importance for our theme.

Structures do make a difference in the communications patterns of organizations.

106 More recently, Burguess (1969) experimented with two structural shapes — the wheel and the circle — and linked the results to the question of motivation, "It may be," he says (1969, p. 157), "that several kinds of social structures can be equally efficient in producing desired ends, if under certain structures the members receive reinforcements of greater amounts, at more fre­ quent intervals, or at higher probabilities," So, chances are that the best structure for better communications would be the one offering the best stimulation for the participant,

Hage et al. (1971), after examining data from several government agencies, suggested that the more diversified organizations become, the greater the increase in specialization. In such circumstances, differentiation tends to make them more dependent on a system of recipro­ cal information flows to achieve coordination and there is less reliance on a system of programmed interactions.

Relationships Between Formal and Informal Organizations

Other researchers have picked up where Mayo et al. left off. Pheysey et al. (1971) , from the

Aston group, in a study comparing groups of line managers and supervisors in two organizations with different organizational structures, examine differences in rela­

107 tionships stemming from the different structures. They concluded that given the multidimensionality of the con­ cepts of formal structure and organizational climate, there is a nonlinear relationship. The relationship be­ tween the variables is very complex although they found indications supporting their hypothesis. Relationships among the members of the groups in the more mechanistic organization were seen as more formal at all levels of the hierarchy; all groups saw themselves as having less autonomy, and the organizational climate was seen as being oriented toward rules and conventionality.

George and Bishop (1971) in a study of organiza­ tion structure, teacher personality, and organization climate reinforce the Aston group findings. They con­ cluded that:

The patterns which emerge from these data among personality and structure variables suggest that in a smaller, less bureau­ cratic, innovative district, a preponder­ ance of teachers exhibit low anxiety and perceive low organizational structure. They are more dependent, conservative, and trusting people, who act out — exhibit inauthentic behavior — in their organiza­ tional roles. In the larger, traditional, and more bureaucratic district, the teachers perceive high organizational structures, and are more independent, opinionated and brighter. They also tend to reveal a higher degree of organizational anxiety, (p. 474)

Tichy (1973) tries to establish the conditions for clique formation in organizations. His effort is

108 towards the advancement of some testable propositions in this area. He works with the structural variables of mobility (upward vertical movement in the organization hierarchy); compliance (borrowing Etzioni's [1965] clas­ sification; coercive, utilitarian, and normative) and size (the number of organization members). Relating this to the clique formation phenomena, Tichy suggests that mobility and compliance have direct effects on the moti­ vation of individuals for clique formation. These vari­ ables and the size of the organization affect the cliques internal structure. He also expresses the belief that;

"... the effects of formal structure on informal struc­ ture can be dealt with explicitly in the design and re­ design of organizations" (p. 206). Tichy is very hopeful that the computerized use of sociometric methods will allow for rapid analysis and identification of cliques in large organizational settings and will permit the comparative analysis of organizations as advanced as the studies of the Aston group.

Payne and Mansfield (1973), studying the concept of organizational climate through the perceptions of re­ spondents from fourteen different organizations, found support for the hypothesis that size of the organization has influence^ on perceived attributes of the organiza­ tional environment by organization members. As a final statement, they find climate as a too gross dimension to

109 be useful in the prediction of the behavior of social systems. In other words, the complexity of the issue does not allow for a satisfactory quantification.

Likert and associates (1961 and 1967) and Emery and Trist (1965 and 1973) link the effectiveness of work to the proper development of the social dimension that also integrates the organization. Likert's group-based leadership system, with the use of supportive vertical and horizontal relationships in the organization, is a clear recommendation for the satisfaction of social needs.

Emery and Trist's claim for the satisfaction of social needs in the so-called socio-technical systems is another slightly different view very much supported by empirical studies.

With this brief review of empirical studies on organizations structures, we are ready to examine some alternatives to the bureaucratic-classic model that has been tried in different settings. This following section is different in format from the rest of the review of the related literature. The variety of alternatives on organization structure is a subject that is very broad.

This attempt is only indicative of the richness of the field and does not cover it completely.

110 Alternative Structure Models to the Bureaucratic-Classic Model of Formal Organization

This section deals with specific suggestions for the formal structuring of organizations. The review of the main works in the organization and management litera­ ture provides the basic principles and issues to be faced.

The review of the empirical studies suggested the prob­ lems around the dimensions of organization structure and the effects of internal and external variables that effect and are related to structure.

Here, we deal with more specific details per­ taining to the establishment of organizations that move away from the bureaucratic-classic model and explore new ways to organize.

From the bureaucratic ideal type of Max Weber and the principles of management of Henry Fayol, two basic problems of organization structure arise and are solved by the classic writers. The first is the problem of division of labor and the ever-changing situation of the line and staff relationships. The differentiation be­ tween line and staff is crucial and the relationships between these two groups are not always harmonious. The second problem concerns departmentalization, Gulick

(1937) established the cases for departmentalization.

Departmentalization can be done by purpose, process,

111 clientele or product, and place or region.

Another very important concern with organization

structure relates to the number of layers that can be

found in its hierarchy. Organization structure may be

flat or tall depending on the number of hierarchical

layers. The adoption of flat organization has been more

intense recently given the problems of tall organizations

and the greater autonomy granted to departments and work

groups.

The so-called project or program management de­

parts from the classic model. In a project structure,

the activities and people are assigned on a temporary

basis, i.e., as long as the project lasts. The project

manager is fully responsible for activities required to

complete the project. Once the project is finished, the

people and materials are reassigned to new projects.

This arrangement is especially useful for organizations

experiencing great amounts of technological challenges

and involved in unique tasks.

A formal structure that compromises the classical

functional arrangement and project structure is the matrix

organization. The permanent departments of the functional

structure are maintained and projects are established

crossing department borders for the achievement of spe­

cific objectives. Mee (1969) says that the concept of a matrix organization entails an organizational system

112 designed as a "web of relationships" rather than a line

and staff relationship of work performance. The goal of

the web of relationships is established at the start of

a project and rearranged at the project completion.

An elaboration of this idea, but with more ample

social consequences, is network centers. These are de­

fined by Schon (19 71) as a set of elements related to one

another through multiple interconnections. In these net­

works, the concepts of authority and hierarchy are removed

from a first level importance and replaced by cooperation

and integration concepts.

Another societal conception with interesting

applications for the structure of work organizations are

the phenomenarchies proposed by Will McWhinney (1973).

These are societies or communities pluralisticly designed

to support the full range of human needs. Although

McWhinney creates a terminology that apparently abuses

new words with old meanings, his notions are interesting

and follow the trend for the replacement of hierarchical

and authority based structures.

Several other ideas deal with the managerial

aspects of organizations, including workers' directive

councils, and the concept of plural executive. The workers' councils were briefly discussed in the section

devoted to Industrial Democracy, and their success in

Yugoslavia and other European countries is a fact. The

______113 concept of plural executive will be reviewed when the case study of this dissertation is presented.

Participative management is a part of a very strong current in American practice and literature.

Participative management does not necessarily imply struc­ tural changes. Very often the same bureaucratic-classic organization structure exists with minor refinements and additions. The results are promising and sometimes are just the beginning of more daring structural reformula­ tions.

The forms that participative management can take are many. One very popular one is the Management by Ob­ jectives (MBO). MBO is a process where every segment of the organization has the opportunity to participate in the goal setting process and the methodology for goal attainment is very much a matter of concern of the people who are directly working in the achievement of these goals. The degree to which MBO is participative varies, but the technique lends itself to participative practices.

Program management or project management has a counterpart in the budget system. Planning, Programming,

Budgeting System (PPBS) emphasizes planning through the budget. The technique allows for some centralization and for some decentralization at the same time. The central­ ization occurs in the sense that it is possible for the central management to assess the progress of every

114 program, such as cost, manpower availability, benefit cost analysis, and other variables. On the other hand, it allows the peripheral parts to plan according to their own peculiarities, the ways, cost, and other dimensions pertaining to their job.

Likert offers the linking pin, and the systems (4) group based, participative management. Argyris with his mix model advances a series of ideas along this same path, although showing more design audacity.

Jay Galbraith (1973) departs from the fact that due to environmental characteristics, organizations are confronted with increased task uncertainty, and he makes the point for the need for modified organization able to handle the additional information load. He proposes two basic strategies for coping with the problem, all of them involving structural changes. The first one is to reduce the need for information processing within the organiza­ tion. The second is to increase the capacity to process information. The reduction of the need for information processing may be reached by two structural modifications, the creation of slack resources or the creating of self- contained tasks. The increase in the capacity to process information is possible to achieve by the investment in vertical information systems and the creation of lateral relations. Galbraith ignores or suspends judgment on the hierarchical participative debate and offers suggestions

115 that go both ways as in the development of control and through vertical information systems and the creation of lateral relations with its consequent augmentation of power for the lower echelons. These suggestions are typical of contingency management.

The mentioning of contingent management is not complete without a reference to the work of Lawrence and

Lorsch. Although their discussions are almost solely on the continuum of autocratic-participative control, their research report gave a certain legitimacy to contingency management approach.

The organismic organization described by Burns and Stalker is a very comprehensive conceptualization with multiple application in the design of formal struc­ tures of organizations. No list of alternatives to the bureaucratic- classic model is complete without reference to the

Tavistock work on social-technical systems. Emery and

Trist (1965) provide a model for autonomous work groups, in which attention is given to satisfying both production- technological needs and psycho-social imperatives. The empirical nature of the proposal has drawn attention of theorists everywhere. The discussions on the socio- technical systems by Katz and Kahn (1966) and Kigdon

(1974) are very pertinent. The socio-technical systems conceptualization is not only a way to structure effective

116 organizations, but it is also a powerful tool for change.

The development of autonomous work groups in

Sweden (Gibson, 1973) and other European countries is

to a large extent an application of the socio-technical

system concept.

The proposal of Bennis (1966) for some parameters

of a nonbureaucratic organization was developed further by Kirkhart (1971). These developments constitute the

Consociated Ideal Type of Organization as opposed to the bureaucratic ideal type. Some of the characteristics of

this consociated ideal type are; organization strives to

adapt to environment; social relationships are noncom­ petitive, trusting; the basic work unit is the project

team; the technology is situation oriented; there is a multivalent authority structure, the clientele is repre­

sented in the directive bodies of the organization, the

organization is a place of temporary employment, not a

career. As a consequence of the adoption of this organ­

izational model, Kirkhart forecasts that social diversity

and independent personal life styles will be facilitated;

alienation will be minimized in the work place; tolerance to conflict and ambiguity will be increased; and the prob­ lem of structural rigidity and aging will be reduced.

I"6 is clear that this list is only exemplifica­ tive. The several models mentioned have variations and subvariations that can be discussed ad infinitum. It

117 seems that at the moment, our purpose is fulfilled. This nonexhaustive list offers the reader examples of the im­ mense possibilities in structural redesign and could provoke the spark for more innovation.

Summary and Conclusions

Organizational literature is rich with information related to formal structure and to issues as to the in­ fluence of and on such structures.

For our purposes, we classified the theoretical literature on organization into six groups — Classics,

Human Relations, Industrial Democracy, Open System,

Applied Behavioral Science, and Critics of Bureaucracy.

A brief review of the recent empirical research on structure of organizations reveals that most dimensions measured, and the comparisons made, spin around the pro­ posals of Weber and Fayol. This is a difficulty when the purpose of a study is to examine possibilities away from the bureaucratic-classic model. It is very difficult to compare nonbureaucratic organizations because no two are alike. Bureaucracies have common features that invite comparative studies.

The last part of the review of the related lit­ erature is a list of alternatives to the bureaucratic- classic model. Very often these alternatives are just

118 partial suggestions for structural changes, do not con­ stitute complete new models, but only tentative experi­ mental ones. The positive aspect of these is that partial change is viable. Through a dialectical process, it is feasible to rebuild organization by departing from the bureaucratic paradigm in a way that allows for gradual growth.

119 CHAPTER III

RESEARCH PROCEDURES

Introduction

The first chapter covered the scope of the study

and delimited the general area to be examined including

the nature of the problem, research questions and defini­

tions of major terms. Chapter II provided a broad review of related literature, including an examination of em­ pirical studies on formal organization structure. The

empirical case study, on the California State Compensation

Insurance Fund, the object of this dissertation, was de­

signed to utilize concepts suggested in Likert's Profile of Organizational Characteristics, Argyris' Mix Model,

and Burns and Stalker's Organismic-Mechanistic dichotomy.

In Chapter III, we turn our attention to the main methodological problems including the procedures for data gathering and processing as well as the process involved in building the research instruments. It is also the purpose of this chapter to provide an introduction to

Chapter IV in which we discuss research findings.

120 The Design of the Research

This research was designed in the format of a case study. Utilizing case studies in research creates problems and poses some dilemmas, Mouzelis (1971) dis­ cusses the dilemma of case study survey that is common in organizational literature. The case study has the ad­ vantage of providing many insights and fruitful hypotheses about the working of a specific organization. The survey, on the other hand, provides for more general and method­ ologically valid findings, but which have the drawback of superficiality. The choice says Mouzelis is "between theoretical substance and methodological sophistication"

(1967, p. 66).

Helmstadter (1970) believes that the case study is an almost essential technique when exploring completely new fields. The lack of commonalities, interchangeable variables, and other problems faced in new and complex situations makes the case study a very valuable technique.

There are, however, some common mistakes of which a re­ searcher must be aware. First, one may assume that all past experiences of the individual case have had a defini­ tive influence on the past result. Under these circum­ stances, the research may emphasize facts that are irrelevant to the situation, confuse the investigation and lead to false conclusions. The second problem is that

121 case studies rely very much on memory of the persons who have been involved in the action. There is no need to elaborate on the unreliability of the human memory. The third problem is that case studies often address problem cases giving the impression that generalizations may be made on bases of negative views of the phenomena.

It is possible to avoid the first problem by a careful examination of causes and results. In the present study, the danger of information overload was serious, but since there was no great concern with causal factors, the overload does not constitute a serious difficulty.

To avoid problem two, the investigator made intensive use of documentation and cross checking of many data sources.

The third problem does not apply since the research was conducted in a successful organization.

Barnes (1964) says on the subject matter:

Most times it is far easier to obtain data through single cell studies than it is to draw valid conclusions from the facts dis­ covered. Studies of this type tend to have a larger scope and to range more freely than experimental studies with control groups, (p. 67)

We accepted the Barnes point of view as we engaged in our study.

It is evident that the study of organization structure very easily spreads itself to adjacent areas such as organizational climate, managerial style and even the social psychological aspects of working groups.

122 In the present study, there was no effort to avoid getting into these areas when the research process addressed them,

InstrumenLaLioii

The data for the case study were gathered in three basic ways: (1) investigation of papers, reports and a variety of written documents on the Fund, including records, files and personal notes of employees and other officials of the organization; (2) interviews with Fund personnel, such as managers, top executives, external consultants for the Fund, internal consultants and regular employees. Interviews followed the "Schedule of Inter­ views" shown in the appendix of this study. With the schedule as a guideline, interviews were conducted in an open-ended fashion with the interviewees being the center of action. The nondirective type of interview proved to be adequate for the needs of the research. The inter­ views lasted an average of one hour. Other conversa­ tions, held without the guide, were also very informal.

Much information was gathered through the interviews and the time and attention spent by the Fund personnel in these interviews was greatly appreciated by this re­ searcher.

In addition to gathering data by interview, in­ formation was also accumulated through the use of (3) a questionnaire (see Appendix). This questionnaire of

123 sixty-four questions covers areas of interest, some of them overlapping. Questions number one to twenty are the Likert Profile of Organizational Characteristics, published by Likert (1967) and used worldwide by his associates from the Institute of Social Research of the

University of Michigan at Ann Arbor, This instrument, as it is discussed elsewhere, attempts to measure the managerial style in a given organization from six major dimensions in four possible managerial styles. The an­ swers are given on a scale from one to twenty which provides four subdivisions, one for each managerial style.

Questions number twenty-one to thirty were developed by

Robert N, Ford of A.T, & T, for in-house training of supervisors, and published by Pfeiffer and Jones (1972).

These questions are designed to test the orientation of the respondents towards either the MeGregor theories X and Y, In the present study, the scale for the answers was changed from a four-point scale to a five-point one, to make it consistent with the rest of the questionnaire.

Questions thirty-one to thirty-six are the dimensions that indicate the direction of one organization towards the essential properties of the Mix Model of Argyris

(1964). Here, respondents were invited to assess the adequacy of statements to describe the organizational reality of the Fund, A five-point scale, Likert type, was used. Questions thirty-seven to forty-five are an

124 adaptation of the characteristics of the organismic model of organizations as presented by Burns and Stalker (1968).

The same five-point, Likert-type scale was used.

The remainder of the statements in the question­ naire are directly related specifically to the Fund.

Questions forty-five to fifty-nine are concerned with specific structural aspects of the Fund such as decision­ making bodies, centers of authority, and other details on the same order. Questions sixty to sixty-four elicit demographic information from respondents. Several ques­ tions were suggested by members of the Fund itself. The

Executive Committee was interested, for instance, in the impact of the Fund's policy and the policy-making pro­ cesses on the several layers of authority in the Fund.

There is an obvious overlap among the various series of questions. This is considered a positive factor in the research, because to check and confirm the areas that overlap.

The validation of this questionnaire was attempted in several ways. The questionnaire was first tested through two experimental administrations, one with a group of graduate students at the School of Public Admin­ istration, University of Southern California, and the other with a group of Fund employees. The questionnaire was completed by these experimental groups and they were invited to comment on the meaning of the statements and

125 questions. Their suggestions were considered and modi­ fications were made accordingly. A few professors at the

School of Public Administration of the University of

Southern California were consulted and their suggestions were also considered and modifications were made. A few other methodologists and fellow doctoral candidates also

aided in revising and strengthening the questionnaire.

