Alfred Chandlers Assessment of the Managerial Capitalism - Literature review Example

Alfred Chandler’s assessment of the development of the concept of managerial capitalism is in the contemporary period the dominating synthesis in America’s history of business. Despite this fact, over the past twenty years, economic stagnation has toppled the hero of the piece, big business in America. This essay will asses the contributions of Alfred Chandler to the sociology of organizations, specifically how integrated managerial enterprise uncovers long-term success of leading economies. So as to do this, the essay will consider what constituted the sociology of organizations in the sixties as well as Chandler’s critic of the postulated theories. Chandler’s implied criticism of the organizational theories that existed had a primary place in the consequent growth of organizational theory. Despite the fact that Chandler raised an array of critical questions, his perception of organizations was assaulted from a formidable force of quarters that had a stake in the sociology of organizations. The consequent development in organizational sociology gave a basis for Chandler’s perspective critics to put a case across that discounted the fact that his ideal heroic managers were only part of the story and not the whole story as he had propagated. However it is important to note that, Chandlers work still offers an insight into the bigger questions and issues, although his perspective with regard to the ultimate role of the organization in the economy is doubtful from sociology of organizations point of view. There are three major perspectives of the sociology of organization in the sixties as well as the beginning of the seventies. The interest of all these strands was to discover a science of organizations. As a result of this, none of these points of view saw the difference between organizations, nonprofits as well as government bureaucracies. Moreover, there also was a discrete absence of interest in the historical emergence of corporations. A significant proportion of the sociology of organizations was primarily concentrated on Max Weber’s original formulation of the contemporary bureaucracy (). One strand of the experiential literature was characterised by a positivist inclination. Its major purpose was to discover the extent to which the corporation did or did not match with Weber’s characteristic description (Blau and Scott 1962; Hage and Aiken 1970). This school of thought hired Weber’s paradigms relating to the structure of bureaucracies and transformed them into experiential measures and ultimately carried out surveys of corporations to find out the extent to which the said corporations matched with Weber’s perspective. A second tradition in sociology also hired Weber as its motivation. However, this point of view criticized Weber’s perspective in which he postulated that bureaucracies actually did work. At the time scholars strived to demonstrate that real corporations in the real world were to a diminished degree omnipotent as well as rational and on the contrary more driven by gaining employees compliance and at the same time more transparent with regard to external and internal political as well as social forces (Gouldner, 1954). This points of view led to Perrow’s reading (1972) that witnessed the power seeking characteristic of organizations, an aspect that was wielded by specific actors and parties of interests. Perrow’s case was that organizational theory had rose up as more subverted by the theory of management that perceived organizations as benign. He put his case across that stressed organizational understanding which gave emphasis of how the said organizations constituted power systems. The 3rd paradigm was to a significant degree located in business schools which a majority of sociologists knew little about in the sixties as well as the early seventies (). This elegant formulation was developed as a criticism of the economic framework of players in corporations. The economic paradigm put emphasis on leaders of organizations were perfectly informed about all their costs and much in the same line were able to implement the most efficient method to produce their goods as well as services. Simon and Marches model began with a framework of the individual that stressed that single individuals had a limited rationale that meant that they could not have all relevant data in any specific situation and if they did they were not gifted with the cognitive ability for processing such information. They also contended that all employees that worked for an organization could not exhibit interests that were in tandem with the interests of the organizations management. To solve these problems called for the creation of the right type of a formal corporation which was posited well in dealing with the question of bounded rationality as well as the organization’s individual members potential to shirk or in other words act opportunistically. For Simon (1962), managers as well as workers had to be given standard operating procedures with goals that these procedures had to achieve. This would diminish the issue of bounded rationality on the part of players through making available to the management tools of knowing what was supposed to be done and to assessing their relative achievement at doing it. Rewards together with punishments would be bounded to the achievement of goals and as such take opportunism under control. Managers at the higher level would also be bound by goals and standard operating procedures. But in this instance, their procedures would make it possible for them to supervise