Open and Rational Organizational Paradigms - Case Study Example

Organizational Paradigms Introduction: The rational organizational paradigm is structured and hierarchical, adopting a top down management style. Within the context of a global environment however, the rational model is increasingly giving way to natural and open ended systems, where a greater level of flexibility and responsiveness to the environment can be facilitated. In changing over from the rational model which was prevalent earlier, a higher level of social responsibility is being mooted in organizations, with higher levels of learning taking place. The rational organizational paradigm: The rational organizational paradigm is centered upon the notion of rationality as the guiding force of the organization, with rationality being equated to efficiency in that efficiency “is often used as a virtual synonym for rationality.” (Simon et al, 1950:490). The administration of an organization will be good and correct if the modus operandi of the organization is such that it can “accomplish its work efficiently.” (Simon 1946:64). The notion of rationality under this model comprises two elements – limited and bounded rationality, although both involve cognitive processes. This model also holds that the authority framework within the organization is influenced by the decisions of individuals and this administrative rationality is dependent upon the use of means to achieve the desired ends, with the rationality of individuals in achieving the ends also being dependent on the cognitive reasoning processes. Simon holds means –ends thinking to be “a key component of human problem solving skill” (Simon, 1991:220), hence means-ends rationality is an integral part of this organizational paradigm. The management of the organization holds the required authority to make decisions and according to Simon, the exercise of authority within an organization occurs such that an individual “allows his decisions to be guided by decision premises provided him by some other person.” (Smith, 1976:xx). Hence all decision making within the organization is in the hands of management and individual behavior and performance within the organization are to be geared towards the achievement of the organizational objectives; this constitutes rational individuals. The administration and efficient operation of the organization is measured in terms of its impact upon the performance outcomes, specifically in the area of costs savings.(Simon, 1976). The major objective is to achieve the desired objectives with as much efficiency in operations as possible and this efficiency is to be “the guiding criterion” of the organization. (Simon, 1946:62). Since efficiency is the underlying paradigm of the organization in the rational model, there is less importance accorded to the individual idiosyncrasies and desires of people. The employment of the means-ends approach to achieve a set of desired organizational objectives with efficiency allows little room for incorporating individual goals and aspirations. As stated by David, issues such as “whether a particular goal reflects the need, the morality, the expressed intentions, the subjective desires of the various participants, or are reasonable have little consequence.” (Davis, 1985: 53). There structure of the organization in the rational model is assumed to be unchanging, it is only the people making up the organization that may change. But this will not affect the basic rationale of efficiency in achieving organizational objectives, where the people involved function as little more than cogs in a machine. One good example of the rational type of organization is any bureaucratic enterprise. It clearly demonstrates the emphasis placed by the rational model on outcomes. While decision making is in the hands of managers, when faced with a series of options, the decisions these people will tend to make would be the ones leading to the best overall outcome in terms of organizational objectives. Decisions will therefore be strictly conditioned by rationality, which means that (a) There is a need for complete knowledge and the ability to predict what the likely consequences of each choice made on a decision will be (b) When the consequences of the decisions lie in the future, imagination must supply the necessary values, although these may only be imperfectly predicted and (c) the final choice is to made after taking into consideration all the possible alternatives that exist to cope with a particular problem, although in reality all the alternatives may not occur to a person at the time of making a decision (Simon, 1997). Simon also stated that in some instances, individual decisions may be made on the basis of bounded rationality. In a case where a decision maker does not know all of the available alternatives, he satisfices, i.e, he tries to find a course of action or an alternative that is simple satisfactory. In a bureaucratic framework, decision making is confined strictly to the managerial personnel, while individuals working as Government servants are provided with little individual authority or flexibility in making of decisions. This is also the case with all organizations which function along bureaucratic lines, where the major emphasis is on the ends, while the means used to achieve those ends tend to pay scant attention to the improvement of quality, which is sacrificed due to the focus on the end objective. In a case study of four health care delivery organizations with a view to examine the quality of the care provided, Leatherman et al (2003) have found that the deficiencies in service may be caused by the existing financial structures, which do not allow room for improvements in quality. This study identified seven topics on which to examine the levels of care and reports results from four of the health care organizations where each of these topics was examined. The elements of the rational organizational model may be noted in this study. For example, this model shifts decision making to managers and individuals are required to be guided in their decisions by the existing framework provided by others. The objective of the rational model in an organization is usually to achieve economic efficiency. The study by Leatherman et al (2003) found that in the case of one organization, a lipid clinic was introduced on a trial basis for 800 patients and was found to demonstrate benefits through monitoring patients without the necessity for a hospital