It was intended that these reviews would increase the validity of the instrument already partially validated by previous research.

It is important to mention that the way the ques­

tionnaire is built that it is impossible to avoid some positivity bias. The statements are written in an

affirmative fashion that naturally invites the respondents

to an agreement; to answers in the positive side of the

scale. This also tends to cause a clustering of responses

towards the center of the scale, the indecisive or "don't know" syndrome.

Another methodological weakness is related to the

normative character of the organization models against which the Fund is compared, Likert, Argyris, and Burns

and Stalker have a highly normative content in their work.

This normative content is idealistic and sometimes

romantic in its views of organization reality. The Fund

is an operating organization with real day to day prob­

lems. Discrepancies between the real Fund and the ideal

126 models of the authors should be seen with this under­ standing.

Selection of Respondents

The three managerial groups in the organization are from the top management group: the Executive Com­ mittee; the District Office Managers group, which is made up of managers of the field offices that are in direct contact with the customers; and the Home Office Managers group. This last group includes the managers of the sup­ port departments, most of them working in San Francisco where the organization is headquartered. In addition to these three natural groups, two other groups were selected to answer the questionnaires: the Program Advisory Coun­ cil, made up of popularly elected rank and file employees; and a sample of Rank and File employees from all the re­ maining sectors of the organization.

The four first groups were not sampled. All mem­ bers of the different groups were invited and given the opportunity to answer the questionnaire. The last group, the Rank and File, was randomly selected from a list pro­ vided by the personnel department of the Fund. This list with all employees of the Fund consisted of approximately

1,500 employees, out of which sixty names were selected and to whom the questionnaire was sent.

127 Data Collection Procedures

The main sources for information about the Fund were hour-long interviews with managers, employees and other people related to the Fund.

The administration of the questionnaire was made directly with all groups with the exception of the Rank and File group. In this study, then, we are dealing with the populations themselves and not samples, except as noted.

The questionnaires were distributed and discussed in a general meeting of the Managers Council (this council is discussed in the next chapter). The managers were then invited to take the questionnaires with them and return the material at their earliest convenience. A similar strategy was used with the Program Advisory Council, with the difference that with this group, a two-hour period was reserved for the filling out of the questionnaire.

The last group, the Rank and File random sample, received their questionnaires by the internal mail of the organ­ ization and a loss of questionnaires was noticed. About sixty questionnaires were sent and thirty-four usable ones were returned.

The Executive Committee and the Program Advisory

Council completed and returned all of their questionnaires.

From the population of twenty-two Managers of the Home

128 Office departments, fourteen questionnaires were returned.

From the population of eighteen District Office Managers, fourteen returned their questionnaires filled out.

Characteristics of the Respondents

The five groups that responded were — Executive

Committee, Home Office Managers, District Office Managers,

Program Advisory Council, and Rank and File.

The rates of return of the questionnaires from each group is shown below.

The average age of the respondents is shown on

Table 3-2. In the Executive Committee, there is just one member under fifty years of age. In the group of the

Home Office Managers, none are over fifty years old.

The District Office Managers are, in average, older than their fellow Home Office Managers. The age of the two nonmanagerial groups in the Fund averages lower than the managerial groups, but, as the standard deviation shows, there is a larger spread. In other words, there is a large spread in ages of the nonmanagerial groups.

The sexes among the respondents in the Fund are not represented in balance, as is usual in the American business scene. An examination of Table 3-3 is enough to demonstrate this statement. There are no women in the managerial groups of the Fund. There seems to be a better balance on the nonmanagerial groups.

129 rH (ü *0 ■P c ro

in ro

•H ro ro (N (N ro ro

•H in •H •H

(N (N •H CN (N ro in (N CO w w ^ ro ro

-H •H -P -P -H ro in H U

•H

-H •H •H

130 ro in ro

ro

(N (N

■H U U -H -p m m M-i ■H O

ro ro

■H •H

•H

131 Longevity in the Fund corresponds to the normal expectations concerning seniority. The greater the seniority of respondents, the higher they are likely to be in the hierarchy of the organization.

Managerial groups have more formal education than the nonmanagerial groups. Also college education seems to be a requisite for higher positions. In all managerial groups, every respondent has at least high school level of education.

Theories X and Y; Personal Orienta­ tion of the Respondents

An attempt was made to assess the assumption of managers and employees through the use of ten question­ naire items related to Douglas McGregor's theories X and

Y, The items were intended to reveal the respondents orientation and provide an additional element for the judgment of the suitability of participative techniques in an organization such as the Fund, The idea here is to test if there is a great number of persons, among the respondents, oriented towards theory Y, which indicates a more participative and autonomous organization struc­ ture, The results are very interesting and may be seen in Table 3-5,

132 (ü »d ro u t—I CN CN

in ro

in (N

ro CN H CQ ro

■H -P -P -P 0 -H

W U

I—I I—I

CN CN in t—I

m CNCN The same five groups were used to classify the respondents. The scale runs from 10 to 50. Results under

30 reveal an orientation towards theory X, results over

30 an orientation towards theory Y. By head counting, the individual orientation of the respondents is shown in

Table 3-6.

The computation of the chi-square for these scores produces the result of 11.15 that is significant at .05 level of probability. That means that statistically, there is a significant difference between the groups and their orientation towards theories X and Y.

It is surprising to find that the personal orien­ tation towards the theory Y is stronger in the upper layers of the structure. The assumptions are that theory

Y leads to a more participative organization where the managerial controls are kept to a minimum. In the Fund, these ideas are held more emphatically by the management than by the nonmanagement groups.

Data Processing and Analysis

The questionnaires provide the data source for the quantitative analysis. In the form of closed-end, fill in questions and statements, the responses to the questionnaire offered an opportunity to check, confirm or question some of the data obtained in other sources of data.

134 ro

ro

ro CN CN

E k M 6 i-t »H fO O -H ft) O *H k CQ U k (0 U ro Cn H C Cn-H C O > ^3 CN p > 5 u 04 < U

•H in •H •H cn •H cn ro M-l fO roro Ik fO Ik C ro «k C •H •H

H •H Cn ro 4-> -P 4-» -P 0) -H CN ro 0 -H CN ro W U

•H -H

135 The data from the questionnaire were tabulated and computed with the help of a desk electronic computer.

The main descriptive statistical measure used was the arithmetic mean. This measure of central tendency was used with standard deviation. This measure was selected because in most cases, we are dealing with popu­ lations and not with samples of respondents. About the validity of the standard deviation, one word of caution is warranted. The standard deviation is a measure that is more valuable when there is a normality of the distri­ bution of observations. In the groups of this study, the small size of these groups, as well as their natural char­ acteristics, do not guarantee an assumption of normalcy, making the standard deviation less reliable.

We used the chi-square in making the assessment of differences among the groups. This test was selected as a function of the nature of the data. The small size of some groups and the relative convenience in computation were factors considered in the selection. The restric­ tions of the use of the chi-square are met by the data in this research. Spence et al. (1968) and Siegel (1956) warn about some limitations in the use of the chi-square, such as no expected frequency smaller than one, and a reduced number under five. The data are frequency data and the data categorization follows a logical basis. The computation was done following the recommendations of

136 Haber and Runyon (19 74),

Conclusion

The research procedures used in this dissertation were discussed in this chapter. Also a brief presentation on the characteristics of the respondents was made.

Several concurrent problems, such as sampling procedures, research design, data gathering, and data processing activities were examined.

This material serves as a preparation and needed introduction to the following chapter on the findings.

137 CHAPTER IV

THE STRUCTURE OF THE CALIFORNIA

STATE COMPENSATION INSURANCE

FUND — FINDINGS

Introduction

In this chapter, we present the main findings on the case study of the California State Compensation In­

surance Fund. The chapter starts with a general history and goes on to a discussion of the structural features and characteristics of the Fund. The data for this study comes from a variety of sources as previously discussed in Chapter III on the methodology.

In this study, there has been an effort to link conceptual frameworks found in the related literature with the characteristics of the Fund. The findings offer

some insight into the Fund, but the organization reality is too rich and changes too fast for a complete and accurate account.

Some of the reasons for the selection of the Fund as a case study for a doctoral dissertation stem from these dynamic characteristics. The ever-changing char­ acter of the Fund plus its unique structural features

138 provide a tremendous field of study for anyone interested in organizations.

Ibe History of the Fund

Responding to social needs and to the leadership of Hiram Johnson, governor of California at that time, the state legislature passed the Boyton Act of 1913. This law not only established that employers were liable for accidents on the job, but also made provision for insur­ ance against this kind of loss. The act gave employers access to reasonable insurance by the creation of the

California State Compensation Insurance Fund.

The purpose of the new institution was twofold:

1. Provide the employer with an insurance carrier that would treat him fairly and provide insurance against his mandatory liability, within a reasonable cost; and

2. Guarantee the injured employee services and assistance due his injury, including assistance to his dependents.

The Fund began operations in the beginning of

1914 with the home office in San Francisco and a facility in Los Angeles. Later on, in that same year, offices were opened in Oakland and San Diego,

To begin its operations, the Fund received a loan of $100,000 from the state of California, which was soon repaid with the current rate of interest. Since then,

139 the Fund has remained self-supporting (SCIF, n.d.).

The law gave employees the option of using the

Fund, self-insurance. To the employers, the law gave not only the Fund as an insurance carrier alternative, but

they could self-insure themselves or receive protection through any stock, mutual or reciprocal insurance company offering workmen's compensation policies.

The modus operandi of the Fund was established as

a mutual, self-supporting insurance company operating at

cost. The excess premium, then called dividends, are re­

turnable to the insured, the amount depending on factors

such as the loss ratio.

The Boyton Act, the law that created the Fund, went further in establishing a series of objectives and moralities that the Fund should follow. These goals are

synthesized here (SCIF, n.d.):

1. To provide employers with an assured permanent market for complete workmen's compensation insurance pro­ tection at the lowest possible cost;

2. To pursue a policy influenced by moralities

involved in each situation rather than merely the legal­ ities, and to provide all benefits promptly to injured workmen and their dependents;

3. To provide the best medical care and rehabil­

itation available with the goal of restoring each injured employee to a useful place in his community;

140 4. To relieve human hardship and protect human lives through safety activities and education designed to guard against the hazards of industrial injuries;

5. To operate in free and fair competition with other insurance carriers and, at the same time, act as a

"yardstick" for the maintenance of fair premium rates for employers and fair treatment for injured employees.

Since the beginning, the Fund worked with the ob­ jective of not only meeting the legal requirements of its mission, but also to satisfy moral and humanitarian as­ pects of the workmen's compensation business.

The Fund has a history of success. Since early times, the organization has kept a good share of the market, maintaining a good reputation both as an insurance carrier and as a good place to work.

The organization grew incrementally without major changes until 1945. In that year, the Department of

Industrial Relations experienced a general reorganization and the Fund received full status within the Department, moving out from the jurisdiction of the Industrial Acci­ dents Commission. This reorganization gave the Fund a

Board of Directors, with five members to oversee the general policies of the organization. In 1947, the state legislature amended the Insurance Code to make the

Director of the Department of Industrial Relations ex officio chairman of the Fund Board of Directors. The

______141 remaining four seats are to be filled by persons that are

Fund policy holders, non civil service employees, appointed by the Governor.

The role of the General Manager of the Fund was also reinforced in the 1945 reorganization. The General

Manager implements the Board's policy, is the liaison with state legislative committees on Fund affairs, and maintains relations with other state agencies. Prior to the reorganization, the relationships between the Board of Directors and the General Manager overlapped and were characterized by some role confusion. One year before the reorganization, 1944, Joseph J. Gallagher, an employee since the foundation of the Fund, became the General Man­ ager of the Fund. This man, in the words of Neely

Gardner (1969, p. 2) "was the Fund." His dynamism and energy allowed him to supervise, in great detail, almost every operation of the organization. In the words of a top management official of the Fund, who worked under

Gallagher, he even personally distributed the payroll checks to each employee. As General Manager, Gallagher operated a very centralized organization.

Almost ten years later, in 1954, the Board of

Directors and the General Manager, interested in improving the overall effectiveness of the Fund, decided to obtain a broader factual information base to start a program of change and general improvement. The Fund engaged the

______142 stanford Research Institute to survey and present facts on

Fund organizational structure and selected operational procedures as they related to broad policies, management practices, personnel practices, supervisory procedures,

and employee relations. In May of 1955, the Institute presented the research report with the general conclusions

and recommendations, originated from a major employee

survey. Some of the more important findings were (Ebey,

et al., 1955, p. 6);

— The need for clarification of relationship be­ tween the Board of Directors and the General Manager.

Some conflict between these two parts was to be solved through a more explicit definition of areas of competence by a joint effort of those parts involved.

— The report suggested a regrouping of functions within the internal organization of the Fund and a clari­ fication of roles and relationships. A new organization

chart was proposed.

— A strengthened position for the personnel rela­ tions manager was advocated, and a stronger effort on the development and training of employees was proposed. The

Stanford Research Institute also recommended the develop­ ment of a written statement of personnel policies, in­ cluding a clarification of the grievance procedures*

— Along with a suggestion for a better communica­ tion system within the Fund, there was the suggestion for

143 more delegation through the better use of supervisors in

the development of effective employee relations.

It is interesting to examine, in Figure 4-1, the

organization chart that the Fund had at the time the

Stanford Research Institute started the study. On the

report presented by the Institute (Ebey, 1955, p. 94),

there is the observation that in the Fund there was no

clearly shown division between line and staff responsi­

bilities. There were several "dotted line relationships"

that mean: several cases of functional supervision by the home office. Fourteen executives reported to or through

the executive secretary. There were other apparent dys­

functions such as low civil service classification for

the personnel officer, and confusion stemming from the

fact that the mail room was assigned to the underwriting

department. From this highly centralized structure, the

Stanford Research Institute recommended a somewhat more

decentralized organization in the sense that seven execu­

tives would report to the executive secretary.

To implement these and other recommendations, the

Fund signed a second contract with the Stanford Research

Institute. The accomplishments of this joint effort were

summarized in a report made public in April, 1957. Here,

Ebey et al. give some of the details of the changes made. The general structure is depicted in a new organ­

ization chart shown on Figure 4-2. The report also shows

144 Board of Directors ] Manogef

Executive Secretary^ Clerical

X A ssistant As^iston)’ Comptroller Actuary Executive Secretary Executive Secretary j: I Accounting Coshi er Claim: Claims Legal Medical Underv/rlting Personnel Field Statistical Field Auditi hg Services. Cashier- Superintendent Adjustment Chief Medical Super­ c r IV Super­ Credit of Claims Counsel Director intendent Super­ intendent Manager Assistant SCIF Underwriting intendant intendent Accounting Executive Field Audit and Secretary I 1 Policy Files Services Statistical 1 / H C I ^ Index Assistant Mobile Safety Super­ Supply Mcil j Crew Typing intendent Supervisor, Section Safety Printing Photo Field Records Services Services Communications — I / Clerical Los Angeles LOs Angeles Branch Manager San, Francisco Ooklond I -:------Assistant Executive Secretory Son Jose —I Sacromento Stockton Fresno Clerical — "Ëureko j

1 1 t 1 1 . 1 Accounting Claims Cloims Legal Medical Underwriting Moil Telephone ; Field CIR IV District Field Senior District CIR IV Services ~ ~ 1 Super­ Adjust­ Counsel Medical Photo Assistant Son Diego Long Beach intendent ment SCIF Director Records Super­ Claims Case Supply Closing of Claims CCA IV intendent Fid. Svc. Typing Section '

^Source; Stanford Research Institute, Organization and Personnel Relotions, ' ...... (SRI, Applied Research Center of the West, Stanford, Californio, 1955), p . 95

Figure 4-1 California State Compensation Insurance Fund Organization Chart, 1955

145 BOARD OF DIRECTORS

MANAGER

ASSISTANT MANAGER

DIVISION CHIEF, ACTUARY DIVISION CHIEF, CHIEF COUNSEL PERSONNEL, RESEARCH DIVISION CHIEF, DIVISION CHIEF, FINANCIAL AND BUSINESS AND DEVELOPMENT POLICYHOLDER SERVICES CLAIMANT SERVICES GENERAL LAW SERVICES SERVICES ______SUBROGATION C0IÎPTR01.LFR PERSONNEL UNDERWRITING ACCOUNT!NG-STATISTICAL CLAIMS ADJUSTMENT PREMIUM COUÆCTI OX

TRAINING PAYROLL AUDITING CREDIT AND COLLECTIONS CLAIMS FIELD ADJUSTMENT ORGANIZATION AND FIELD SERVICES GENERAL OFFICE SYSTEMS PLANNING REHABILITATION KA NAGEAIENT SAFETY

PURCHASING

ELECTRONIC DATA PROCESSING

DIVISION CHIEF (L.A. BRANCH MANAGER)

A S S T . L . A . BRANCH MANAGER

Figure 4-2 California State Compensation Insurance Fund Organization Chart, 1956

146 that the proposed changes were accepted by the Fund in the major part of the cases, A management guide was pre­ pared and brought into use. The personnel activity was upgraded and reorganized with a clear statement on general personnel policies and grievance procedures.

The survey team also recommended giving attention to the betterment of communications and to the upgrading of supervisory personnel. In the implementation process,

Ebey and his colleagues tapped the opinions and feelings of managerial personnel at several levels, "This step,"

say Ebey and associates (1957, p, 8), "is what is commonly known in industry as participative management," The re­ port gave heavy emphasis to training and continuous development of the Fund's personnel, along with the con­ tinued use of meetings for the collection of ideas and

information.