the performance of the subsequent lower level of the hierarchy. Their supervision would make it possible for them to be notified when system subunits were underperforming or failing. They could then undertake specific measures in understanding the reasons behind the underperformance or failure and as such allow them to make modifications on the basis of whether or not the faulty system stemmed out of specific staff or more theatrical shifts in the conditions of the market. This point of view was the inspiration behind the development of a set of related theories of management commonly referred to as rational adaptation theory or contingency theory. The notion that corporate managers could undertake adjustments to changes in the company’s performance was established in contingency theory. This approach focused on using the failure to attain organizational objectives that were mostly about how markets which are primarily business environments had changed. From this point of view, the Managers adjustment through change of the conditions in the market was continuous. Better managers were able to forecast the signals in the market whereupon they adjust their corporation’s use of inputs as well as production of outputs ultimately adapting the firm to derive maximum returns. Certainly, Chandler is to a significant degree sympathetic to managerialism. However, Chandlers perception of managers to a certain level, was more pragmatic as well as grounded than was March and Simon’s. This worked in very many ways. Chandler perceived the aim of the corporation as a firm’s tool to bring commodities to the market. In the nineteenth century, markets developed as the population evolved as a more urbanized population that was also educated and the same time richer. For the firms to derive benefits from this they were required to learn how to participate in mass production. This, for Chandler, presented the organization’s owners with an array of practical puzzles to solve. These practical puzzles involved building plants used to finance large scale facilities as well as securing required supplies, and producing commodities reliably on a mass basis (Chandler 1962; Chandler 1965,). Additionally, it also involved solving issues of communication together with transportation so that commodities could be transported to where they were required. The management came up as the individuals who were charged with solving these issues as well as coordinating these actions. In the event that the hierarchy of management was not built, it would mean that these markets could not have been met. To put it in a simple way, in the absence of managers who were absolutely critical in the coordination production in hierarchical organizations, mass production was impossible. This perspective implied Chandler’s scepticism regarding economic theories that contended to perceive the increase of the organization in restricted terms. Chandler’s resisted March and Simon, (1958) and Williamson, (1981) contention that purported that an organization’s management was mostly affected by a bound rationality or in other words opportunism or simply; management transaction costs. On the contrary, he perceived an organizations management as the only pragmatic individual or group of individuals capable of solving its problems. Managers did this by beginning with business strategies as well as designed structures to solve their problems. When they worked, their solutions, gave room for the expansion of the market and as a result of this, the ultimate dominance of larger firms (Dobbin 1994). Because of his bent historically, Chandler was disposed to perceive these practical advances as the product of the circumstance in which the management found itself as well as a type of cultural advancement that the management would craft. Chandler also thought that once some managers had derived a solution to a specific issue, their answer would be taken on by their principal rivals who perceived it as the way to succeed. It is very useful to perceive Chandler as a Weberian. Weber saw the contemporary world as the result of dual forces; one was a cultural product while the other was an organizational product. The leading reason for the modern world according to Weber was the notion that individuals came more and more to perceive themselves as rational players with goals (Dickens 2003). Weber recognized these players as involved in means-ends activities whereupon once they had modelled their ends they would develop vehicles for social organization as their means. To Weber, the type of corporation they employed was the formal organization or bureaucracy. Big and complicated corporations prepared states as well as firms more competent as these kinds of corporations were more efficient at achieving their objectives. Chandlers perception of the management is quite steady with Webers overall theoretical formulation. For the case of Chandler, organizational management has strategies or goals whereupon they design structures that are generally bureaucracies. The organizations they form win as they have the ability to produce products reliably for a mass market in circumstances or instances where minor or less organized competitors fail. Chandlers dispute with regard to organizational sociology was two-fold. Firstly, the unease in developing a scientific theory of corporations implied that sociologists had foregone Weber’s project of comprehending how historical forms, for instance, the organization, emerged and were ultimately transformed. This complicated sociologists asking bigger questions that both Weber and Chandler asked. Chandler’s persistent historicism