While aspects of organisations such as structure and growth have been widely examined and discussed by theorists, the process and circumstances of organisational birth has received very little attention and analysis. Even significant authors of organisational theory seemingly dismiss organisational birth as an event of minor significance, which , if included at all, is often illustrated by a neat 'just-so' story of far less than universal application or significance. This essay examines theories of organisational birth and contrasts these theories with a real world example. I intend to show that organisational theory is deficient in both description and explanation of organisational birth, with a specific focus on theoretical description of the role of established organisations in the birth of new organisations.
'Organisational birth' will be defined here as the formation of a new, discrete organisational entity, in particular a formal organisation. I use the term 'formal organisation' in the sense outlined by Blau and Scott (1966), to describe an organisation with an explicit structure and goals that have been predefined in anticipation of the organisations activities. Organisations can be formed in a variety of ways, depending on the kind of organisation to be established, the reasons for doing so and the circumstances under which it comes to be. The establishment of a political party will be different to the establishment of a for-profit company, which will be different again to the establishment of a charity. Differences include the legal framework each is subject to for official recognition of organisational status, as well as the provisions they must submit to in the course of operation. The number and kind of individuals or even other organisations involved in planning and establishment, who may contribute resources and knowledge, and the political, cultural and economic conditions at the time of establishment are also potential factors.
I wish to contrast theories of organisational birth found in standard texts with a real life example, drawn from an Australian report of an enquiry into a specific independent, not-for-profit administrative sector (The Simpson Report, 1995). This report took submissions from a number of organisations on a variety of topics, but the part of particular interest is the discussion and submissions that resulted in the report recommending the formation of a new organisation in this particular sector. Almost all organisations in the sector are non-government, not-for-profit and limited by guarantee, working for the benefit of their members; types of organisations that one would think of as being formed by a individuals of particular group for their own mutual benefit. Yet the key actors, who were instrumental in proposing and then realising the birth of a new, independent organisation, were member organisations of the same sector, advocacy groups and the government. Does existing organisational theory accommodate this account of organisational birth?
Existing theories of organisational birth are generally brief, inconsistent from author to author and not very useful, especially when applied to the real world and compared to specific examples of organisational birth. The theoretical description of organisational birth varies markedly between authors largely, I suspect, as a result of their academic background. Blau and Scott (1966) and Scott (2003), for instance, come from a sociological perspective, while it is obvious that Jones (1995) writes from a business or economic point of view. These differences in background, combined with the relative lack of attention these authors (especially the first and the last) give to organisational birth, might go some way in explaining the indifferent state of knowledge in this area.
Blau and Scott (1966) are representative of authors from a sociological background writing during the 60s and 70s. Their writing concerns itself with formal organisations, how these organisations interact with society and vice versa. Organisational birth is not discussed in any great depth, but rather is illustrated by an example in the introduction to the book in spectacularly simplistic fashion. A group of people come together to accomplish some task, but must first define the tasks of each individual and their relationship to the other members of the group. Such an organisation, once established, might be distinguished by the independence of the organisation from the individuals that work within it (Blau and Scott, 1966). Nowhere again in the book do the authors mention the creation of an organisation again. This lack of interest in organisational birth is repeated in the works of other authors from a similar period, such as Dunkerley (1972) and Sofer (1972). Other aspects of organisations are discussed in great depth and have many studies to draw on, but far less significance seems to be placed on how these organisations came to exist in the first place.
Jones (1995) is broadly representative of one tradition in organisational theory that is mostly concerned with business, especially for-profit business. Organisations are assumed to operate in the economic marketplace, be they businesses, charities or even the nation's defence force (Jones, 1995). This view sees organisations as tools, structures for creating “value”, and also as the products of human invention.
The important thing to remember, however, is that organizations are human creations: They reflect our hopes, desires, motivations, and vision of ourselves and the world. The way they operate and the results of their behaviour are the products of the way we govern them and of the social, institutional, and political structure within which they operate. (Jones 1995, p.6)
For this value-driven model, organisational birth occurs when individuals (entrepreneurs) come together to make a new opportunity to create value. Interestingly, Jones does mention other organisations in connection with the birth of new organisations – he believes that existing organisations are a source of new entrepreneurs, who will leave their employers to set up their own organisation. Also, by establishing a new organisation to the pattern of an accepted organisational form, entrepreneurs confer legitimacy on their new organisations (Jones, 1995). Despite these useful observations, Jones cites no evidence from studies of organisational birth, but does give a little 'just-so' vignette in his section of organisational birth with such meaningless examples as, “Michael Dell found a new way to market low-priced computers to customers,” (Jones, 1995: p.421).
In light of the real-world case we can immediately see that some of Jones' fundamental assumptions about the creation of new organisations seem a little tenuous. The case described by the Simpson Report (1995) seems to show a group of related organisations, not individuals, contributing to the establishment of a new organisation, and from the report itself it does not appear that any employees of the existing organisations left their posts to work permanently in the new one. But that knowledge was transferred between the existing organisations, and that they were pro-actively involved in this process, does seem to support the idea of existing organisations being important as a source of knowledge and precedent for new organisations. Also, the structure of the new organisation would have been formalised very early on, if not at the beginning, which would contradict another of Jones' assertions, that young organisations have a high degree of structural flexibility and become more formalised as they get older (Jones, 1995).