These attempts of the Fund and the Stanford Re­

search Institute constitute the beginning of the movement toward the very innovative organization that is reflected in today's Fund,

In 1958, the Training Division of the State of

California was asked to assist the Fund's efforts to accelerate a serious program of Executive and Employee

Development (Gardner, 1969, p, 3), This made it possible for Fund employees to participate in programs to enhance the internal competence of the team,

147 From that date to today, the Fund has stimulated active participation in training activities. In a paper written in 1969, Neely Gardner says that:

. . . Almost all managers, at significant levels, have participated in educational programs given by the Business School of the University of Cali­ fornia at Berkeley. Virtually all have experi­ enced laboratory training, not once, but a number of times.

He continued:

Team development laboratories are not uncommon. Continual upgrading efforts are made through such kinds of training as the Kepner-Tregoe Decision-Making program, attendance at American Management Association conferences, and many other supporting efforts for mid-career educa­ tion and training.

In 1962 a new General Manager was appointed by the Board of Directors. Al Young started at that time a new era for the organization. He was a man acquainted with the latest developments in the theory of organiza­ tions, and was eager to try these new ideas in the Fund.

Young retained a consultant that was for sometime, already, familiar with the Fund. Professor Charles K.

Ferguson of the University of California at Los Angeles, an experienced practitioner of Organization Development.

Ferguson stayed with the Fund giving assistance and con­ sulting in this area for some time.

It is interesting to note a statement by Young, given to Ulku Dicle (1969, p. 200), because it reflects the ideas of the top management of the Fund that gave

148 origin to the new structure. It reflects his motivation

for moving in the new directions that we will examine;

In an age of rapid change, we try to keep the status quo. We are having a hard time in giving up. Acknowledgement and willingness to deal with change is our biggest external problem today. Our great internal problem comes from people's satisfaction with the existing situation. We continue to build ancient hierarchical systems and want to maintain the traditional levels of control and authority. A few years ago, I would have told you that our biggest problem is excessively authoritarian structure. Although we still have some people who are most happy and comfortable when they have the complete control of the whole situation, now these people are in a minority in the Fund. My organizational concept or plan is par­ ticipative form of management. I have read McGregor's book, and I think it will work. In fact, not only work, I don't see any other al­ ternative to it. I can't get anything done through force. I can't scare anybody to work for me. Not in today's culture. First of all, I don't have the means to do it; even if I had, I wouldn't want to use them. I couldn't exert fear to motivate them. They don't have to be afraid of me. Expert insurance people are scarce. They are in short supply. If I had done anything to them I would be committing organizational suicide. The only way we can function is through people.

The Dispersal of the Claims Department

A crucial development in the evolution of the

Fund's organizational structure happened in 1964. In

October of that year, the Fund started the dispersal of the claimant services. Fund staff developed a "Report on

Dispersed Claimant Services." This document provided the following concepts:

149 — Unification of all Fund services in a local geographic area,

— A District Manager responsible for the conduct of operations in the district.

— All activities of claims adjustment done locally.

— A close identification of the Claims Adjuster to policyholder.

— Application of the organizational concept of operating line divisions and functional management divisions.

In an effort to achieve these objectives, the organization would provide a variety of resources. Under­ lining the effort to disperse the claims activity were two factors. The first one was the necessity to develop a greater sensitivity to the needs of all clientele of the Fund. The second factor was in consonance with the attempt to apply the total services of the Fund in the local area of operations of each district office. The

"Report on Dispersed Claimant Services" (1964, p. 222) states:

The basic concept in establishing a completely integrated district office is to provide the means whereby the entire services offered by the State Fund can be brought to bear in meet­ ing the objectives and purposes for which the State Fund was created. The organizational make-up of a dispersed claims unit is intended to provide consistency of effort, singleness

150 of purpose and identification to policyholder through the cooperative efforts of all per­ sonnel in the district office.

The report gives consideration to other Fund de­ partments affected by the claims dispersal. Some depart­ ments play a close and direct role in the adjustment and processing of claim cases.

These departments: Rehabilitation, Medical, Accounting, Central Data Processing, Under­ writing, and Legal, directly support claims adjustment in one way or another, and the program for claims dispersal will require revisions in their operations, procedures and relationships.

This is the acknowledgment that the new claimant services system would cause systemic changes throughout the Fund.

It also recognized that other departments such as Per­ sonnel, Training, and Business Services, not directly related to the claims system, would be affected, not in their internal structure, but in services provided by them to the Fund as a whole.

The dispersal of claims, from a centralized de­ partment in the home office to the district offices, is perceived not only as an effort to decentralize in a specific area, but also as a restructuring of the Fund in broader terms. One aspect of importance is the role assumed by the District Manager. With the claims dis­ persed, the District Manager, whose job had been largely that of a sales supervisor, started to receive broader responsibility because the role of the District Office

______151 itself was being enlarged, "The District Manager conducts the operations of the State Fund in an assigned geographic area" ("Report on Dispersed Claimant Services," 1964, p. 54) was the new definition of the boundaries of the role of the District Manager, The implications of such an undertaking are important for the future of the Fund's structure because they bring the seeds of the new "ever- changing" organization.

The dispersal of claims was a dramatic start in the changes that occurred in the Fund's structure. Even at this time, however, considerable centralization was retained and the Fund still held a very traditional organization structure. The divisions of Southern and

Northern California regions were maintained and most of the traditional departments, reporting systems, continued without any major modification.

The process of dispersal started gradually. Some offices of small size did not qualify for the establish­ ment of an autonomous claims section. In early 1965, the

District Office of San Jose had its claims operations in its own house. Later on in the same year, the District

Offices of Fresno and Stockton started their own opera­ tions in claims services. By January 2, 1975, eleven years later, the District Office of Bakersfield will have its claims operations dispersed. This is the nineteenth full-service office. The long process of claims dispersal

152 is being successfully completed. With the start of this process of dispersal, the Fund started a new phase with serious implication to the modus operandi and the struc­ ture of the organization.

Fund Recent Structure

Before dealing with the recent history of the Fund itself, it is interesting to deal with some of the basic assumptions that oriented that history.

In 1966, four years after Al Young took over the

Fund, Neely Gardner retired from the position of Director of the State Training Division of California. Gardner took a position in the Faculty of the University of

Southern California, School of Public Administration. As he had, at least theoretically, more free time in this new position, the Fund asked him to take a closer role as a consultant to the organization. The association of

Gardner with the Fund was not new. Gardner had had the opportunity to share some of the principles from the training of the state division since 1958. To a large extent, this closer association did not represent a de­ parture from ideas and attitudes the Fund was acquainted with from the several training experiences and from the services of the Stanford Research Institute and Charles

Ferguson.

153 At the moment Neely Gardner started to perform his role, no longer as a trainer director of a friendly but remote training agency, he started, in his own words, a "training phase" (1969, p. 10). He circulated the work of Dahl and Lindblom (1963) on economizing behavior, the concept of a temporary society as discussed by Dennis and

Slater (1969) in the Temporary Society, the concept of legitimacy as articulated by Fred Riggs (1968), discus­ sions on Homan's ideas on social exchange, Rogers'

"propositions" regarding personal development, Maslow's hierarchy of needs and general definitions of open systems theory were held and aired among the top management of the

Fund in this preliminary phase.

As can be seen, a variety of current concepts in usage by organization theorists were made available to the personnel of the Fund. Most of these ideas are part of the set used by Organization Development practitioners.

Gardner says (1969, p. 12) that at this early stage, the

General Manager, Al Young and several other members, were interested in a "changing organization." This idea opposes itself to the concept of organizational change with a stabilized and reformed stage after the change.

Here, the ideas of Young and some of his managers were geared toward permanent changing to endow the organization with capability to continually search for an optimum com­ bination of internal segments in relationship to the goals

154 and the environment. The notion being developed at that

time was on ever-changing organization rather than with

a "one-shot" change.

Along with this feeling of constant change, there

was the recurring theme of problems encountered in a

bureaucratic and hierarchical formal organization. There

was the sense that the several organizational layers were

not being helpful to the life of the organization. Also,

concern was high over the duplication and fierce competi­

tion between the Home Office (San Francisco) staff units

and the field units or the District Offices. There were

problems between the two regional divisions — Northern

and Southern California. Al Young (1969, p. 3) referring

to this problem says that "one almost needed a passport

to go from one division to the other."

The general feeling, in the words of the former

General Manager, was that the organization was a good one,

"it was successful, but one which I had always felt had

the potential for real greatness." (Young, 1969) Many

of the factors impeding this greatness were in the order

of structural demands. The structure did not allow for

the higher objectives.

After fifty years of organizational life, the

Fund was becoming a middle-aged organization. Writes

Young:

155 , . , A number of old-time executives were coming to the point of retirement. We realized that we had done poorly in planning ahead for management development, or replacement. Secondly, a number of fairly serious personnel problems were occur­ ring in our organization, sort of administrative brush fires throughout the whole geography of California from the Oregon line down, to San Diego.

In the following paragraph, he continues:

Many of us had convinced ourselves that the highly centralized organization with the Presi­ dent on top, and the traditional staff beneath that, and a big line of department heads, then district offices, just wasn't the best way to administer this organization. And in fact, it was creating such serious communications blocks in the lone lines of communications that we had real difficulty getting a reading on what our problems really were.

The development of vertical structures competing among themselves is not uncommon in the insurance busi­ ness. Young believed that the columns around clusters of specialized skills, such as underwriters, claim ad­ justers, auditors, sales, legal counseling, rehabilita­ tion, personnel, and all other areas that make up an insurance company, were in the Fund, developed in rigid structures, competing with one another, causing added problems in the function of the restrictions imposed by the Civil Service system imposed upon the Fund.

The graphic configuration of the Fund at the time of the intervention is shown in Figure 4-3, The organ­ ization chart represents an organization highly hierar­ chical. At that time, the basic administrative unit was,

156 Board of Directors

General Manager Chief Council Medical Director Assistant General Manager

I General Northern Program Southern Insurance Administrative Operations Development Operations Administration Division Division Division Division Division

Division Division Division Division Region III Division Revion IV Chief Chief Chief Chief Chief 1 1 Personnel Claims Regional Asst. Chief Regiorxjl Supt. of Region I O fficer Region II Program Unit Monoger Council Marvoger Underwriting

Training Regional Regional Program District Mgr. Asst. Medical District Mgr, Supt. of Data O fficer Manager Manager Review Los Angeles Director Long Beach Processing

Supervisor District Mgr, District Mgr. Supt. Safety District Mgr, Branch Per*, District Mgr. Insurance of Accounts Son Francisco Sacramento Services West L .A . and Training Santa Ana Service* O fficer Business District Mgr. District Mgr, Research and District Mgr. District Mgr. Cashier Serv. Officer O a k la n d San Jose Systems So. Pasadena Branch I Son Diego Business District Mgr. Infernal District Mgr, District Mgr. District District Mgr. Services Supvr. of Son Bernardino Audit Santa Rosa Stockton Serv, Officer Public Agency O fficer Rehabilitation

District Mgr, District Mgr, District Mgr, Metropolitan Branch Ventura Redding Fresno Claims Supervisor of District Mgr, District Mgr, Rehabilitation Eureka Bakersfield

Metropolitan Claims Source: Personne) Department, State Compensation Insurance Fund Ôroanlzotlon

Figure 4-3 — State Compensation Insurance Fund Organization Chart, 1967

157 already, the District Office. Heading each District

Office was the District Manager. Below the District Man­ agers rested four to six specialized sections with their respective supervisors, or, depending on the size of the

District Office, departmental managers. These departments or sections of the District Offices covered sales, safety, auditing, claims, clerical and a few other supportive tasks. This internal structure of each District Office was kept relatively untouched up to date, as will be briefly discussed later on.

Over the District Office for approximately each six District Offices, there was a Regional Manager. Above this regional manager, there was a Division Chief. The state was divided into two with a Northern and a Southern

Division. In addition to these two Division Chiefs, there were basically three other Division Chiefs in charge of staff services — Program Development, General Adminis­ trative Services, and Insurance Administration. These five Division Chiefs reported to the Assistant General

Manager, who in turn reported to the General Manager.

Not included in this description were the Chief Council, head of the group of attorneys and the Medical Director, both of whom reported directly to the General Manager.

This particular organization structure caused problems at both ends of the hierarchical chain as

Kirkhart observes (1969, p. 35). At the top, the informa-

158 tion originated from the field would arrive filtered several times by the layers of the organization. The top management would not receive clear information and the level of precision would be very low given the general and vague character kept after all that filtering.

After serious discussion of these questions, the

Fund decided to experiment with some different organiza­ tional considerations.

The South Pasadena District Experiment

In the beginning of 1967, Gardner and General

Manager Young invited a doctoral student at the University of Southern California, Larry Kirkhart, to document and investigate an experiment on a District Office of the

Fund. Tentatively, the District Office of South Pasadena was selected as the one where the concept of organization devolution was going to be put on trial.

The general conditions under which the District

Office was going to live were (Kirkhart, 1973, pp. 128-

129):

1. The experimental office would be given a high level of autonomy. For the period of the ex­ periment the only limits on the district office would be those the General Manager faced. Otherwise the field office would have as much autonomy as the General Manager; anything he could do the field office could do.

2. The district office would be provided with a lump-sum budget which could be spent, subject to the limits placed on the organization by the State of California, in whatever way the 159 district office though was appropriate.

3. The experimental office would be removed from its normal position in the hierarchy of the organization and report only to the General Manager.

4. All reports normally required of the field office by the larger organization would be suspended during the experiment.

5. All services — personnel, accounting, data processing, training, etc. — required of the overall organization by the field office would be obtained only if the field office was willing to contract for and pay for the services in needed out of its budget.

6. The district office would keep the few records necessary to meet the State bookkeeping re­ quirements.

7. Any and all organizational records were to be made available to the district office — regardless of its character — if the district office asked for it.

The District Office was requested to prepare a program statement that would guide and assist this ex­ perimental year. The program statement had to contain

(Kirkhart, 1973):

1. The reason why the Fund had been originally established.

2. The present need for the organization.

3. The broad goals the district office intended to pursue during the course of the experiment.

4. Statements on the various, short-term objec­ tives the organization intended to achieve.

5. Alternative to the proposed objectives.

6. Make explicit the paths or alternatives that would be pursued during the experiment.

160 Even before the go-ahead signal from the Home

Office, the District Office started discussing the pos­ sibilities and alternatives they had once the experiment was sanctioned. The Manager of the District Office was very excited by the possibility to participate in such an experiment and started consulting meetings with all the staff of the District Office. At many of those meetings,

Neely Gardner and Larry Kirkhart participated as ob­ servers. The general feeling towards the experiment was of fear, hesitation, and doubt about the sincerity of purposes of the top management of the Fund and on the several components of the Home Office in San Francisco.

Some of these concerns were taken to the San

Francisco Home Office of the Fund and were discussed with top management. After much discussion, a hesitant go- ahead was granted. The next phase was of intensive preparation. Internally, there was an intensification of meetings in the District Office. In the Home Office, the District Office Manager started a series of prepara­ tory interviews with several staff departments from which the cooperation would be important for the success of the experiment.

After some digression and difficulties in deter­ mining what would be the legal limitations placed upon the District Office, it was decided that those would be the limitation of the General Manager. Also, a lot of

161 concern was devoted to the criteria by which the District

Office would be evaluated. Finally, in September of 1967, the General Manager sent a communication to all the Fund that made the experimental research project official.

The project started then with some hesitation and problems. For a complete description, one should refer to Larry Kirkhart's work (1973). This was a research re­ port that followed the developments of the project in the

South Pasadena District Office.

Very surprisingly, two months after the project was launched, the District Manager was requested to resign for reasons that had no connection with the project. The new manager was supportive of the project and the experi­ ment went on. One interesting outcome of the interchange of ideas in the District Office was the creation of a special unit that would deal with Public Agencies only.

This was an effort to provide better service to the clientele. An old complaint of several clients was that they had to deal with too many different people within the Fund. To this problem the District Office of South

Pasadena responded by creating interfunctional teams that would cut across the traditional boundaries of the differ­ ent areas, like sales, safety, auditing and clerical.

This format resembles the matrix organizational structure discussed previously in this work.

162 At that time, the Fund authorized the dispersal of the claims function to the South Pasadena District

Office. The new function was absorbed by the district causing no problems to the new matrix arrangement.

Kirkhart's research project revealed no statis­ tically significant differences between this District

Office where so many changes took place, and other District

Offices used as control groups. In other words, the atti­ tudes of the staff of the South Pasadena experimental

District Office were not different from staff members in other District Offices. Kirkhart {1973, p. 159)! suggests, however, that there was a higher commitment to the goals of the organization in the South Pasadena District Office than in other offices studied.

In December, 1968, the experimental program was considered completed. It was proven that the District

Offices could survive with satisfactory level of accom­ plishment in freer relationships with the staff units in the Home Office and without the multi-layer hierarchy of the traditional structure.

The freedom that the South Pasadena District Office enjoyed during the experimental period was partially ex­ tended to all the District Offices and Home Office depart­ ments by the Fall of 1969,

163 The Adoption of the Concept of Plural Executive

By the time the ideas adopted at South Pasadena were extended to the rest of the departments and districts, the Fund had made, or was in the process of making, several other changes. One of these changes was to adopt the con­ cept of Plural Executive. Before this change, the Fund had five Division Chiefs that formed the top management team. Two of them were the chiefs of the Northern and

Southern field divisions. The other three were in charge of functional staff activities: (1) General Administrative

Divison, (2) Program Development Division, and (3) Insur­ ance Administration Division. With the increase in the authority of the District and Home Office Managers, the need for these Division Chiefs was sensibly reduced. On the other hand, the volume of communications to be dealt with by the top management increased very much, because each field and home office manager was entitled to a direct relation with the top management.