pressed sociologists to progress away from the notion that there existed scientific theory of corporations providing a historical description of their materialization as well as dynamics. Sociology, alternatively, had to confront the reality that there was a point in time when such corporations were not present and much in the same light, over time new corporations as well as organizational forms are now appearing constantly. Second, the contracted stress of a few features of those organizations as well as the relentless wish to perceive all organizations to be the same implied that sociology of organizations could not put into consideration how firms were distinct from state bureaucracies as well as non-profits. They could not also consider how their relationship might be. The sociology of organizations that was there at the time could not relate to Weber’s original model that put stress on the interdependence of the various elements that developed the modern society. Ultimately, organizational theory as it is entrenched in sociology dealt with both these issues whereupon they began to develop some diverse theoretical perceptions. The most important contributions of Chandlers work have in real sense stemmed from sociology (Smith, McSweeeney and Fitzgerald 2008). The sociology of organizations from the middle of the seventies has obtained at least three criticisms of Chandlers point of view. This can be referred to as population ecology as well as institutional theory, and in a most direct reference, Chandlers own general disinterest with the issue of how governments interceded in market procedures together with the role of organizations seeking out market control in the event of inherent and real cutthroat competition an element that came along with the rise of big business. The critical forerunner to this final train of thought has to be Perrow (1972) whose contributions would motivate consequent sociologists to pose a challenge to Chandler’s thesis more directly and explicitly. It is valuable to review these challenges briefly. Population ecology (Hannan and Freeman 1977; Aldrich 1979) began with the notion that Chandler had focused much on large organizations. Scholars purported that if one assessed the materialization of fresh markets, there was a procedure whereby a significant number of organizations were developed, most of them failed, and the small number of survivors persevered out of their fit to the market environment. Such a perception started with the notion that all of the individuals who ran organizations (managers) had the capability and adeptness to forecast the market trends and produce the commodity. Out of the fact that the onset of any market happens amidst increased uncertainty regarding whom the customers were as well as what they want from the product together with how to produce the commodity they want, these evenly rational managers invest in diverse ways so as to try and exploit the market opportunity. Put differently, the primary resource dependency of corporations at the start was not apparent enough. Chandler’s critique was that only by considering winners of this competitive process (stories of the bigger firms), he was convinced to the extent that he overemphasized the extent to which the options of the management were central to the survival of the organization (Porter 1990). His identification of the dependent variable, that is, large survivors implied that he could not really tell whether it was those options or others including luck that could explain the winners. Institutional theory as propounded by DiMaggio and Powell, (1981) and Meyer and Rowan, (1978) was the basis for an alternative critique to Chandler’s perception. These theorists started with the notion that the legitimacy of what the organizational management could do is as critical as the extent to which their activities might actually derive positive results for the organizations. Such authenticity depended on persuading other stakeholders who are owners as well as boards of directors together with other managers, employers, the governments and the communities that the selected action made sense. DiMaggio and Powell contended that since the market environments of big corporations are hard to interpret, whereupon pressures arise for the management to take actions that are the same as their principal competitors (DiMaggio and Powell 1983). Managers can rationalize their activities by replicating what they view to be successful corporations, adhering to what is perceived as best practices by experts or doing what a regulator advices them to do. The fact that such actions prevail in corporations in a specific line of business may be the outcome, not of competitive processes through which all organizations are bound to produce according to the same logic, but on the contrary, isomorphic demands to look like other organizations free of whether or not they are competent. So, for instance, while GM lead the way in the multidivisional form, its ultimate adoption by various organizations, both small and large could easily mirror the fact that that a specific structure became valid as the correct way for organization as opposed to structure following strategy . References Aldrich, H 1979, Organizations and environments, Englewood Cliffs, NJ, Prentice Hall. Blau, P & Scott, 1962, Formal Organizations: A Comparative Approach, San Francisco, Ca.: Chandler Publishing. Chandler, A 1962, Strategy and Structure. Cambridge, Ma, MIT Press. Chandler, A 1965, Railroads, the Nations First Big Business, New York, Columbia University Press. 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