J. Pfeffer and G. Salancik, The External Control of Organizations, Harper & Row, 1978, pp 39-61


Summary

Summary

Organizations are dependent on the environment for their survival. These dependencies typically take the form of a relationship between themselves and other organizations. Interdependencies are mutual dependencies that develop to reduce the uncertainty in the relationship.

Organizations who are dependent on the continued success of other organizations may build "behavioral dependencies" with them to reduce risk. This often involves "increased coordination and mutual control over each other's resources" . In modern society these dependencies have increased over time as firms become more specialized.

Pfeffer and Salancik state that "It is the fact of the organization's dependence on the environment that makes the external constraint and control of organizational behavior both possible and almost inevitable". Groups that control the most vital resources or can reduce the uncertainty of other organizations have the most power.

Control over resource allocation is an important power source. This power basis can arise from:

 

Anytime there is dependence asymmetry between organizations (or individuals) there is a power difference. The authors conclude that "it is possible to conceive of organizational behavior as the consequence of influences". Results of studies with Israeli and US firms demonstrate that those organizations with more governmental dependencies will conform more readily to governmental requests.



Chapter 3: Social Control of Organizations

"Organizational activities and outcomes are accounted for by the context in which the organization is embedded".

The number of organizations that attempt to control other organizations is large (accrediting groups, regulatory groups, etc.). This chapter is about how groups exert influence on other groups.

Interdependence

Interdependence exists when one doesn't control all the resources needed for a desired action. There is outcome interdependence (like between competitors), and behavior interdependence ( arranging a poker game). There can be symbiotic or competitive relationships. Interdependencies can be assymetric or unbalanced.

Interdependence is relative to the amount of available resources and the demand, and the transactions between individuals in the same environment. Interdependence causes uncertainty, and steps to reduce that uncertainty (like finding another supplier) can affect other organizations. They typical solution to problems of outcome interdependence is increased coordination and mutual control over each others resources (i.e., increasing behavioral interdependence).

Note that interdependence has increased over time as firms become more specialized.

 

The Social Control of Organizational Choice

"It is the fact of the organization's dependence on the environment that makes the external constraint and control of organizational behavior both possible and almost inevitable".

There are various conditions that facilitate external control including:

* control groups has resouces the org wants and can't get elsewhere

* they can assess compliance with their demands from the organization

* the demands don't conflict with other external demands

These factors also work within organizations. Org that control more vital resources or reduce the most uncertainty often have the most power.

Resource Importance

There are dimensions to a resource exchange -- the relative magnitude of the exchange and its criticality. Org's who produce many products are less dependent on particular customers than one's producting only one product. Firms with single suppliers are more dependent than those with multiple suppliers. Criticality measures the ability to survive without the resource.

Thus, resource stability is very important. Resource variablity will also affect the interdependencies and threaten organizational coalitions.

 

Discretion over Resource Allocation and Use

Allocation discretion is a key component of power. Some basis for power in terms of resources are:

* posession of the resource

* ownership (less powerful sometimes)

* control of access to a resource

* control of the actual use of the resource (eg., air traffic controllers)

* making the rules that regulate the resources

 

Concentration of Resource Control

Power also depends on whether a critical resource is obtainable from other sources. There can be situations of few suppliers or even legal monopolies (like utilities). Collective action between groups can also constrain resource availability. Or action upon a regulatory agency that controls groups of organizations can have an effect on resources.

Dependence

"Dependence can then be defined as the product of the importance of a given input or output to the organization and the extent to which it is controlled by a relatively few organizations."

 

Contervailing Power and Asyymetric Dependence

For a dependence to provide power of one over another, there must be assymetry in the exchange relationship. For example, there is definitely a power difference between General Motors and it's myriad of suppliers, each producing only of fraction of what GM requires.

Empirical Examinations of Interorganizational Influence

"it is possible to conceive of organizational behavior as the consequence of influences".

Studies with Israeli managers on a hypothetical business situation with the government and with US companies on future woman MBA hiring practices showed that firms with high dependency on the govt are more willing to comply with government requests for action.