The solution for this problem was the Plural

Executive concept. The position of Regional Manager was eliminated. The Division Chiefs were appointed as Vice

Presidents with one senior Vice President replacing the

Assistant General Manager. This group of seven men headed by the President became a multiple decision-making body,

164 each member having equal authority and equal status in

the decision-making process. They were concerned no more with their private territories of authority, now their

concerns were the total corporation.

The idea of a decision-making body as opposed to

a single head at the vortex of the hierarchical structure

seems to have some historical antecedents. In an interview with the President of the Fund, Robert F. Hassard, the

author was acquainted with a very interesting parallel of

the Plural Executive concept used in the Fund and the com­ mander staff concept first used by the German military before World War I. In the military case, the idea was to provide full-time, twenty-four hour a day attention and decision-making capability to any major problem emerging from the battle fields. As in the military, there is a

standard procedure for doing the thinking. The decision making will occur as the problems arise and it will be made by that part of the staff that is present at that given moment. This may happen while the commander is away. Through this example, it is possible to see the

Executive Committee as a permanent top management team,

spending a considerable part of their time in internal meetings to reach decisions on a collegial, and, whenever possible, consensus mode. The other large segment of time is spent in contacts with the field and the environment.

Upward communications have a very large receiving station,

______165 larger than any single head arrangement would be able to provide.

This brief delineation serves as an introduction

to the basic characteristics of the Fund and its structure.

Below, these descriptions will be expanded upon and more

details will be discussed. For the moment, it is enough

to mention the transformation of the top management team

of the Fund, from a group of highly differentiated man­

agers , to a team under the idea of the Plural Executive

conception.

The Environment of the Fund

A review of the related literature suggests that

the environment of an organization exercises a major in­

fluence on the formal structure. In the case of the Fund,

this is also true.

The new employees the Fund is now engaging in its

service seem to reflect a major environmental change. The newcempioyee/is alert, and alive. He questions policies

and expects more autonomy, as almost any of the people interviewed in the Fund observed. When motivated, the new employee seems to commit himself in a deep way. The ex­ pectations of the new employee are higher than the ex­ pectations of employees of some years ago, and the participative mode of the Fund seems to suit many of the needs of this new type of person.

166 The world of insurance business is a world highly regulated by legislation. In the past years, the legis­ lative activity has proliferated safety laws. New federal legislation requiring more care from employers in the pre­ vention of work accidents has been followed by state regulations. The other end of the system has also been revised by legislators. Extended protection in terms of injury benefits is a reality. The courts have been active in interpreting the existent in broader and more protec­ tive ways. Workers receive more ample coverage than was the case several years ago. For instance, the injuries that are a result of past occupational functions qualify the injured for benefits even when the employee has left the job on which the injury was incurred. Firemen and policemen are also receiving increased benefits. The accidents they suffer in the line of duty are covered by workmen's compensation insurance. This practice is fairly new, and the consequences are obvious. A broader inter­ pretation by the courts, of the deserved benefits for the injured workers, tends to stimulate a greater number of legal proceedings by injured employees in an effort to obtain higher benefits.

The Fund is a creature of the state legislature.

Although the interference of the legislature has been minimal, it is necessary to maintain working relationships with the political leadership of the Assembly and Senate.

167 In earlier times, the Fund counted upon the support of organized labor within the political arena. The liberal policies of the Fund, allied to its not-for-profit ob­ jectives, made the organization a reliable, impartial, and sometimes friendly entity. Nowadays, organized labor prefers to deal with the problem of job safety with the federal government, via legislative reform.

Related to this political setting is the private competition faced by the Fund. There are more than 150 insurance companies selling workmen's compensation pol­ icies. Twenty of these are highly competitive and offer a fair challenge to the Fund. Years ago, these competitors opposed the existence of the Fund, arguing that free com­ petition and private initiative were threatened by the existence of the Fund. Today, with the danger of social­ ization of all health-related activities, the Fund is con­

sidered an element of safety. Its existence, to some extent, permits the existence of the other companies. If other insurance carriers offer stiff competition for the

Fund, the cannibalistic trends are in a very low profile, nowadays.

The Fund itself has proved to be a fair and honest competitor. It is grudgingly respected by competitors and customers alike. Now, trying to assume an even more com­ petitive posture, the Fund in 1974 sought permission from the state legislature to become a Public Corporation.

168 Several of the restraints upon it would be eliminated.

The move would have also permitted public agencies to buy workmen's insurance anywhere. This daring move was seen by the industry as an additional proof that the Fund is

serious in competing in equal terms. The conversion of the Fund to a public corporation would, among other things, eliminate a very serious handicap. The trend of the economy is towards the conglomeration of local or regional firms in national and even multinational compounds. The

Fund is allowed to insure workmen whose working relation­

ship was originated in the state of California only. If converted into a public corporation, it will be allowed to cover all national territory. This would make the Fund more attractive to national corporations that would prefer to have a single policy with a single carrier. The legis­ lation transforming the Fund into a public corporation did not pass in 1974; the anticipated benefits are still speculation.

One environmental aspect that has been crucial for the Fund is the self-insurance problem. Any employer, within guidelines set by law, may self-insure himself.

This trend has grown in the last few years, particularly with the large public agencies. The trend toward self- insurance has, in some cases, left the Fund with only ex­ cess insurance or claims adjustment service consultation.

This has constituted a great threat to the Fund. Little

169 can be done to counteract this trend other than to provide the best service possible to present customers.

Three factors work together to increase the cost of insurance in the last few years. The first is the higher price for health and rehabilitation services, second, the broader application of the workmen's compensa­ tion benefit structure, and finally, the growing trend towards litigation that increases costs. Before 1964, the lawyers of the Fund annually processed cases adding up from three to four million dollars; in 1973, the courts decided cases in the amount of over forty million dollars.

The task environment of the Fund seems to have changed little, but all the peripheral factors have changed so much that the characterization of the Fund's environment under the fourth type of the Emery and Trist taxonomy does not seem to be out of place. The environ­ ment the Fund is in is highly turbulent.

The New Structure of the Fund

So far, we have examined highlights in the devel­ opment of the Fund up to the current stage. Now, we turn to an examination of general characteristics of the formal structure of the Fund in an attempt to provide a panoramic view of the organization. The data presented here is the result of personal observations of the author, hour-long interviews with management personnel, and the views of

170 several groups within the Fund that answered the ques­ tionnaire.

The most salient characteristic of the Fund is that it is a flat organization. This is the result of the extension of the prerogatives given to the South Pasadena

District Office to all the other District Offices. This radical change was begun in 1968 when several hierarchical layers were eliminated. In Figure 4-3, it is possible to observe that in 1967, the Fund had under the General Man­ ager and Assistant General Manager, under this five

Division Chiefs, and under these. Regional Managers. These three layers were eliminated: Assistant General Manager,

Division Chiefs, and the Regional Managers of officers of the same level when the case was related to staff func­ tions. They were eliminated because the autonomy granted to the District Office and Home Office Departments made them obsolete.

In the District Offices, there were no major changes. The flattening of the organization affected the managerial levels only. To deal with eighteen District

Managers and a similar number of managers of the support services, the Fund adopted the Plural Executive concept.

The Plural Executive role is played in the Executive

Committee.

When one adds the number of field managers to the staff or support services, one finds there are more than

171 forty managers in the Fund. The size of the offices or

departments they manage varies very much. In the dealings with the Executive Committee, these forty are all equal.

This situation is facilitated by the utilization of a

Management by Objectives system and an Outcomes Budget,

At the beginning of each fiscal year, the managers nego­

tiate their budgets with the Executive Committee. After

full examination and approval, they are virtually autono­ mous in their right to administer their funds to achieve

the stated goals described in their program budgets.

There is no doubt that the stars in the organiza­

tion are the District Managers. Since they are in charge

of the production and are in close touch with customers,

they are given full attention by the rest of the organiza­

tion. The services provided by the staff departments are

theoretically contracted with the District Offices. Theo­

retically, staff services may be obtained outside the

Fund, if costs and services are competitive and the Dis­

trict Manager wishes to go this route. The full imple­ mentation of this idea was never completed but the spirit

remains to a large sense, and the functioning of the

"standing committees" is a good indication of the nature of this relationship. The "standing committees" that are

discussed later on are small groups of District Office

Managers who meet with the management of the support ser­ vices to present to them their needs, suggestions, and

172 counsel in matters that will help the betterment of ser­ vices to field offices and improve relations with support services departments.

The coordination needs that arise out of this structure are addressed by periodic meetings of all Man­ agers with the Executive Committee. These meetings are known as Managers' Council. Since there are so many as­ pects shared in common by the District Managers, they meet regularly in the District Managers' meetings, which are seldom attended by either Executive Committee Members or support managers.

Executive Task Forces are tanporary groups as­ signed to specific projects. The membership in these task forces is highly differentiated, almost as much as the job these task forces perform. Much of their work is in the planning and implementation areas. New ideas, new systems, new programs are very often the result of task force effort. Recently, the Fund organized a Systems

Development and Planning Committee with the membership made up of three District Office Managers and three Home

Office Program Managers. This new committee will be in charge of monitoring projects and will operate as a cen­ tral clearing house for special task forces.

The other major component of the Fund structure is the Program Advisory Council. This information and ad­ visory body is constituted by representatives of each

173 District Office and Home Office departments. Each repre­ sentative has mandate of a year. The Council meets around ten times a year with the presence of the Executive Com­ mittee. In general, the Council members are non- supervisory employees who have been elected by their peers.

Components of the Fund structure are aimed toward constant change. The participative managerial style that pervades the several collective decision-making and infor­ mation exchange bodies uses innovative and constantly evolving forms of organization to allow for a creative and permissive flexible organization. The character of con­ stant change seems to be clearly perceived by the Fund members and materialized through participative, décentrai^ izing and dehierarchizing efforts.

The interviews with management personnel revealed an enthusiasm for the new structure. The reasons for the enthusiasm are varied. Some managers would say that under the new structure, there is more freedom, more exchange, more lateral communication. The opportunities to partici­ pate are present and almost everybody has the opportunity to get involved.

Respondents also claimed closer relationship with clients, both employers and injured employees. The several

District Offices spread throughout the state arc able to function in accordance to local customs and procedures, and at the same time, insure adherence to uniform state

174 procedure. The best of both worlds is achieved. The decisions related to daily operations are made by people with the facts, close to the problem — the people in the field.

The participative style requires close work ties.

Love and respect by the fellow workers is a must and the freedom in communications enhances these relationships.

The system is also perceived to favor better development of new managers. "I enjoy the fact I don't have any boss," stated one of the managers interviewed. More flexibility, seems to bring more responsiveness.

There are also negative aspects. If daily deci­ sions are faster, corporate decisions take longer in this structure. With participative practices has come an infor­ mation overload. Some managers complain that there is no uniformity in the Fund any more. This not only refers to different treatment of employees but also to unequal treat­ ment of customers. An example of differences is illus­ trated by the rate of adoption of the Claims Director

System, an all encompassing system designed to make use of electronic data processing and a comprehensive approach for the claims services of the Fund. Although the decision to incorporate the system in every District Office was made several years ago, so far it has had partial accept­ ance by some District Offices. Some districts went all the way in adopting the Claims Director System and some refused. The concept of Plural Executive is also a target of criticism. Some managers find it extremely difficult to relate to six executives instead of just one. The new structure, says one manager, "is slow, costly, frustrating, and sometimes the benefits do not seem to justyfy the cost," but he added that he would never want to go back to the old bureaucratic, hierarchical structure.

Some managers could not adjust to the new system and were eliminated, mostly by voluntary resignation.

When the changes started to take place, most man­ agers did not have clear expectations from the structure.

The few that understood had general fears and negative expectations. The South Pasadena District Office experi­ ment was not well understood, and to the offices in the northern part of the state, the experiment was hardly known.

Figure 4-4 is an attempt to represent the organ­ izational chart of the Fund. This drawing was made in

1969 and it is not accurate any more, although the main features remain unchanged. It seems likely the attempt to revise the chart would be futile since it too would be out of date before this study is published. In addition to the Program Advisory Council and the Managers Council, there is the District Office Managers Meetings. It is important to note that the Program Advisory Council is just advisory and has no decision-making power. Relating

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Figure 4-4 — Organizational Chart, 1969 -1-7-7J to the Home Office programs, there are the Standing Com­ mittees that come from the District Office Managers

Meetings. In the effort to monitor and organize the

Executive Action Forces, there is the newly created Sys­ tems Development and Planning Committee. In the Executive

CommitLee the areas of concentration were removed and the concept of Plural Executive reinforced. The center of attention continues to be the District Offices and most of the Fund activity is geared to satisfy their needs.

It is widely recognized that the changes made by the Fund are mostly in the management area, and most of the structures of the programs remain in the same shape they had before, i.e., in the lines of a Weberian bureau­ cracy. To continue the revolution to bring change to the lower levels of the Fund is a task that some of the man­ agers have already started, but the process is not gen­ eralized. So far, the managerial changes are enough to keep our attention on the organization.

Perceptions of the Executive Committee

Interview and questionnaire data accumulated in this study provide us with perceptions respondents have of the Executive Committee.

With the elimination of the direct supervisory functions of the Division Chiefs, the concept of a Plural

Executive was adopted. This change was to serve a variety

178 of objectives. First of all, the Executive Committee is a wide body with ample information processing capability and able to handle the flat organization structure demands.

Second, there was an attempt Lo have a top executive structure compatible with the participative nature of the

Fund as a whole. To this, it may be added the usual policy responsibilities of the top management of any organ­ ization on the corporate or on the public realm.

In 1971 the Executive Committee issued a memorandum reaffirming the functions and clarifying its own functions, which at that time were listed: Operations, Organiza­ tional Development, Planning, Public Relations, Fiscal Re­ sources, and Special Projects. In 1972 the Executive

Committee operations were revised and a new memorandum made clear the responsibilities that the Executive Com­ mittee saw itself responsible for. These areas of action were: Public Relations, Planning, Benefit Operations,

Employer Operations (employers are the customers par ex­ cel lance of the Fund), and Organization Development. To each one of these several areas, one member of the Execu­ tive Committee had responsibility as his area of concern.

This memorandum stated, as had previous memoranda, that no line relationship should be encouraged. The team aspect of the Plural Executive of the Executive Committee organ­ ized bo support program managers and programs in the accomplishment of their objectives was maintained and reaffirmed. ______129L In the day to day operations, some of the team

characteristics of the Executive Committee were perceived

to be menaced by the areas of concern. To avoid the

transformation of vice presidents from the Executive Com­ mittee concept to old-fashioned "line" or "region" activity

in the beginning of 1974, the Executive Committee decided

to do away with the areas of concern. In Executive Mem­

orandum #1-74, the Executive Vice President said:

Rather than continue the assignment of areas of concern on a functional basis, the individual members of the Executive Committee will now have areas of concentration which cut across lines of functional responsibility and which more properly reflect their corporate role.

The objectives of the Executive Office were kept largely

the same: (1) to achieve the State Fund plans and objec­

tives, supported by written management policy and manage­

ment guide; (2) evaluation of State Fund performance in

relation to program objectives, and appropriate corrective

action when required; (3) responsive State Fund repre­

sentation in the political arena; (4) effective communica­

tion to the Board of Directors of internal and external

factors affecting the State Fund's plans and operations;

(5) fiscal security and stability in State Fund opera­

tions; and (6) effective managers. These are the results

to be achieved by the managing of the Executive Committee.

Each Executive Committee member has the following

responsibilities: (1) To be aware of the State Fund's

180 total operation and participate in establishing all of its

objectives; (2) to be conversant with existing and new

concepts in his area of concentration; (3) to cause the

Executive Committee to communicate its decisions to the

organization; (4) to serve as a project leader when

assigned by the Executive Committee; and (5) to evaluate

individual performance, serve on Employee Development

Committees, and counsel and assist middle managers in

their development.

The areas of concentrations are very similar to

the former areas of concern. They are: Maintenance of

Management, including Development Program, the dealings

with the Managers Council and Career Development Sessions.

The second area is Results Measurement, under this area

are also overviewed the role relationship of staff/support

departments and District Managers Standing Committees.

The third area is Planning and System Development. The

fourth area is the Fiscal, including the supervision of

the construction of new building for the corporate head­

quarters. The fifth area is the Corporate and Operating

Policy including the Guidelines and Management Guide.

The sixth and last area of concentration is Public Rela­

tions.

Some of the managers and Executive Committee mem­

bers interviewed consider the adoption of the Plural

Executive format a natural evolution of the hierarchical

181 type of organization. Being an experimental concept to some, it is a format mandatory for a flat organization.

The Executive Committee is also perceived as a

training ground for executives. The size of the group

permits a smooth transition from lower management levels

to the top position that the membership at tlie Executive

Committee confers. Some managers and Executive Committee

members perceive the size of the Executive Committee as a

key for its success. Others would rather have it somewhat

smaller. It is interesting to observe that there seems

to be a consensus that the role and the success of the

Executive Committee will be dictated as the needs of the

field managers arise and are satisfied. The role of the

Executive Committee being defined by the needs of the

field managers implies a close relationship with the role

of the Standing Committees system of the District Office

Managers.

The results of the questionnaire from almost 100

respondents from all the Fund do not coincide with the

general feeling of satisfaction that came out of the inter­

views. As was noted in Chapter III, we are dealing here with results from populations rather than samples, with

the exception of the data from the Rank and File group.

This means that the differences are to be considered

independently of any statistical test. As it will be seen most of the questions are of evaluative character, the

182 respondents being invited to give their opinions in a

scale of agreement to disagreement.

On the average, the Fund respondents have a 3.2

as a result. This lies between uncertain and disagreement with the statement (commending the functioning of the

Executive Committee as highly effective). More impressive

are the answers given by both groups of managers that more

emphatically disagree with the statement.