stay. The organization however had an existing capitated plan for some patients to reduce hospital stay. But there was no provision within the existing capitated health plan to implement the expanded plan to include more patients in the short term within its scope, because the organization would have had to change its policies and incur administrative delays in implementing such changed policies. A rational organization such as that which exists within a bureaucratic set-up are very structured and do not offer much scope for flexibility, hence implementing changes are always difficult and time consuming. The needs of individuals are not considered, rather, it is the existing structure which is rigorously adhered to (Leatherman et al, 2003). The goal of the rational organization is also to achieve economic efficiency. The plan mentioned above would have produced financial benefits for the organization in the long term. But the period during which the plan was considered was one of financial pressure for the health care organization. The operation of a rational organization is considered in terms of its financial outcomes and cost savings. Since Medicare reimbursements were not available for these programs, the question of convenience and benefit to patients, the reasonableness of the move and long term savings were simply not considered in the short term and the plan was not successful. Leatherman et al (2003) have concluded in their study that Medicare, which bears the primary burden of the health care system bases its payment system to reflect costs rather than aspects like benefits to the patients. There is a need to make the system more adaptable and receptive to fast changes if it is to incorporate higher levels of quality, which is however not possible under the rational organizational model. Open organizational paradigm: Open organizational systems differ from rational systems in that they allow greater levels of interaction with the environment. It is a dynamic organizational system, where the organization is equated to living systems which are also open and exchange matter with the environment. (Von Bertalanfy, 1986). The opposite of an open system would be a closed one, where the organizational operations would be characterized by a low level of interaction with the external environment, such as a bureaucratic system under the rational model, which is not easily responsive to the changes occurring in a dynamic external environment. The open system thus addresses some of the deficiencies in the rational model. Certain aspects such as the subjective needs of participants, the general morality of actions, etc would be considered within the open systems model, because it is more socially oriented. The systems organizational paradigm is based on the underlying concept advanced by Aristotle that a whole is made up of constituent systems, however the whole is more than the sum of its parts (Von Bertalanfy, 1986). In nature, different systems have certain general characteristics which may be applicable to a number of entities, with interdisciplinary aspects being an integral part of the theory.(Von Bertalanfy, 1986). A system can be defined as a se of separate elements which interact with each other and with the environment. Hence, within an organization, they could include different systems or business processes, such as the payroll system, marketing, sales, etc. An open organizational paradigm allows for adjustments and flexibility in organization of these processes, such as in outsourcing for example, to achieve the best results for the organization. Improved social systems are one of the characteristic features of open organizational systems, together with the facility for self maintenance through the facility for exploration of non conventional revenue sources (Scott, 2003:25-30). Hence, there would also be a greater level of attention paid to ethical issues in organizations, because they impact upon their reputation in the marketplace and among the general public. Many of the measures that have been taken to introduce corporate governance within organizations for example, are a function of the increasing role played by the external environment in a global scenario. Business and information models are integrated within these systems in order to make the organizations more responsive and flexible within a global, challenging environment. Many organizations are shifting to this paradigm, for example there is a great degree of input into company affairs that is being allowed to shareholders of organizations, as a result of the higher level of interaction and receptivity to the environment. One example of an open systems based model may be noted in the Tribal Government organizations in California. They used to be modeled on the rational system, with a top-down hierarchical system of governance, however they have switched over to the open system model, which includes many of the features that are characteristic of such systems – improved social systems, a central policy circle which is responsible for developing goals for the benefit of the tribes and the opportunity for the new tribal governments in self maintenance through new revenue sources. (Begar and Kozma, 2004). Under the new open system, the tribal Governments are no more controlled by the actions and policies of the Federal Government; rather they have their own elected governing council which provides them the facility of self governance. This is a direct change from the earlier rational model, where the subjective needs of the tribes and their aspirations were not fully taken into account. Moreover, new measures have been introduced for the tribes to garner their own sources of funds through Indian gaming. This arises in contrast to the previously existing rational model, where funds were received from the Federal Government and their use was also dictated by it, thus providing the tribes with less autonomy in managing their own affairs. However, under the open system, the tribal governments have developed Indian gaming as a source of funds accruing to them from the external environment, thereby providing them with an opportunity to exercise some autonomy in the use of such funds, taking the aspirations of tribal members into account. Moreover, the development of the open organizational system has also produced a greater focus on social issues such as health care, community development and housing, which allowed for the provision of enhanced services in