Scott's (2003) text is more comprehensive than the two previously examined, as he attempts to give an overview of the field of organisational theory in general. Scott divides the multitude of disparate writings and fundamental assumptions and divides them into three broad fields of system theories; rational, natural and open. Scott's background is more academic, which might explain the greater breadth of theory in his text as compared to Jones, or even his earlier work with Blau (1963). The more important points to note from this text are Scott's own assertion that organisational birth has been largely ignored by theorists and that organisations are increasingly playing roles in the birth of new organisations (Scott, 2003: p.169-170). Although he concedes that a rational, formal and goal-orientated definition of organisations is the most dominant in the field, Scott also declares that “goals are not the key to understanding the nature and functioning of organizations... we will miss the essence of the organization if we insist on focusing on any single feature in isolation,” (Scott, 2003: p.24). Similar to Jones, Scott says that most organisational structures are borrowed rather than invented. Scott also gives two possible reasons for organising: the rationalist view that organisations are created to co-ordinate complex tasks of an administrative or technical nature; and the natural systems view that organisations are demonstrations of formal rationality, created out of approved structures to enact known and approved procedures (Scott, 2003).
While the absence of simplistic or case examples in Scott's work is refreshing, the specific theoretical content of his section on organisational birth still fails to investigate the significance and possible consequences of organisational involvement in organisational birth. The natural systems observations about formal rationality is of potential significance to this area, as are other observations about organisational behaviour in general, but none have as yet been linked to the actions of organisations involved in the creation of new organisations. Scott makes an important start by at least mentioning that organisations are increasingly involved (Scott, 2003), but he fails to contribute anything significant or new to the area of organisational birth.
The involvement of organisations in the formation of other organisations is not unknown, and indeed there are some obvious examples. Industries come together to establish lobby groups, or even organisations for the creation of industry-wide standards, such as the Personal Computer Memory Card International Association (Stair & Reynolds, 2006). Universities spawn research and development companies and technology transfer companies, such as Uniquest, the technology transfer company for the University of Queensland (Uniquest, 2006). The idea of organisations creating other organisations does not receive much attention in any of the writings discussed above, and for no apparent good reason. The economic view seems to hold the establishment of organisations by individuals as self-evident. Entrepreneurs are cast as kinds of geniuses, spotting opportunity to which all others have been blind. The sociological view also sees the establishment of organisations by individuals as the norm, although certain authors, such as Scott (2003) have recognised that organisations can play a part in organisational birth.
Contributing to organisational birth is an overlooked area of organisational behaviour in general, although it remains to be seen whether some existing observations made in literature on organisational theory could be usefully extended to this subject. I believe that it is a significant issue, especially where organisations are founded to deal with social problems or for charitable causes. The natural systems view given in Scott (2003), that formal rationality ('doing it right') tends to outweigh function rationality ('getting things done') could be usefully combined with observations made by Colebatch and Larmour (1993), that organisations tend to recognise and frame problems according to their own organisational perspective, structure and goals. The practical implications of these observations could be that implicit in the structure and function of new organisations, founded by existing organisations, is an attitude of co-operation or even co-dependency between the new and the old. It is widely accepted that organisations seek to stabilise the environment they operate in, and this clearly extends to the population of organisations one inhabits and deals with. Any of these theoretical observations could provide a starting point for investigating the events dealt with in the Simpson Report, but using current organisational, there is no precedent or acceptable way to draw meaning out of the real-world observations of the actions of these organisations and their involvement in an organisational birth.
To conclude: the involvement of organisations in the birth on new organisations is a very poorly recognised phenomenon in organisational theory, and its implications more poorly recognised still. More study will need to be done in the areas of organisational birth and organisational behaviour, and also to link the two, before real world examples, such as that described in the Simpson Report (1995) can be usefully understood.
References
Blau, P & Scott, W R (1966) Formal Organizations. Routledge and Kegan Paul, London.
Colebatch, H & Larmour, P (1993) Market, Bureaucracy and Community. Pluto Press, London.
Dunkerley, D (1972) The Study of Organizations. Routledge and Kegan Paul, London.
Jones, G (1995) Organizational Theory: Texts and Cases. Addison-Wesley, Reading.
Scott, W R (2003) Organizations: Rational, Natural and Open Systems. 5th edn. Prentice Hall, Upper Saddle River.
Sofer, C (1972). Organizations in Theory and Practice. Heinemann Educational Books, London.
Stair, R & Reynolds, G (2006) Fundamentals of Information Systems. 3rd edn. Thompson Course Technology, Boston.
The Simpson Report: Review of Australian Copyright Collection Societies (1995). Department of Communications, Information Technology and the Arts, Canberra. ONLINE: http://www.dcita.gov.au/ip/publications/ip_publications/the_simpson_report_review_of_australian_copyright_collecting_societies [accessed 2/3/06]
Uniquest (2006) http://www.uniquest.com.au [accessed 26/3/06].
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