The answers to question 46 seem to be a little more in line with the comments given in the interviews.

These answers may be seen in Table 4-2.

Here again there is a cluster around the uncertain

score of 3.0, but there is less disagreement with the con­

cept of Plural Executive than with the actual functioning of the Executive Committee.

Some of the problems that seem to hinder the

activity of the Executive Committee is that it is difficult

for managers and other members of the Fund to relate to a body of six managers instead of a single person occupying

an authority position. Concomitant to this, the Executive

Committee is committed to the idea of power devolution and does not respond to managers• requests for upward delega­ tion, i.e., the Executive Committee refuses to make

decisions that are the function of the program managers themselves. This in^thecpast more than in the present created the perceptions revealed in these answers. The

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tH 184 perception of some managers of the Executive Committee may be that it is an inaccessible unresponsive, and un- re sponsible body.

Within the Executive Committee one of the problems that emerged was the inequality of the members. Some members are perceived as being reluctant to disagree with the President or with the Executive Vice President, that is, the senior member of the group. The extent to which this claim is valid is difficult to access, but the sub­ ject deserves more than nominal attention.

Perceptions of the Managers Council

The decision to give autonomy to the District

Office under the form of annual programs and to eliminate several layers of the hierarchical structure left the need to improve and to renew the communications system in the

Fund. The goal of maintaining a changing organization added to the need to create highly effective means to enable the organization to function properly. The year of 1958 brought the experimental establishment of two councils that had decision making and information ex­ change objectives. These two bodies were the Home Office

Program Managers Council and the District Office Managers

Council. Two two councils had a hesitant start. The meetings, as described by many participants, were frus­ trating and the desired climate of openness and trust was

185 very seldom achieved.

Taking the initial mistakes as an educational process, a decision was made to integrate both councils

into a Managers Council. Here, a body of approximately forty managers plus the Executive Committee meet once

each two months or when needed. The objectives are still the same — decision making in operational issues of the

Fund, and information exchange. The Managers Council is

a forum, an arena to provide for wide participation in the

decision-making process, a place where the management of

the Fund is invited to exercise broad thinking. Neely

Gardner (1969, p. 26) referring to the Council says that

it is not too different from many hierarchical arrange­

ments, but the focus of the gathering is on output as a

matter of prime importance. There is an explicit agree­

ment to avoid punitive aspects of feedback. Connerley

(1974, p. 149) observes that:

It is hoped that through this mechanism [the Managers Council] the Fund can be not only "changing" but also "error correcting" in that it can operate with an awareness of the results of its own actions.

The internal organization of the Council has gone

through many reorganizations. Caucus groups, confronta­

tion periods, action reports, evaluation sections were

some of the meeting techniques tried with some degree of

success. Nowadays, there is an Agenda Committee formed by

three managers of the Home Office programs and three from

______im i the District Offices. This agenda committee selects the data for the meeting (usually two-day meeting) and site, non-Fund facilities like resort hotels are preferred.

The Agenda Committee is renewed each six months. The agenda formation process for each meeting is very open.

Managers or members of the Executive Committee submit topics and there is one or more issue paper that con­ stitutes the core of the discussions. These issue papers are prepared in advance and discussed thoroughly in the meetings. Executive Action forces, or development groups, or special task forces, use these meetings to submit their findings, recommendations or plans. With the material in hand, the agenda committee sets the agenda and distributes it to all managers. The agenda committee is also in charge of the housekeeping arrangements, such hotel accommodations, transportation and others.

Comparing this council with the PAC, as will be seen later, the major difference lies in the fact that

PAC is a feedback mechanism and the managers council is a decision-making body too.

Several managers that were questioned about the

Managers Council agree that the Council has improved very much since the combining of the two councils (Home Office and District Office managers councils). Yet, there is still room for improvement. It is certain that the council helps read the pulse of the organization. It

187 also provides District Office Managers, who are sometimes geographically distant from the Home Office, a unique opportunity for interaction with Executive Committee members and Home Office Managers. The most typical com­ ment about the Council is that it is developing; it is beginning to learn as a collective entity. The problems felt by the group are: lack of trust, absence of risk- taking behavior, withdrawn participants, low level of participation, very formal and self-restricted interaction while the meeting is formally assembled, too much time wasted and very little information exchanged.

As a probable cause for these problems, some man­ agers recognize that the size of the Council with forty plus managers does not favor participation. The fact that there is pervasive conservative, reserved and closed be­ havior by the majority of the Council members is another factor indicated as an obstacle for higher productivity.

In sum, the setting and some of the behavior displayed by the participants conspire for results less than desirable on the meetings of the Council. Another problem likely to reduce the Council's achievements is the lack, some­ times, of real issues. This problem has been alleviated with better work from the Agenda Committee.

The Council has a relatively unique design. The mission is very complex and the expectations high. This setting of factors makes the Council an entity with which

188 it is easy to become frustrated. On the positive side

are several aspects such as the very high rate of attend­

ance at each meeting considering the physical distance that many managers have to travel and constant improve­ ments are being made in the functioning of the Council.

The most salient positive aspect is that there is a sense

of improvement over these five years of work. The Council has problems, but the Fund is educating itself and over­

coming these problems.

The opinion of Fund members about the effective­

ness of the functioning of the Managers' Council is shown

in Table 4-3. It is interesting to observe that the

participants of the Council, namely Executive Committee members and managers in general, are more critical, more

dissatisfied with the functioning of the Council than

the other respondents.

The Likert type scale, ranges from 1 to 5, 1

being strong agreement and 5 strong disagreement, and

3 uncertainty. While the nonparticipants of the Council

are uncertain, with average scores of 2,69 and 2.9, the

participants do not agree with the statement. This con­

firms the interviews. Council participants believe that

there is a long way to go before the functioning of the

Council can be considered satisfactory. This does not

imply that the Council has been stagnant; on the contrary,

the Council has been very active in trying new formats,

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tH 190 new ideas and in improving itself in a variety of ways.

The results are already being achieved. In the last

Council meetings, which the author had an opportunity to observe, it was possible to feel a growing sense of pro­ ductivity. Council members, consulted afterwards, could not hide their enthusiasm for the achievements recently felt in the Council.

Perceptions of the District Office Managers' Meetings

The common tasks and needs of the District Office

Managers make them a natural elite group in the Fund. The initial attempt to congregate them in a Council attended by the Executive Committee members was not successful.

It was this failure that stimulated a merger with the Home

Office program managers to form the larger Managers'

Council discussed above.

The need to exchange experiences has brought these nineteen leaders to sponsor their own periodic meetings.

Late in 1969, the District Office Managers got together on their own initiative to discuss issues of general interest and to exchange experiences. This first meeting was informal and only District Managers were invited.

The result of this meeting was so positive to the managers that a month later, another meeting was arranged. Since this time, meetings have been held regularly and the

191 satisfaction derived from them is very high.

These meetings never received corporate sanction but have been going on without disturbance due to the open

climate of the Fund. Several functions are performed by

these meetings. They are "rap" sessions, information is

exchanged, difficulties and accomplishments of the dis­

tricts are analyzed, and of course, ways are developed to

deal as a group with Home Office programs and Executive

Policies.

Some managers even state that this natural aggre­

gate is the most influential body in the Fund. There is

a generalized sense of success and the meetings are be­

ginning to be used by other entities of the Fund to offer

information and to receive feedback on specific issues.

In these meetings, most of the subjects discussed are on

the operational level. There is no intention of estab­

lishing policies, but the nature of the cooperative

arrangement provides for active interaction and mutual

help. The meetings are organized with a minimum of for­ mality and a rotating chairmanship provides the structure

required. From the interviews conducted by the author,

there is almost unanimous approval and support for the

operation and level of achievement of these meetings.

The views of the District Managers' Meetings by

the rest of the Fund is not completely in agreement with

those of the participants. To the statement "The func-

192 tioning of the District Managers' Meetings is highly

effective" (Question 48), the several groups of respondents produced the answers that are summarized in Table 4-4 below. The first fact from these data is that there is

District Managers agreement in relation to the statemenL

of high effectiveness of the meetings. The other groups,

except the Home Office Managers, also agree with the

statement. It is particularly relevant that the Executive

Committee members agree with the effectiveness of the

meetings. As was mentioned before, these meetings grew

out of the common needs of the managers themselves and no

corporate sanction was provided. This organic development

was acknowledged and accepted by the higher officials of

the Fund. This acceptance has developed so well that the

Executive Committee and the District Office Managers have

recently reached agreement that, whenever possible, one

Executive Committee member will be present at these meet­

ings. The Executive Committee is willing to'participate

and the managers see this with approval and enthusiasm.

Another very ingenious result of the activity of

the District Office Managers' Meetings are the so-called

Standing Committees. These committees were formed by the

natural interaction of the District Office Managers in

their meetings and represent an excellent example of cre­

ativity and organic development of an organization open to

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A final aspect that deserves some attention is the non-agreement with the statement of effectiveness of the meetings from the Home Office Managers. Their average

answer of 3.2 indicates uncertainty and does not consti­

tute a frontal disagreement, but it reflects some lack of understanding between the two groups of managers. It is possible to infer from this response from the Home Office program managers that they are not completely aware of

the functioning of the District Managers’ Meetings. It

is also possible that the views grow out of skepticism felt by Home Office Managers for the efforts of those with whom

they have a natural rivalry.

Perceptions of District Office Managers Standing Committees

The traditional communication channels have only been partially effective as a means of ef­ fective two-way communication between the dis­ trict offices and the support departments. This has increased the complexity of developing mutually supportive programs.

This statement is part of the document circulated in the

Fund in January of 1973, giving the basic justification

for and establishing the general lines of functioning of

the District Office Managers Standing Committees. These

Standing Committees are to serve as communication liaison between the District Office Managers and the management of

the support programs at the Home Office. Committee members

195 also serve as representatives from the District Office

Managers and receive from them the mandate to decide on important matters with the exclusion of program resources allocated to each District Program specifically.

The origin of the Standing Committees is on the

District Office Managers' Meetings and is the result of incremental application forced by the needs of the day to day operations. The Standing Committees are a new concept with three or four District Office Managers representing the total group in dealing with Home Office Managers.

The first Standing Committee started its operations in the beginning of 1972. At that time, it was called the

District Managers' Liaison Committee. It worked with the

Department of Insurance Services in an effort to become familiar with the functioning of this department and to provide a communication link with the District Management group that represented the field activities. After a year of experimental activities, the idea of Standing Committees was extended to the rest of the support departments in the

Home Office. Now there are seven Standing Committees in operation.

It is the function of these seven Standing Com­ mittees to relate to all departments in the Home Office.

All of them relate to more than one of the central support departments. The departments are grouped according to some sort of affinity of the job; for instance. Accounting,

195 Auditing and Insurance Services are grouped in the same

Standing Committee, The Standing Committee that deals with the Personnel Department is the same that deals with the

Education Center, the central training facility of the

Fund.

One important aspect of the Standing Committees is that they are self-started. The Standing Committees organization is not the result of a planning activity or the result of a superior decision, but a creation possible only in an organization flexible enough to allow for cre­ ativity and morphogenesis. The Standing Committees are not control devices, in themselves, they have no formal authority, but they are a communication link with the Home

Office departments.

With the institution of the Standing Committees some problems arose. The first was one of the total representativeness of the Standing Committees. The man­ agement of the Home Office departments wanted to have a single element to deal with instead of the nineteen

"customers" that would, sometimes, present contradictory requests. In order to provide this single voice, the

District Office Managers have had to spend long sessions establishing the limits of the representativeness given to the Standing Committees. To some District Office Man­ agers, this delegation represented an involuntary abdica­ tion of legitimate power. They had to see results and then

197 agree with the system. To the Home Office Managers, the

Standing Committees institution provided not only a simplified channel of communication but also served and serves as a testing ground for new ideas and modifications necessary for the improvement of the services. It is im­ portant to observe a potential source of problems in the relations of some Home Office departments with the other

Home Office Departments. As an example, the Department of

Personnel Services could be given. This department serves not only the District Offices but serves also all the other programs in the Fund. Today, only the District

Offices are represented in the Standing Committees. The potential for problems resides in the fact that the voice and the needs of the rest of programs in the Fund are not a consideration given the dynamics of the Standing Com­ mittees' activity. The question remains to be solved if and when the problem emerges^

An issue relevant to the processes by which change and innovation takes place in the Fund arose involving the

Standing Committees. They are here related because it is important for a better perception on the functioning of the Standing Committees. The Standing Committees were experimental in the beginning of the year 1972. By 1973, almost every major department of the Home Office had a

Standing Committee to relate to. In October of the same year, the Executive Committee issued an Executive

198 Memorandum making the Standing Committees an "official"

entity in the Fund's structure. In this memorandum,

there was an explicit reference to the fact that the

development and adoption of the Standing Committees was

due to the District Managers. There was also a brief

statement on the responsibilities of the Standing Com­ mittees reaffirming what was on previous documents issued by the District Managers. These responsibilities men­

tioned are basically in terms of communications and the

participative process of priority setting and problem

solving. Not all the managers understood this memorandum

very well. To some District Managers, the document

represented an unwanted intrusion of the Executive Com­ mittee in their area of action. The real reason for the memorandum, as was later clarified, was to make clear

that the Executive Committee had no objection to the con­

cept and would offer its support to the continuation of

the Standing Committees use. At the beginning, some managers felt that the development of the Standing Com­ mittees was seen with apprehension and fear by several

segments of the Fund, including members of the Executive

Committee. As it turned out, these perceptions were in­

correct, but it was time consuming Lu clarify them.

Still another problem that will demand some atten­ tion is the unevenness of work effort from Standing Com­ mittee to Standing Committee. Some Standing Committees

199 are a focal point of attention for the rest of the group of districts. Others have areas not so troublesome and do not require so much attention. What results from this unevenness is that some Standing Committees are overworked and some others are without much to do.

What is the perception of the Standing Committees as reflected in the survey? Table 4-5 below gives the results. To the statement: "The functioning of the

Standing Committee is highly effective" (Question 49), the answers received indicate perceptions throughout the Fund.

The most supportive group of the Standing Com­ mittee is the District Managers. They reacted to the question statement with a almost complete agreement 2.1.

The rest of the groups are concentrated around the "un­ certain" with means of responses very close to 3. It is surprising that the Home Office Managers in the personal interviews reveal themselves very much in favor of the

Standing Committees and gave responses that averaged a mark of 3.1 uncertain, slightly in disagreement with the statement. Also interesting in the light agreement given to the statement by members of the PAC and Rank and File respondents. These groups are nonmanagerial groups and their knowledge on the Standing Committees is supposedly very superficial.

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201 Perceptions of the Program Advisory Council

In 1968, immediaLely after the generalization of the prerogatives extended to the South Pasadena District

Office to the rest of the District Offices, several con­ sultative and vehicles of communications bodies were created to the Fund, a well-articulated organization.

The Program Advisory Council was one of them. The Council meets about nine times each year. The Council has one representative from each District Office and representa­ tives from the departments of the Home Office. No program managers or supervisorial personnel are elected. Ini­ tially, there was a ground rule of no reelection in order to insure the maximum rotation of the Council, This rule was later relaxed, reelection being permitted in some cases. Two or more members of the Executive Committee attend each meeting,

Neely Gardner (1971, p, 5) describing the Council says:

Advisory Council members bring the Home Office up-to-date views of opportunities or problems occurring in the field. The President com­ municates to the members the latest significant information available to him. Research and Development Task Teams receive advice and coun­ sel from the members, and when their studies are concluded, reports are made to the Council before recommendations are implemented.

202 The Program Advisory Council is not a decision­ making body. The main function of the Council is advis­

ory. It is a grass roots from the Fund in contact with

the top management.

The President of the Fund wrote a memorandum

about the Council in 1972, four years later the start of

its functioning. In this memorandum. President Hassard

indicated that:

The mission of the Program Advisory Council is to provide feedback to the Executive Committee on how well the State Fund's various programs function as perceived by those who are directly involved in doing the work. Secondary, it serves to surface questions concerning State Fund policies and programs.

Program Advisory Council is primarily an upward

communications vehicle from the job stations to top man­

agement, and each Program Advisory member is a link to

the Executive Committee. By sharing the thoughts and

reactions from the working level on the plans and pro­

grams of the State Fund, employees will have a direct and

positive impact on the future of the organization.

In the interviews Conducted, respondents were

asked about their views on the Program Advisory Council.

To a large extent, the views held on Program Advisory

Council are in agreement With the general idea of the

usefulness of the program.

In terms of the goals, objectives and purpose of

the Program Advisory Council, most of those interviewed

203 believe that the program provides an opportunity to the

Executive Committee to get in touch with the grass roots of the organization. Most of them also realize that the

Program Advisory Council is an upward communications de­ vice. In reality, they say, the Program Advisory Council is an educative device for the program representatives.

Members have their questions answered, doubts clarified, rumors dissipated. Another function that is acknowledged is related to motivation. By involving employees in the

Council activities, there is an increase in motivation and commitment towards the organization. Two things the

Program Advisory Council are not are also clearly under­ stood by the people interviewed. The Program Advisory

Council is not a decision-making body and the program does not replace the formal grievance system of the Fund.

In practice, the misunderstanding of Program Advisory

Council participants and Rank and File Fund employees on these two aspects, is known to lead to frustration and discredit to the Program Advisory Council activities.

