-3.1- MULTIPLE OBJECTIVES IN ORGANIZATIONS
The organization possesses scarce resources over which many conflicting forces compete. Since these forces have influence over the disposition of resources within the firm, even though they do not properly belong to the firm, 1;hey all must be taken into consideration when decisions are being made by the management of the firm. Conflicts within the organization are hardly new and are, in fact, an essential part of the modern corporation.
Rivett [47] notes that multiple demands are placed on the firm by :Internal and external forces which the firm cannot fully control. These (demands frequently conflict with each other and may even change over time. The rise of the institution we call the "firm" was motivated by the promise of both decreased transaction costs and economies of scale. Economies of scale were achieved through specialization of function. In specializing functions, the corporation, itself a multipurpose system, institutionalized the conflicting goals of the specialized groups.
One of the few consistent correlation's found in studies of the relation of structural variables in organizations is the relationship between role specialization and the size of the organization [30].
Rivett identifies five subgroups within the firm, purchasing, production, marketing, personnel, and finance. These may be regarded as a minimum number, as divisions and subsidiaries increase both the depth and breath of complexity. However, Amara [4, p.103] feels there are only four subgroups, leaving out personnel .
Organizational efficiency and effectiveness are frequently cited as the goals which represent tradeoffs within an organization. Examining organizations that survived over 100 years, one author notes: "It seems reasonable to assume that those having survived not only met their own goals, but met some of society's goals as well... Organizational operations must have been within the bound of effectiveness and efficiency to survive." [30, p.317] Indeed, the construct of effectiveness in describing organizations is dismissed by Bluedorn [8], because it is unmanageable. Effectiveness is dependent on one's point of view, as well as the goals defined. An example of the inherent conflict is the failure of banks during the 20's that were both efficient and effective within the view of business analysts and the banks themselves, but were ruined by depositors who saw the banks as ineffective.
Bluedorn suggests that the proper use of the construct of effectiveness is to examine individual goals, and that it should not be treated as a generalizable theory. Survival of an organization involves a multiplicity of goals, each of which must be evaluated in terms of efficiency and effectiveness, and not all of the goals lie within the organization. In the U.S., the single measure of success has been the dominant focus of financial theory .
-3.2- TRENDS INFLUENCING THE SHIFT FROM SINGLE TO MULTIPLE OBJECTIVES
The single criterion of the historical success of the organization is examined by Caves [11]. In his cross cultural study and review of the work of Chandler and Williamson, Caves determined that structural changes in organizations were motivated by a single economic criterion (return on assets) but that the legal and regulatory climate, as well as resource constraints, of each country affected the speed and course of development. Consistently over time, the U. S. has been the leading innovator in organizational change, with the rest of the world following only after a significant time lag.
Caves believes that matrix organizations (hybrids of functional and multidivisional structures) maximize profits when the core technology requires a large volume of information and multiple, essential, competing activities are present. This appears to be the direction in which the U. S. organizations are evolving and it appears likely, based on historical evidence, that other countries will follow in this direction, modified by legal, regulatory, and resource constraints. The idiosyncratic constraints in each country will cause variances in the matrix structure, adding yet another dimension of complexity to the interface between the organizations of different countries.
The inherent complexity of the matrix organization alone requires an information system which serves both the functional and multidivisional elements. The functional orientation requires centralized processing, with rigidly defined areas such as marketing, finance, etc. and the locus of decision making is function specific. The multidivisional structure requires the use of multiple functions within the division but the locus of decision making is task- or market-specific. The value of the matrix structure, in economic terms, is determined by balancing the costs of an additional layer of management against the savings of the elimination of redundant communication channels and improvement in control. In organizational terms: "the matrix structure requires the politicization of structure and behavior in order to work." [52]
Politicization of the organization implies that there is ambiguity in the organizational structure and behavior. The inherent ambiguity of authority and acceptable behavior causes the control functions within the organization to become flexible and multifaceted. The result is a greater dependence on informal channels for control and an increase in the objectives each manager must satisfy (i.e., he is responsible for reporting to at least one functional area and to the group of which he is a part). The requirement that organizations become politicized to remain effective increases the complexity of the relationships between managers who come to depend on informal channels.
In the MNC, the strongest loyalties may lie outside the organization. Thus, as the organizations adopt the matrix form, the number of objectives again increases. The informal nature of the controls can become counter productive for the organization with subsidiaries in foreign countries or for organizations engaged in international joint ventures as the complex relationships inherent in the matrix structure are compounded by nationalism or local social problems. Because of the increased variety in organizational structure and behavior, it may be necessary to develop a more holistic approach to organizations in order to analyze organizational problems.
-3.3- HOLISTIC ORGANIZATIONS FOR HOLISTIC DECISION MAKING
Schein [50] suggests that we redefine the organization. He suggests that it be classified as an open system, with multiple purposes requiring multiple interactions with the environment. Organizations consist of many subsystems which interact; the subsystems vary in their dependence upon one another, there are multiple environments which vary in size and interact dynamically with the organizational responses to them, and the boundaries of an organization cannot be clearly defined.
Schein further suggests that we define the organization as a set of stable processes that import, convert, and export goods or services, rather than as the structural characteristics of size shape, function or design. The structural concept of organizations is reflected in most of the MIS and DSS systems. This reinforces the structural approach to organizational behavior, making the organization less able to adapt to rapid changes in the environment. It may be more useful to view the organization, as Schein suggests, as stable processes which are supported by a flexible structure and interchangeable human resources. Rapid turnover and frequent changes in organizational structure render most DSS and MIS programs ineffectual. A DSS in a matrix organization should be stabilized using the processes, and not the formal organizational structure, as the starting point.
A modular approach to information support is necessary to support the matrix organizational form. The process modules should be no larger than the smallest subsystem in order to facilitate suboptimization, but should be coordinated to allow decision making at a higher level. In a functional organization, the size of the minimal subsystem could be quite large. Spanning the areas whose goals conflict (marketing, personnel, purchasing, production and finance) involves large and relatively autonomous groups. This autonomy allows centralized decision systems with centralized information systems (such as MBO programs) to function effectively.
The matrix organization has blurred the distinctions between the functional areas and increased the complexity of the conflicts within the organization. Matrix organizations, like functional organizations, require a decision support system that is capable of coordinating the efforts of each group and maintaining the stability of the overall processes, but in addition require more flexible, decentralized information systems. The result is frequently the creation of many ad hoc models to provide the additional information, while maintaining the large scale DSS as a separate system. These ad hoc models are usually created without an intent of integrating the model with the larger DSS.
Thus, the corporate model should be capable of being integrated to maintain the stability of the organization, but should allow an individual DSS to facilitate localized decision making based on the bounded rationality of the individual decision maker.