these areas, since members are no longer restricted within a particular framework of action or a particular source of funds, but can exercise flexibility and initiative. Natural organizational paradigm: The natural organizational paradigm has evolved as a result of the changes taking place in the global organizational environment in the 1990s. Changes in organizational design are being mooted due to the competitive pressures in the environment and the need to streamline the functioning of the organization to make it more responsive to changing customer tastes and demands. The onset of information technology that is the prime mover for these changes, because it symbolizes an unprecedented and novel kind of breakthrough for which no existing precedents are available, thereby necessitating a radical kind of change in organizations. For instance, Jensen and Meckling state that the structure of an organization is dependent upon three major elements: (a) determining who will be responsible for which decisions (b) introducing incentives to reward decision makers and (c) monitoring and measuring outcomes of decision making. The quality of the decision will thus be dependent upon the quality of information available to the decision maker and the facility provided to him or her to make quick decisions to respond effectively to a dynamic environment. As a result, natural organizational systems which are characterized by the ability to survive under chaotic conditions; they are able to constantly renew themselves through a system of continuous learning and the empowerment of its decision makers. They are able to demonstrate a high degree of responsiveness to a dynamic environment and bring about internal restructuring to achieve better organizational outcomes. Such a transition from traditional rational organizational systems which were structured and hierarchal may be noted in the features which are becoming characteristic of the new organizational environment. Some of these features are (a) the downsizing of organizations despite the economies of scale, in order to achieve higher productivity (b) a networked organization with decision making power being diffused among lower levels and the elimination of the hierarchical, top down administrative systems (c) introducing measures such as performance based pay rather than fixes salaries in order to cut costs, and various other such measures. Additionally, the natural organizational paradigm includes leaning organizations. This was a concept that was articulated by Senge (2006), where an organization is a place that allows individuals to continually expand their capacity to create the desired results and where new and innovative ways of thinking are encouraged. As a result, set thinking patterns are done away with and this allows an organization the degree of flexibility and innovation that can provide it with a competitive edge in a dynamic marketplace. One of the best areas where the natural organizational paradigm may be seen to work is in the area of information technology, which has revolutionized the manner in which information is organized and used. An organization needs to constantly renew itself if it is to survive in a changing environment, much in the same manner as natural organisms undergo adaptations and modifications to be able to survive in a changing environment (Von Bartelenfy, 1972). Most of these changes that need to be made do not have established precedents which can be relied upon in making changes; they call for creative and innovative solutions to problems. The clothing retailer Zara is one organization which demonstrates the application of the natural organizational paradigm. This organization responds quickly and efficiently to the volatility of demand in the retail market, by producing a larger variety of styles and producing them in smaller quantities each year.(Dutta, no date). The successful implementation of information technology is an integral part of Zara’s success because it enables intensive and timely communication between the various departments and employees of the organization. It also allows them to maintain a comprehensive database that can be accessed by customers and employees for efficient transfer of information. Secondly, the organization demonstrates a high level of responsiveness to the environment and to changing customer demands. It has been able to evolve and adapt and make quick decisions through constantly reinventing itself and adapting its product to suit customer tastes.(Dutta, no date). It has been able to eschew traditional supply chain management in favor of a different system of supply chain management, which is novel and different from that which has been traditionally followed. In this aspect, it is functioning as a learning organization and adopting new and innovative practices in surviving within a competitive environment. References * Begay, Donna and Kozma, Karen, 2004. “Creating an organizational paradigm”, Retrieved March 9, 2008 from: http://www.navatech.org/Docs/Native%20View%20of%20Organizational%20Paradigm%20%20-%20Begay.htm * Davis, C.R., 1985. “A critique of the ideology of efficiency”, Humboldt Journal of Social Relations, 12:73-86 * Dutta, Devangshu, no date. “retail and the speed of fashion”, Retrieved March 11, 2008 from: http://www.3isite.com/articles/ImagesFashion_Zara_Part_II.pdf * Jensen, M. and Meckling, W, 1992. “Knowledge, Control and Organizational Structure Parts I and II”, IN Lars, Werin and Hijkander (Eds.), Contract Economics , Cambridge: Basil Blackwell, at pp 251-274 * Leatherman, Shiela, Berwick, Donald, Iles, Debra, Lewin, Lawrence S, Davidoff, Frank, Nolan, Thomas and Bisognano, Maureen, 2003. “The Business case for quality: Case studies and an analysis”, Retrieved March 8, 2008 from: http://content.healthaffairs.org/cgi/reprint/22/2/17.pdf * Senge, Peter, 2006. “The Fifth Discipline”, Doubleday * Scott, W. R. (2003). Organizations: Rational, natural, and open systems (5th ed.).Upper Saddle River, NJ: Prentice Hall. * Simon, Herbert A, 1946. “The proverbs of administration”, Public Administration Review, 6: 53-67 * Simon, Herbert A, Smithburg, D.W. and Thompson, V.A., 1950. “Public Administration”, New York: Knopf. * Simon, Herbert. 1976. “Administrative Behavior: A Study of Decision-Making Processes in Administrative Organization.” New York: The Free Press. * Von Bertalanfy, Ludwig, 1972. “The history and status of General Systems Theory”, Academy of Management Journal, 15(4): 204 Read More