The managers consulted had some general observations relative to the functioning of the Program Advisory

Council. Some of them observed that the Council, by de­ sign, is too close to reality, with members lacking a broad perspective that would be more useful to the top management of the Fund. One of the reasons for this is that professional personnel rarely appear among those

204 elected to the Program Advisory Council. "Professional" people are defined as those engaged in sales, claims ad­ justment, and other more specialized activities. Clerical personnel, in the opinion of respondents, make up the bulk of the Council membership. Along the same lines is the observation that the Council is, by design, too pre­ tentious and will normally lead to frustration because it is expected to perform more than it possibly can. The effectiveness of the Program Advisory Council could be improved if trust from other components of the organiza­ tion was increased and, internally, some rearrangements would be made in the direction of more internal articula­ tion. The problem of converting the Program Advisory

Council from a communications device to a grievance mechanism demands consideration because the push to this direction seems to be an organic one. There are also expectations that decisions should come out of the Pro­ gram Advisory Council meetings. Those interviewed fear these trends and believe that it is most important to maintain the Council as a two-way communication channel without mixing grievance and decision-making activities.

The Program Advisory Council is perceived very positively by the majority of the managers. They recog­ nize that the Council serves to inform the Executive

Committee, educates, informs, and motivates Council mem­ bers and Rank and File employees and can be a safety

205 valve in the sense of clarifying rumors and misunder­

standings on policy matters. It is true that some man­

agers are opposed to the Program Advisory Council. Some of the dissatisfaction stems from the fact that programs, projects, and even new experimental policies are submitted to the Program Advisory Council before they reach program managers. This problem was referred to by several man­

agers as being a disrupting activity of the Council in

the sense that the manager's authority and prestige may be diminished by such a practice. One comment was that,

"The Program Advisory Council is something I tolerate because it surfaces annoying, embarrassing information

that I don't know about." This is a sensitive aspect

that deserves some further consideration. A number of managers and Executive Committee members indicated spe­

cific instances where the Council was extremely useful

in orienting, providing feedback, and suggesting alterna­

tives to problems of which management and Executive Com­ mittee members were not aware.

In responding to the questionnaire statement of

Question 50, Table 4-6, it is clear that some disagree­ ment regarding the functioning of the Council exists.

All groups cluster around the Score of 3 which means uncertain. This confirms the interviews and the personal observations of the author who attended some of the Program Advisory Council meetings.

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207 Perceptions of Task Forces and Ad Hoc Committees

In Future Shock, Alvin Tofler (1970) mentions that in the future, instead of bureaucracies, there will exist temporary organizations known as ad hocracies. In the Fund, the use of temporary task forces is very in­ tense. Many innovative solutions found in the Fund are the result of efforts by task forces. One of the most dramatic steps towards decentralization and district autonomy was the so-called claims dispersal. This ac­ tivity came into being due to the activity of a task force in charge of the study of claims dispersals.

The number of these temporary collegial bodies and the scope of their action has expanded in the last years. The Fund invests significant time and resources in these action groups. Sometimes, it is difficult to measure the tangible results hoped for from such an investment.

To place planning and systems development in per­ spective, the Fund established an operating policy which addresses these activities. The Executive Committee is responsible for establishing and maintaining Entrepre­ neurial and Strategic plans. The Planning and Systems

Development Committee is charged with the establishment and control of operating task forces. This committee is

208 integrated by nine program managers. They are: three

District Office Managers, three Home Office Managers, and three ex-officio members who are the managers of depart­ ments of Data Processing, Program Information and Systems

Development. The ex-officio are not voting members, except in the case of the Systems Development managers whose votes resolve ties. The Planning and Systems

Development Committee may approve, disapprove or suspend planning and systems development projects costing more than $500, requiring more than ten man days of work, cross program plans, or requiring the hiring of outside help. The Planning and Systems Development Committee supervises and prioritizes the work of other study groups, task forces, and ad hoc committees which fall into the specifications above. The activities of the Planning and

Systems Development Committee are just recently being put into effect. At this juncture, it is still impossible to determine the adequacy of the Committee to the rest of the Fund structure.

The evaluation of the work of task forces in the

Fund was requested in the questionnaire of this study.

In Table 4-7, the results may be observed.

All the respondents are in agreement with the statement that the special task forces functioning in the Fund are effective. A correct assumption would be to consider these results not indicative of any tendency.

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tH 210 The respondents are uncertain about the effectiveness of the work of the special task forces in the Fund, It is very interesting to observe how similar are the means for all groups, clustering around 2,8.

The reason for an uncertain response on this matter may be derived from the varied result of different task forces. Some are highly successful and their pro­ posals materialize in excellent changes. Others, not so successful, either never finish their work or the final result is not bright. Now, with the new superviserai committee over all special task forces' work, it is pos­ sible that some measure will be developed allowing for a more systematic evaluation of the work of these intriguing components of the Fund structure.

Perceptions of Corporate Policy

Our personal view is that if a traditional organ­ ization corporate policy is seldom consulted, it becomes more a museum piece than a guide to action. On those occasions, when policy pronouncements are invoked, it is for the purposes of punishment. In a participative organ­ ization, policy can be a most effective instrument for integration, guidance, and unification.

Part of the present investigation was intended to find out how the Fund reacts to corporate policies. In the interviews with management personnel, and subsequently

211 in the questionnaire, questions were included to elicit information on the perceptions of the utility of Fund policy.

In general, the Fund's policy is perceived favor­ ably, There appears to be a growing awareness of the policy manual. Fund members seem to feel more responsi­ bility to write, reform, suggest, and keep themselves up to date on policy matters.

There are three basic kinds of policies in the

Fund, The corporate policy, which is general, the oper­ ating policy that serves to interpret corporate policy and guides (of which the management guide is the most used example), and that serves to advise the user when a choice of methods is available. Beyond these policies are procedures and standards that occupy a lower position in the hierarchy of official guiding documents. Our attention was concentrated on corporate and operating policies.

The policies are also perceived as a framework for action. With some differences of perception at dif­ fering hierarchical levels, respondents, generally, con­ sider policies easy to change.

Table 4-8 indicates that both groups of managers are more inclined to accept the spread of the policy. It is interesting to observe that the Executive Committee is the least favorable to the statement, indicating their

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1—I 213 opinion that some work must be done in this area.

To the statement referent to the possibility of change in policies, the groups consulted were, in general, more positive. There is a relatively well spread belief that it is possible to change the Fund policy when re­ quired. The lowest agreement was on the group of the

Rank and File respondents.

The answers to Question 58 reaffirm the ones given to Question 56. To some extent, this statement is dis­ pensable, but it is interesting to observe that the levels below the management level do not know much about policy.

This was confirmed in several interviews. Many managers feel that it is necessary to advance the knowledge of the

Fund policies to lower levels of Fund members.

The results shown in Table 4-11 confirm the three tables above. Considering the importance of the knowledge of the policy for the functioning of the specific type of structure the Fund has, there seems to be general uncer­ tainty concerning the acceptance of the several levels of

Fund policy, even though many express the thought that policies are easy to modify.

It is true that some managers think that the im­ portance of the policy is overrated in the Fund. Given the level of generalization of policy statement, they are not very helpful and a perfunctory knowledge of such policies would be sufficient. Still, following the policy

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0 0 0 0 k •H 4J 0 0 •H > i > 1—1 0 U) n 0 0 G k k ■P IX 0 0 G 0 0 II 0 0 0 P tH S W 2 1 6 a little more closely would give the Fund more uniformity of operations and activities would be coordinated better.

Gouldner's study on rule enforcement (1954) seems very appropriate for the present discussion. There are

some notable differences, though. In a more bureaucratic organization, rules are supposed to be very stable. In the Fund, rules are considered, at least by the management, transitory, easy to modify, and in constant process, and of course, up-to-date. In any case, a call for the limited power of rules is necessary. And it may be the case that rules in a nonbureaucratic organization assume a higher

importance. Nevertheless, the inherent deficiencies of rules emerge, no matter what the type of organization.

Perceptions of General Aspects of Fund Structure

At the beginning of this section, we discussed some general features of the structure of the Fund.

Specific components of this structure have been examined.

When available, the data from the questionnaire were presented to provide a base for observation and specula­ tion. Here are some statements of more general character related to the structure of the Fund.

When questioned about the suitableness of the con­ cept of programs, the respondents agree with the statement in a general way. Executive Committee members and District

217 Office Managers are the most knowledgeable, have the most personal investment, and are the most enthusiastic about the system. The overall score for the Fund as a whole i s a significant 2,2 as can be seen in Table 4-12,

Asked about the adequacy of the structure the

Fund displays, the respondents gave less emphatic answers, closer to the gray area of "uncertain" (3,0), Again there is a positive view of the organization and its structure.

The results shown in Table 4-13 are favorable to the present structure and the most indecisive group is the

Program Advisory Council,

Is the Fund structure favorable to innovation and problem solving? On Table 4-14, there are the answers the Fund respondents gave to this question. The overall answer of the group was in agreement with the statement.

The Executive Committee and the District Office Managers are the ones who most agree with the statement. Members of the Program Advisory Council are uncertain on the average.

The relation between the structure and employee satisfaction is felt more strongly by management than by the two groups of employees pooled. The average of re­ spondents in the Program Advisory Council is 3,4, closer to disagreement than any other group. The responses of the management group are not extremely emphatic and the mean of all respondents falls in the uncertain mark of 3,0,

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IX

220 The New Structure of the Fund: Summary

Most of the statements on the questionnaire are evaluative in nature. Some of the caveats already ob­ served in Chapter III of the research procedures are worth examining in the light of the examination of the actual data obtained. The fact that most statements were built in a positive form results in a situation less controver­ sial than a series of negative statements would possibly provide. It is reasonable to admit that statements of negative content on the Fund would yield a clearer reac­ tion of the respondents with less clustering around the mark of 3.0, "uncertain." It is also a problem that positive statements have a normative content that very often agrees with the modern value systems of many. After all, very few want to work, and would admit so, in an organization with innovative trust, with untrustworthy fellow workers, and rigid policy where all managerial sub­ systems would be unresponsive. With these limitations in mind, any generalization has to be made with caution.

Observing the results, so far, there are some as­ pects that deserve renewed attention. Table 4-4, with results of the perception on the District Offices Man­ agers' meetings, is a case where there is a flagrant dif­ ference of perception in the several groups of

221 respondents, being the District Office Managers who were very enthusiastic about their meetings, and the Home

Office Managers who were negative. The same happens on the statement relative to the Standing Committees, only this time, the Home Office Managers are less negative

(Table 4-5) .

The evaluation of the Program Advisory Council is also an aspect that deserves consideration. In general the managerial groups, as can be seen in Table 4-5, are negative about the effectiveness of the Program Advisory

Council functioning. The Council members give an answer that, on the average, is very close to uncertain. The

Program Advisory Council, as observed by Connerley (1974), tends sometimes to share opinions with the Executive Com­ mittee. This was not the case in this present research.

As far as the present question goes, there are notable differences of opinion. It can be argued that the

Council, because of the attendance of Executive Committee members to its meetings, enjoys some proximity with the

Executive Committee, and the attention received by the top management is retributive in conformity and apprecia­ tion. On the other hand, the voters for the Program Ad­ visory Council representatives are constantly presenting demands as questions that are not easy or even possible to be met in Council meetings. This results in a deaf clash of interests, top management versus Council representa­ 222 tives. This duality in the relationships of the Council helps to explain in part the discrepancy in the results.

Sometimes, the Council and management, especially the top management, are close together, and sometimes there is a wide gap in their opinions. The relationships are in a love-hate basis.

Concerning the policy issue, the responses are also interesting. For instance, management, in general, be­ lieves that it is easy to change policy, while Program

Advisory Council members and Rank and File respondents disagree (Tables 4-9 and 4-11).

The statement where everybody agrees is the one referent to the suitability of the concept of program for the Fund. On Table 4-12, the results are very indicative of this. Interesting enough is the influence of the structure on innovation and employee satisfaction is per­ ceived differently by the respondents. Management is enthusiastic about the effects of the structure; employees are not. It may be the case that the structure for man­ agement is different than the structure employees live in.

The next sections are devoted to the study of opinions of Fund members on theoretical models as they apply to the Fund's reality. In these sections, some of the issues here discussed will be touched upon again.

223 The Structure of the Fund and Three Theoretical Models — In Search for a Match

In addition to perceptions focused on the Fund's specific structural characteristics, this study employed the Likert Profile of Organizational Characteristics, the

Argyris Mix Model of Organizations, and Burns and Stalker

Organismic Organization Structure, The use of these theoretical models was made by building questions on their main characteristics and including these in our question­ naire. As in the previous cases, the respondents were divided into five groups, representing five natural groups in the Fund.

Likert Profile of Organiza­ tional Characteristics

Rensis Likert in two of his books (1961 and 1967) presents a classification of organizations according to four basic styles of leadership. These four styles are related to a range of organizational variables. The four styles per se and each one are conceptualized as a com­ plete and autonomous system. The four systems are: (1)

"Exploitive-Authoritative," (2) "Benevolent-Authorita- tive," (3) "Consultative," and (4) "Participative-Group

Based." According to Likert, these management styles may be found in any functioning organization. Any particular

224 style of leadership or managerial system will provide for

a respective organization climate. Management, under

serious external stress conditions, may obtain results in

a short period of time by employing systems (1) and (2) .

The problem, warns Likert, is that the short-term ad­ vantages will be offset by the long-range disadvantages.

The work force is likely to be resentful of authoritarian practices. The best members of the organization may

either become unmotivated or leave for another organiza­

tion.

Likert advocates the adoption of system (4), the

"Participative-Group Based." This system, according to

Likert, is the ideal for the organization that is effec­ tiveness conscious and humanly oriented. Given the com­ plexity of a modern organization and the variety of behaviors of human beings, system (4) allows for integra­ tion of individual and organizational needs through

active group participation. System (4) excellence is

supported, as Likert shows, by many research efforts in

several organizations of public, private or voluntary character. It is clear that there is a humanistic system of values behind Likert's ideas.

Likert recognizes that to achieve system (4) of management, a given organization needs to work very hard.

The effort will pay off says Likert. The organization.

225 willing to walk this path, will be successful, competi­ tive, a very pleasant place to work, and overall, very effective.

In the questionnaire used in this study, there are twenty questions covering six different organizational variables — leadership, motivation, communication, deci­ sion making, goal setting, and control. The respondents were asked to designate actual and ideal conditions on a scale from one to twenty. The first mark, a letter "A" standing for actual, to describe where the Fund is right now. The second mark, a letter "I" standing for ideal, where the Fund will be in its ideal stage. The scales where the respondents could mark their responses were divided into twenty points, five for each of the four systems of management identified by Likert.

In Figure 4-5, the results from the responses of the total number of respondents in the Fund are shown.

The results represent the mean of all responses received.

The mean of the means for the twenty questions gives a general indication of what the system predominant is in the Fund. The result of 10.4 indicates one organization on the system (3) "Consultative," in the border with system (2) "Benevolent-Authoritative." So in the percep­ tion of the respondents to the questionnaire, the Fund is a "consultative" organization. Following Likert's theory.

226 1. Co n f i d e n c e in subordinates o. rg 2. Confidence in superiors u ^ 3. Subord.felt free talk super.

M 4. Subord.ideas sought, used

5. Type of motivation used

6. Level felt r e s p o n s i b i l i t y

7. Amount of teamwork

8. Direction information flow

9. Acceptance communication down

10. Accuracy communication up g g 11. Super.know subord.problems *u ''i 12. Subord.know org'1.policies

13. Level decisions made

14. Subord.involved decis.rel,work ! I ! I r j I I -J

15. D - M co n t r i b u t e m o t i v a t i o n L_J i— l

t-i H 16. H o w o r g a n ‘1 .goals set ofU ^-P 1^.0 cn •!) 17. Covert resistance org.goals

18. Distribution internal control

19. Informal org.resists formal

20. Use.of internal control data 2065 =10.4 -Actual 335.2 = 16.7 A/1 = .62 -Ideal

Figure 4-5 — Total Fund Respondents

227 there is room for more participation in the Fund, It is

interesting to observe that the responses for the ideal

stage for the Fund lie in the system (4), with a mean of the means of 16.7, not very far from system (3). The re­

lationship Actual/Ideal of .62 showing a non-critical

ratio. This ratio would be critical when under .5,

Basically, the results show the Fund as an organization

actually in system (3) and ideally in system (4), with a

non-critical ratio of ,62. The score for the actual stage of the Fund does not match Likert's proposed system (4), but the aspirations of the Fund personnel show at a low

level system (4) or close to system (3).

Some of the twenty questions used in the Likert

Profile of Organizational Characteristics were answered on the average laying in system (2), "Benevolent-Authori­

tative. " This special area may deserve some attention as

a focus of possible problems. The questions are: Q. 2 -—

Level of confidence in superiors with the result (9.4);

Q. 6 -— Level where responsibility for the achievement of the organization's goals is felt (8.5); Q. 11 — How well

do superiors know problems faced by subordinates? (8.7);

Q. 12 — Do subordinates know the operational policies of the organization? (8.4); Q. 13 — At what levels are decisions made? (9.4) ; Q, 14 — - Are subordinates involved

in decisions related to their work? (9.9); Q. 16 — How are organizational goals established? (8.4); and, Q. 18 —

228 How are the internal review and control functions dis­ tributed? (9.3) . Keeping in mind that the maximum weight attributable to any question is twenty and each category is divided into five segments and represents a different style (twenty divided by four styles), all these questions had answers that on the average lay in system (2),

"Benevolent-Authoritative." These results are from the total number of about ninety respondents. It is time to examine each one of the six groups and to look for differ­ ences in their perceptions.

The Executive Committee results are in Figure 4-6.

Their responses concerning the actual Fund is 11.0, system

(3), Consultative. Their mean for the ideal is 15.5, barely making system (4). Their ratio actual/ideal is very high, .70. This high ratio reveals a narrow gap in the actual/ideal distance. In other words, to the Execu­ tive Committee, the actual situation is not far from the ideal management style. The problem areas in the eyes of the Executive Committee are five: Q. 2 — How much con­ fidence is shown in superiors by subordinates? (8.3);

Q. 6 — Where is responsibility felt for achieving the organization's goals? (7.5); Q. 12 — Do subordinates know the operational policies of the organization? (8.0); Q. 17

— How much covert resistance to the organization's goals is present? (8.8); and Q. 19 — Is there an informal organization resisting the formal one? (9.2). Figure 4-6

229 10.3 A 1. Confidence in subordinates 16.0 2. Confidence in superiors 14.3 10.2 3. Subord.felt free talk super.

4. Subord.ideas sought, used 14.5

11.2

5. Type of motivation used 15.5 5. Level felt, responsibility T5T8 14.2 i;, 7. Amount of teamwork 16.8

8. Direction information flow .U.Ü ! I 12.8 9. Acceptance communication down 12.3 10. Accuracy communication up 16.2 11.5 11. Super.know subord.problems 15.0 12. Subord,know o r g ' 1 ..policies

c ; 13. Level d e c i s i o n s m a d e o O' T 3 T T •H C 11.3 14. Subord.involved decis.rel.work ■S'? 13.3 € !3 1.5. D-M contribute motivation l/.O

16. How organ'1.goals set r r J .-4

17. Covert resistance org.goals .j_lJ

18. Distribution internal control I 1 9 . 2 19. Informal org.resists formal 1_.1_1.J—I 14.4'

20., Use of internal control data

------Actual 219.60 - 11.0 310.60 = 15.5 A/1 = .70

Figure 4-6 — Executive Committee

230 shows the results of the Executive Committee members' responses. The areas of concern, or where some attention may be devoted, are relatively clear. The level of the

sense of achievement among the members of the Executive

Committee seems to be very high, given the high ratio actual/ideal, and consequently the narrow gap between both measures.

Home Office Managers are the support group that

carry out staff functions for the field activities. They perceive the Fund in system (3) having an average response of 11.5. Their view of the ideal stage of the Fund lies on a result of 16,7, system (4). The ratio actual/ideal

is .68, reasonably high. As problem areas, only three questions get an average inferior to 10.0, even then very

superficially on system (2). The areas are: Q. 6 —

Where is responsibility felt for achieving the organ­

ization's goals? (9,5); Q^el2ig- Do subordinates know the operational policies of the organization? (9.6); and

Q. 16 — How are organizational goals established? (9.7).

Findings suggest satisfaction with the overall climate of the organization. For these managers, the Fund runs

smoothly and there are few organizational problems that deserve special attention. The results on the Likert profile for these managers may be seen on Figure 4-7.

The group of District Office Managers is the most enthusiastic about the Fund. Their perceptions of the

______231 1. Confidence in subordinates 16.1

2. Confidence in superiors

3. Subord.felt free talk super,

4. Subord.ideas sought, used

5. Type of motivation used

5, Level felt responsibility

7. Amount of teamwork■ 17.9

8. Direction information flow

9. Acceptance communication do’jm

10. Acc u r a c y c o m m u n i c a t i o n up

11. S u p e r . k n o w s u b o r d , p r o b l e m s

12. Subord,know org'1.policies

13, Level decisions made 1

14, Subord,Involved decis.rel.work

15, D-M contribute motivation

16. Hov/ organ'l.goals set

17, Covert resistance org.goals

IB, Distribution internal control J —1—1

19. Informal org.resists formal

20. Use of internal control data

A/I -Actual 229.8 = 11.5 -Ideal 339.9 16.7

Figure 4-7 — Home Office Managers

232 Fund today are solidly in system (3) Consultative, with a mean of 12.3. Their ideal view of the Fund is also high on 17.1. The ratio actual/ideal is the highest of all groups, .71. This ratio is higher than the one of the

Executive Committee. The general view of their responses can be seen in Figure 4-8. There is one area where their average goes below 10.0; it is Q. 11 — How well do superiors know problems faced by subordinates? (9.1).

This response is the only one falling within system (2) category.

The members of the Program Advisory Council are the fourth group considered. They have a view of the Fund under system (2) with a mean of 9.2, and a high ideal of

16.8 on system (4). Their ratio actual/ideal is at .54.

They score low in almost every question. Figure 4-9 presents a summary of their responses.

The last group to be reviewed is the sample of

Rank and File employees of the Fund. This is the largest group under study and supposedly represents the employees of the Fund in general. Their average for the actual situation of the Fund is 10,0, a response that stays exactly in the border of systems (2) and (3). The ideal situation of the Fund, in view of the sample of Rank and

File employees, is under system (4) with a mean of 16.6.

The ratio actual/ideal is .60. The questions which re­ sponses lay under system (3) are eight and they were 233 10 15 20 11.9 1. Confidence in subordinates A 10.2 2. Confidence in superiors 17.0 12.1 3. Subord.felt free talk super. 17.0 11.3 4. Subord.ideas sought, used 16.9

10.7 5. Type of motivation used 10.5 6. Level felt responsibility 17.8 14.2 Q 7. Amount of teamwork. 17.

g 3, Direction information flow 18.7T o 14.4 ij 9. Acceptance communication down T875 0 14.3 H 10. Accuracy communication up 3 "18.3 1 11. Super.know subord.problems 16.5 V 12. Subord.know org'1.policies 18.1

12.4 13. Level decisions made g' 15. q! 14. Subord. involved decis. rel.worl i ^ 15, D-M contribute motivation 17.9

15, How organ'1.goals set TBTr o 4.; 14.4 Cl Q> 17, Covert resistance org.goals T77r

11.5 18, Distribution internal control i__!_... T57(T 11.4 19. Informal org..resists formal T3T7~ 20. Use of internal control data A/I 17.8 -Actual ËU : il:1 -Ideal

Figure 4-8 — District Office Managers

234 1. , C o n f idence in cebord..i..aatcs

2. Cunfiderj.ee in. 'rnperiors

3. Subord.felt free talk super.

4. Sii'o r d,., i 6 ea n .s v. gh t, u. s e d 16.T

5.' Typ e of motiva ci on use d 6. Level felt r e s p o n s i b i l i t y 16.8 Jit 9 7. Aïiouîit of t.eamifork ,

S. Direction information flow ?. Aocopt.anco coomuni cnrion riown le.c 10. .■ircr.re.cy cor:'j:pv,nioe-:tio.n u p

1.1... Soper.know .rnbcri.prublenio .i

3 2. Cubcra.knov; org ' I .policies 15..8

13. Level decisions reuae

Is, Srbc'Xd. invcd ved decio. ;:el .woili-

:-p 1 = D-M nrri.tij.Le n;ntivrt j on

1. ft. Low organ' 1 .goals .S'Jt

17. Cove.rt resistance org,goals L-i-l-i. -J-...L-J:..,jJuriiU- L. .jJ. 7,.'' IS. Distribution internal .con 1 .rcl

19. informal org..resists formal .[. ,.L.._L-..L..1. L-.l .....] lii" 20. Use of i-iternnl >:;:ontroI data j.._l 1 .J L_J ..L..J ifi- i = 184.4 " r, j:.‘ r .54 — -———. — sO i. ' L a r ■ I -I .886 16..5 J. ~ 1 .J..—'V^. .

Figure 4-9 — Program Advisory Council Members

235 mentioned above in the discussion of other groups.

Figure 4-10 is the graphic presentation of the results of the Rank and File group.

The Fund and Argyri s' Mix Model

Another dimension of this study was to assess the similarities and differences of the Fund with Argyris'

Mix Model. Respondents were asked about the basic six dimensions developed by Argyris (1964) as a basis for his model.

Data collected from the questionnaire reflect the feelings of respondents, but there is some indication that the Mix Model dimensions could be assessed more incisively by use of observations and unobtrusive measures, rather than by the questionnaire.

We believe the Mix Model may be relevant for the evaluation of characteristics and functioning of the

Fund’s formal structure. Although the Mix Model offers no clear detail of the structural relationship, it does, according to Argyris, provide clear goals in terms of an ideal structure.

The results of the questionnaire are shown on

Table 4-16. In general, all the statements but one, Q, 32, were agreed with the respondents, as a whole, and by most groups, individually, as the means in Table 4-16 show.

In general, the lower levels in the flat hierarchy of the

236 10 20 10.2 1. Confidence in subordinates 15.6 o, 2 2. Confidence in superiors 16.6 10.8 16.9

r-( 4. Subord. ideas sought, used 16.3

11.5 5. Type of motivation used 17.8

6. Level felt responsibility 16. 7 11.9 7. Amount of teamwork 18.1 10,2. r. 3. Direction information flow 16.3 0 13.5 bV 9. Acceptance communication down 18.0 0 12.3 .10. Accuracy coirmuinication up 17.7 ■p 1 11. Su p e r . k n o w subord. p r o b l e m s 17.2 o “ 12. Subord.know org'1.policies 16.6

6.9 gr 13. Level, decisions made 1 5 .3' 14. Suboi'd. involved decis, rel.work

15. D-M contribute motivation

•H HS’ 16. How organ'1.goals set O J-I Di 0) 17. Covert resistance org,goals

13. Distribution internal control IT.T 11.5 19. Informal org.resists formal " IT T " 11.3 ' 20. Use of internal control data 13.1 A = 200.3 = 10 A/I 60 — Actual --Ideal

Figure 4-10 — Rank and File Fund Employees

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I 0 >1 P rH rH P 1 •> S3 P TS m m to 0 rH CO •H S3 m g I g S3 0 P 1 m CO • S3 1 o N CO A S3 g 35 CO 0 P N •H S3 m N m m m rH m A S3 S3 0 ■H CN u 0 P ■H CO ■H • m p N A 0 m IN m m CO 35 p X P (d rH Ü S3 A 0 -H CO fii p N m p m •H U P P •H P m m p S3 0 ■H u m > Æ m CO fd u rH m p u p rH m ■H u CO p CO p fd P A fit m •H •H N rQ Æ P S3 TS CN 0 •H CO S3 •H u N rH p •H PU CO u CO fd m m CO S3 0 CO 0 CO Ü CO fd to N m CO A m -H Æ CO m m A P CO m 0 N m N N p 0 35 ^ -r4 rH m 0 U T3 T5 0 P P •H >1 35 0 A rH rH -P CN fd A S3 m S3 P •H P P rO P 0 p 1—1 •H m S3 »N m P 35 P (d •H 35 m p CO S3 to > u u CO CO 35 S3 k CO m S3 > 73 P S3 •H •H S3 •H c m m •H rH m m A •H m 0 >H U P (0 P rH p rl m ■H g m P u ■d r-i m P Ô m U P S3 0 p S3 Ü 0 U S3 S3 0 S3 S3 H P P (0 CO •H N H •H 0 P •H u EH (d m fd p 0 o •H in ID m ro ro ro m s a a a 239 Fund agree less with the statement than the managerial and top executive groups.

The results on Q. 32 may be due to the wording of the question, and this should be taken into account in a deeper interpretation. It is very possible that this statement and even some other statements do not convey meaning to the respondents.

In the case of questions 34 and 35, where the pos­ sibilities of individuals being able to influence the affairs of the Fund are questioned, the responses were affirmative, but the lower we go in the Fund's hierarchy, less power is felt by the office holder.

The temporal orientation of the Fund seems to be perceived very much in agreement with the notion of the

Mix Model. The Fund tries to keep a balance with the responsibilities of the past, the demands of the present, and the needs of the future.

The Fund and the Organismic Structure

In the review of the literature we presented, the mechanistic and organismic models conceptualized by Burns and Stalker (1968), the first model, the mechanistic, like the bureaucratic-classic model, is suitable to calm environments. The organismic model respresents a highly flexible organization appropriate to the type four turbu­ lent environments described in the Emery and Trist (1965)

240 taxonomy of environments.

Given the characteristics of the Fund's structure, it is our assumption that it tends to be closer to the organismic model. The study questionnaire included items calculated to assess the degree to which the Fund tended to represent the mechanistic or organismic model. The results, as can be seen in Table 4-17, are in general supportive of this assumption.

Respondents agreed with all but one statement when the average was computed for the Fund as a whole. A few items were very close to the 3.0 of uncertain.

The first statement, Q. 37, indicates the nature of the use of specialization and knowledge to the achieve­ ment of common objectives in the Fund. In general, all five groups clustered around the score of 2.5.

The task distribution in the Fund seems somewhat problematic. In statement Q. 38, three groups responded as "uncertain" or "disagree" in relation to the realism with which tasks are established. The Q. 39 received a slightly higher score but still is very close to

"uncertain."

Question 40 specifically asks about commitment in the Fund. Here, as in other data already presented, the managerial groups seem to feel more committed over issues such as technical definition or job description. The group more in agreement with the statement is the group of

241 rH 0 TO LD 00 P c • 0 so CN CN CN Eh f t

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244 the District Office Managers.

There is a relatively clear perception of the Fund as a network structure as opposed to a hierarchical struc­ ture. The ideas alluded by Schon (1973) seem to find an example in the microcosmos of an organization. The score of the Executive Committee is the closest to the average

"strongly agree."

The item on distribution of knowledge and authority in the Fund receives a mixed response with an overall score of 2.8, almost uncertain. The responses of the

Executive Committee and managerial groups are toward more certainty than are the responses of the Program Advisory

Council and the Rank and File group.

The statement on the direction of communications in the Fund find perceptions more in accord. The re­ spondents seem to agree that communications in the Fund not only go up and down, but also sidewise. Again, there is disagreement about the nature of communications with managers in agreement and Rank and File not agreeing.

Integration Among the Groups of Respondents

So far, we have presented the results of the in­ vestigation regarding Fund structure and correlated aspects. There were five different categories or groups of respondents. The groups represent natural hierarchical divisions within the Fund and it seems appropriate to test ______245 the degree of integration of these groups.

By use of the Chi-Square Test of Differences, we test for agreement among the several groups. With the

exception of the results of the Likert Profile of Organ­ izational Characteristics, all the other data were tested in a five by three matrix. In one, we have five groups of respondents: Executive Committee, Home Office Managers,

District Office Managers, Program Advisory Council members,

and a sample of Rank and File Fund employees. On the other hand, we have a count on "Agree" (combining together

agree and strongly agree), "Uncertain" and "Disagree"

(combining together disagree and strongly disagree). The chi-square results were tested at .01 and .05 percent of probability that the differences had happened by chance.

A short discussion of the data follows.

General Features of the Fund's Structure

As can be seen in Table 4-18, seven out of the fifteen statements have a significant difference in the responses of the five groups. The controversial areas, statistically speaking, were briefly discussed before.

Here, we attempt to examine the statements that caused differences of opinion.

Ihe functioning of the Executive Committee is con­ sidered controversial at the level of .01. When attitudes towards the Executive Committee were presented previously, 246 TABLE 4-18

CHI-SQUARE TEST RESULTS ON THE ANSWERS RELATED TO GENERAL FEATURES SPECIFIC TO THE FUND FORMAL STRUCTURE

Questions X2

Q. 45 The functioning of the Executive Committee is highly effective. 32.93*

Q. 46 The concept of the Executive Com­ mittee is very adequate to the Fund. 10.55

Q. 47 The functioning of the Manager's Council is highly effective. 38.93*

Q. 48 The functioning of the District Manager meetings is highly effective. 19.90**

Q. 49 The functioning of the Standing Committee is highly effective. 13.12

Q. 50 The functioning of the Program Advisory Council (PAC) is highly effective. 17.38**

Q. 51 The functioning of the Special Task Force is very effective. 7.04

Q. 52 The concept of programs is highly applicable to the Fund. 9.68

Q. 53 The formal structure of the Fund is very adequate for the function it performs. 6.6

Q. 54 The formal structure of the Fund favors innovation and problem solving. 30.53*

Q. 55 The formal structure of the Fund enhances employee satisfaction. 13.77

Q. 56 There is a widespread acceptance of Fund policies throughout the organi zation. 18.22**

247 TABLE 4-18 — Continued

Questions x2

Q. 57 The Corporate Policy of the Fund is easy to modify when required. 15.63**

Q. 58 There is a widespread acceptance of the Corporate Policy at the levels below management. 11.32

Q. 59 The Operating Policy in the Fund is widely accepted in the levels below management. 10.93

*P < .01 **P < .05 (degrees of freedom 8)

248 reference was made to the way some managers perceive its activity and functioning. The concept of Plural Execu­ tives is not completely understood by the organization, and administration by programs with broad delegation has not been accepted by all members of the organization.

There is still reason to believe that the relations of the Executive Committee and the rest of the organization need mutual adjustment.

Perception concerning the functioning of the Man­ agers Council and the District Managers' Meetings are both controversial. Here again, the previous findings indicated the need for improvement. The same happens with the Program Advisory Council. The views taken of the

Program Advisory Council vary greatly, depending upon the group making the observation.

There is no agreement on the influence of the formal structure of the Fund on favoring innovation and problem solving. This lack of clustering of opinion in this area would seem somewhat serious and may deserve more attention.

The last two statements, where significant differ­ ences of opinion were found, are related to the policy on the Fund. The statements, Q. 56 and Q. 57, refer to acceptance of Fund policy and the degree with which these policies may be changed.

249 The Likert Profile of Organizational Characteristics

Tlie study of the score average obtained on the

Likert Profile of Organizational Characteristics is also

interesting in terms of differences among groups. Here,

the computation of the chi-square test was done by estab­

lishing a matrix with the five groups in one axis and the means for each group in the actual ideal responses. This

five by two matrix was composed for the computation of the

chi-square test. The result was .35 that is not sig­

nificant in the case (df 4). As far as the chi-square measures the differences, probabilistically, the differ­

ences are not significant.

Argyris' Mix Model and the Fund

Another set of questions in the questionnaire was based on the characteristics of Argyris Essential Prop­

erties of the Mix Model of Organization. In the six state­ ments presented to the respondents, two were found sig­ nificantly different when tested by the chi-square.

Disagreement exists on the ability of individuals to in­ fluence the activities of the Fund either internally or externally. In this case, the answers were "favorable" so the problem is one of differences of perception according to the different offices held by the respondents.

250 The results on Table 4-19 are indicative that, in general, the groups agree with themselves on their appre­ ciation on the Fund as an organization with similar features.

Burns and Stalker Organismic Organization

When we examined the answers to the statements de­ scribing the organismic model of organization, we saw that in general there was an agreement of the respondents as a whole to those statements. The degree of agreement varies, and these same data tested through chi-squares presented five statements with significant differences out of the eight statements. We note differences in the responses among groups in items covering task distribution, commit­ ment, structure of control, and communications.

On the statement Q. 39, disagreement indicates a felt imbalance on the adjustment and redefinition of tasks. Besides the suggested possibility of task rigidity, there may be uneven task distribution.

Statement Q. 40, covering commitment to the Fund, shows a wide difference of perception among the Fund's hierarchy. The groups disagree with the statement that

Lhe Fund is a network rather than an hierarchic pyramid in its shape of control structure.

Finally, there is disagreement concerning the nature of communications within the Fund. The data on Table 4-20 ______251 TABLE 4-19

CHI-SQUARE TEST RESULTS ON ANSWERS RELATED TO ARGYRIS MIX MODEL

Questions X^

Q. 31 The whole (the Fund) is created and controlled through the interrelation­ ships of all parts (people and programs). 6.90

Q. 32 There is widespread awareness of the pattern of the parts. The similarities are emphasized instead of the differ­ ences. 7.75

Q. 33 The achievement of objectives is related to the success of the whole, the Fund (and not related only to the success of the parts — people or individual programs). 10.30

Q. 34 It is possible for me to influence the internally oriented activities, for instance, policies, internal structure, roles, etc. 27.69*

Q. 35 It is possible for me to influence the externally oriented activities of the Fund, such as policies toward clients, competitors, etc. 16.77**

Q. 36 The nature of main activities is in­ fluenced by past, present and future as opposed to one orientation only to the present. .34

*P ^ .01 (degrees of freedom 8)

**P < .05

252 TABLE 4-20

CHI-SQUARE TEST RESULTS ON ANSWERS RELATED TO BURNS ORGANISMIC MODEL

Questions

Q. 37 In the Fund there is a contributive nature of special knowledge and ex­ perience to the common task of the organization, 9.47

Q. 38 In the Fund individual tasks are realisticly established and are related to the total situation of the organization. 10.40

Q. 39 In the Fund there is the adjustment and continual redefinition of in­ dividual tasks through official interaction with others. 16.39**

Q. 40 In the Fund there is a spread of commitment to the organization be­ yond any technical definition, or job description. 17.46**

Q. 41 In the Fund there is a network structure of control, authority, and communication (as opposed to a hierarchic structure). 19.55**

Q. 42 Omniscience is no longer inputed to the head of the Fund; knowledge may be located anywhere in the network; this location becoming the center of authority. 4.49

Q. 43 In the Fund the direction of com­ munication is lateral as well as vertical through the organization, 19.26**

Q. 44 In the Fund the content of communi­ cations consist of information and advice rather than instructions and decisions. 16.47** *P ^ .01 **P < .05 (degrees of freedom 8)

253 are interesting and at the same time warns the analyst for possible sensitive points deserving full attention.

Conclusions

This investigation called for the collection and use of several types of data. It is, therefore, a dif­ ficult task to draw general conclusions on the findings.

The Fund presents a unique organization structure.

The organization has utilized and tested many of the newer

concepts emerging from the literature on theory of organ­

ization and at least at the managerial level many ideas

are working. Below the managerial level, there is little evidence that the new programs have had much impact.

This seems ironic since managers, liberated from several layers of hierarchy and with authority enhanced by the programs system, have done very little as a group for the continuation of the innovation in their own jurisdictions.

There have been efforts of the organization as a whole to integrate everybody in a participatory process. The existence of the Program Advisory Council and the exten­

sive use of special task forces are clear illustrations of this.

The achievements of the Fund have not been small.

There is a definite departure from the traditional bureaucratic-classic model of organization. The several

254 instruments used in this dissertation indicate this and the direct observation of the daily activities of the

Fund confirms it.

Still, several areas need to be reexamined. The reexamination and in some cases reexamination of direc­ tion of effort will be beneficial, if not to the coping capability of the Fund, at least it will increase the internal coherence.

255 CHAPTER V

SUMMARY, CONCLUSIONS, AND RECOMMENDATIONS

Summary

Using a case study creates some difficulties for the researcher but it also offers the opportunity for analyzing empirical data and theoretical implications against the backdrop of actual organizational eyents.

The study involyed (Chapter I) discussion of the meaning of formal organization structure. Next, came a reyiew of the related literature (Chapter II) which identified six major trends in the literature of organ­ izations: the classics, human relations, industrial democracy, open systems, behayioralist yiews, and critics of the bureaucratic-classic model. In Chapter II, we also reviewed empirical studies which address organization structures that deal with principles developed mainly from the bureaucratic-classic model. At the end of the chapter an attempt is made to offer an overview of alternatives to the bureaucratic-classic model.

Chapter III describes research procedures utilized in the study. This chapter presents data on the character­ istics of the respondents of the Fund questionnaire. The

256 study indicates that the upper layers in the Fund are more oriented towards theory Y than the lower-level re­

spondents. Management people are older, better educated,

and have worked for the Fund longer. There are no females

in the managerial positions of the Fund.

Chapter IV is the core of the study. Here, a historical overview of the development of the Fund and

details concerning the adoption of the innovative struc­

ture used are discussed. The questionnaire was completed

by ninety respondents from the organization, representing

all the hierarchical levels on aspects relevant to the

Fund's structure.

The study also attempts to study three theoretical

models on modern-organization structures. The Fund is

generally perceived as an innovative organization, with

a modern, nonbureaucratic structure that has several points of agreement with the Likert, Argyris, and Burns models. In terms of integration, findings are not favor­

able to the Fund. The point of view regarding the open­

ness and flexibility of the Fund varies, depending on the position of the respondents in the formal structure.

Conclusions

In evaluating the literature on organizations and management, as far as the formal structure of organization

is concerned, one may observe a developmental additive

______25,7 j nature in the succession of varied schools, movements and orientations, rather than a dialectical, diametrical opposed situation among diverse schools of thought.

Traditional labels in organization theory do not apply

entirely when only structural aspects are considered. A good example of this would be Herbert Simon, who otherwise represents a revolution in the conceptualization of the

study of organizations. He has, as far as structure is concerned, a great affinity to proponents of the classical principles of administration. Rensis Likert, a man who repudiates the classical tradition, uses this same tradi­ tion to establish its linking-pin concept which, in reality, is a superimposition on the traditional bureau­ cratic-classic model.

One crucial aspect of newer approaches to the problem of formal organization structure is the way in which they increase the possibilities for the expression and manifestation of substantial rationality. The appar­ ent contradiction of an organization enhancing substantial rationality becomes easier to conceptualize if the par­ ticipative and interactive variables in the organization are allowed to flourish. The reduction of functional rationality will reduce the contradictions, human needs, and organization needs that are so important for the socio-psychological approaches, as well as for the devel­ opments of political theory and democratic theory in the

258 organizational world. The more flexible and more par­ ticipative the organization, the greater the freedom of

expression. Tt appears that insofar as the degree to which freedom of expression leads to increasing substan­ tial rationality, there is an accompanying tendency to reduce the functional rationality and its negative con­

sequences for the organization.

Little help has been provided by the empirical

studies of organismic structures. There is no clear trend or indication coming from those studies that are avail­

able. The reasons for this lack of clarity are varied.

Organization structure is a multidimensional and ex­

tremely complex concept with a constellation of factors

enveloping it in a causal way. Another problem is the

excessive reliance of students of organization on the

structures of the bureaucratic-classic model. It is true that there are good reasons for this constant preference.

In the first place, the bureaucratic-classic model is more complete, more elaborated, and divulged. Second, more organizations are still based on some configuration of the bureaucratic-classic model, a circumstance that makes the comparative and general broad surveys of tradi­ tional structure attractive and the study of new and more fluid organizations less attractive.

These conditions make the case study techniques very appropriate for the study of organismic structures.

259 This is one of the reasons why the approach to the study of the California State Compensation Insurance Fund was one of a case study. The case study does not allow for generalizations but does enhance the probabilities of a deeper understanding of organizations.

The organizational structure of the California

State Compensation Insurance Fund is unique and makes possible a useful and interesting study. Because the

Fund operates within the traditionally conservative in­ surance industry in which solidity and minimization of risks is important, it is remarkable to observe the tremendous thrust for innovation and experimentation.

The Fund has experienced, from 1967 to date, an uninterrupted trend towards opening the organization and making it truly participative. There has been a constant effort to reconcile the normative recommendations of modern organization theory with a business reality that it is unusually demanding. Besides the conservative nature of the environment of an insurance company, the efforts to change within the Fund faced a history of internal paternalism and strong authoritarian leadership.

All this was overcome with ingenuity and cooperative team effort. This action has been taking place at a time when the market situation has not been favorable. The devel­ opments in the trend of self-insurance took away some of the very large public agencies as customers of the Fund.

260 Also new judicial interpretations extended the benefits for injured workers increasing the amount paid out many times over. This, added to the more litigious disposition of today's injured, makes the situation more difficult for the Fund to function. All these environmental factors did not make the Fund return to a more authoritarian struc­ ture. To the contrary, top- and middle-level management in the Fund believe that the new structure has been a very helpful factor in coping with more difficult situations.

In this sense, the decentralized, flat, participative, and flexible organization structure enhances the chances of survival, increases effectiveness, and allows for more satisfaction of human and social needs.

There are some problems. The managerial levels in the Fund enjoy much autonomy and independence. The participative model is truly lived in the managerial circles. Within the several Home Office and District

Office departments, this is not always true. Depending on the program manager, more or less participation is allowed, but the typical program structure is very much hierarchical and follows very closely the bureaucratic- classic model. It is true that the Program Advisory

Council is an outlet for expression for lower rank em­ ployees, but within many program units, there are no structural features that enhance nonbureaucratic behavior.

261 The revolution in the Fund is still only a partial revo­ lution.

Recommendations

Theoretically, it seems that we are just in the beginning stages of structural possibilities. The bureaucratic-classic model, if inadequate for the con­ temporary challenges, will be replaced by an infinity of models. The empirical study of these new models is needed in order to assess, very carefully, the implica­ tions of the adoption of new organizational structures.

The possibility for general studies will continue to be impaired until the development of better measures and

identification of structural variables is reached.

Structures are a broad multidimensional expression and attempts to oversimplify will result in fruitless studies.

The case study methodology will remain relevant and an advisable method for the study of formal organization

structure.

The Fund, as an organization, has to continue experimenting and innovating. The creation of new bodies,

such as the Executive Committee and Manager and Program

Advisory Councils, are proof of the tremendous potential that is unleashed by committeed people at work. The free flow of information and the participative decision-making

262 procedures provide a freer environment. At the same time, that internally makes the organization function more realistically and increases the possibilities for varied strategies of reality coping.

Maintaining internal coherence depends upon the continuance of the revolution. It is clear, though, that positive steps for this revolution should not be initiated by the top management, but by program managers and rank and file employees because it is their interface that needs rethinking.

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293 APPENDICES

294 APPENDIX 1

Interview Questions

1. How would you describe the formal structure of the

FUND today?

2. Is it good, bad, or indifferent? (the formal struc­

ture of the Fund)

3. When the changes took place, what were the conse­

quences that you expected at that time?

4. What are the actual consequences that took place

because of the new structure?

5. In the formal structure the Fund adopts, what are

the strong aspects?

6. What are the weak aspects?

7. Do you personally accept the corporate policy in

toto (totally)?

8. Do you have reservations? Where?

9. How do you perceive the business environment the

Fund operates in? Is it easy to live in? calm?

turbulent? tough competition? many changes in

the last 10 years?

10. Would you say the employees are more satisfied now

(because of the new structure)? Were they unhappy

before (old structure)? 295 11, Is the turnover rate lower or higher today? Can you

see any relationship with the structure?

12, Do you think that the employées and managers fully

understand this new structure the Fund utilizes?

13, What do you think about PAC? Is it useful?

Important?

14, What do you think about the Managers Council? Is it

useful? Important?

a. What do you think of the Plural Executive concept?

b. How do you see it working?

c. Major strengths and weaknesses:

d. How did it come about? What is the history be­

hind the Plural Executive concept and its

application in the Fund?

e. What is the future of the Executive Committee?

15, How many years are you with the Fund? How many

years are you in this particular position?

a. How are the relations of the Fund (E,C,) with

the Board of Directors?

b. What has been the pattern of relations from

1968 on?

c. How were these relations before 1968?

16, What do you believe is important for my study and

I didn't ask you?

296 APPENDIX 2

Profile of Organizational Characteri sties

This questionnaire was developed in order to ob­ tain a description of the management system or style used in a company or one of its divisions.

In completing the questionnaire, it is important that each individual answer each question as thoughtfully and frankly as possible. This is not a test; there are no right or wrong answers. The important thing is that you answer each question the way you see things or the way you feel about them.

Instructions

1, On the line opposite to each organizational variable (item), please place an A at the point which, in your experience, describes the Fund at the present time (A = actual), Treat each item as a continuous vari­ able from the extreme at one end to that at the other,

2, In addition, please placé an I on each line at the point which you think the Fund would function in an ideal stage, i.e., the point you believe it would be the best for the organization and its employees (I = ideal),

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00 cr> o %-4 CM 301 The following are various types of behavior which a supervisor (manager, vice-president, leader) may engage in relation to subordinates. Read each item carefully and then using the scale which appears below indicate the degree to which you would or would not try to exhibit such behavior.

Make a great Tend to Make a great effort to Tend to Do not Avoid doing effort to do this do this know this avoid this

IF I WERE THE SUPERVISOR, I WOULD:

21. Closely supervise my subordinates in order to get better work from them.

22. Set the goals and objectives for my subordinates and sell them on the merits of my plans.

23. Set up controls to assure that my subordinates are getting the job done.

__ 24. Encourage my subordinates to set their own goals and objectives.

25. Make sure that my subordinates' work is planned out for them.

26. Check with my subordinates daily to see if they need any help.

27. Step in as soon as reports indicate that the job is slipping.

28. Push my people to meet schedules if necessary.

29. Have frequent meetings to keep in touch with what is going on.

__ 30. Allow subordinates to make important decisions.

302 Here is another series of statements. Thinking in terms of the Fund as a whole and using the scale below indicate your degree of agreement.

Strongly Strongly Agree Agree Uncertain Disagree Disagree

1 2 3 4 5

31. The whole (the Fund) is created and controlled through the interrelationships of all parts (people and programs).

32. There is a widespread awareness of the pattern of the parts. The similarities are emphasized in­ stead of the differences.

33. The achievement of objectives is related to the success of the whole, the Fund (and not related only to the success of the parts — people or individual programs).

34. It is possible for me to influence the internally oriented activities, for instance, policies, internal structure, roles, etc.

35. It is possible for me to influence the externally oriented activities of the Fund, such as policies toward clients, competitors, etc.

36. The nature of main activities is influenced by past, present and future as opposed to one orientation only to the present.

37. In the Fund there is a contributive nature of special knowledge and experience to the common task of the organization.

38. In the Fund individual tasks are realistic established and are related to the total situa­ tion of the organization.

39. In the Fund there is the adjustment and continual redefinition of individual tasks through official interaction with others.

40. In the Fund there is a spread of commitment to the organization beyond any technical definition, or job description.

303 strongly Strongly Agree Agree Uncertain Disagree Disagree

1 2 3 4 5

41. In the Fund there is a network structure of con­ trol, authority, and communication (as opposed to a hierarchic structure).

42. Omniscience is no longer inputed to the head of the Fund; knowledge may be located anywhere in the network; this location becoming the center of authority.

43. In the Fund the direction of communication is lateral as well as vertical through the organ­ ization.

44. In the Fund the content of communications consist of information and advice rather than instruc­ tions and decisions.

45. The functioning of the Executive Committee is highly effective.

46. The concept of the Executive Committee System is very adequate to the Fund.

47. The functioning of the Manager's Council is highly effective.

48. The functioning of the District Managers' meet­ ings is highly effective.

49. The functioning of the Standing Committee is highly effective.

50. The functioning of the Program Advisory Council (PAC) is highly effective.

51. The functioning of the Special Task Force is very effective.

52. The concept of programs is highly applicable to the Fund.

53. The formal structure of the Fund is very adequate for the function it performs.

304 strongly Strongly Agree Agree Uncertain Disagree Disagree

2 3 4

54. The formal structure of the Fund favors innova­ tion and problem solving,

55. The formal structure of the Fund enhances em­ ployee satisfaction.

56. There is a widespread acceptance of Fund policies throughout the organization.

57. The Corporate Policy of the Fund is easy to modify when required.

58. There is a widespread acceptance of the Corporate Policy at the levels below management.

59. The Operating Policy in the Fund is widely accepted in the levels below management.

60. Your Position in the Fund:

Executive Committee Member (1)______

Program Manager (Home Office) (2) ___ __

District Manager (3)______

PAC Member (4)______

None of the above (5)

61. Years with the Fund:

Less than 2 (1)

2 - 5 (2)

5 - 1 0 (3)

10 - 20 (4)

More than 20 (5)

305 62. Education:

Up to High School (1)

Some College (2)

College Graduate (3)

Graduate Work (4)

63. Age: ______

64. Sex:

Male (1)

Female (2)

306