Organizations Evolving

Book Review

Organizational Structure & Design

Kolkata 4th December, 2013

Miguel Grabiel 1117/13Rakesh Malloju 0184/49Amit Phadke 0033/49

Contents

• Organizations• Evolutionary Processes• Organizational Emergence• Organizational Boundaries• Emergence of a Community of Practice• Organizational Transformation• Emergence of New Populations• Cognitive Strategies• 4 Types of Organizations Evolving• Community Evolution

Organizations

Their achievements depend on the knowledge and resources available to them which vary over time and context.

Base and infrastructure of modern society, since they pursue activities too broad in scope to be accomplished by individuals.

Capacity to do harm (e.g. by-products) as well as good. Foundations and disbandings have a +/- impact on workers. Small size and shorter time-scale than its founders and managers.

Goal-oriented: behaviors and deliberate design of activity systems, focus agenda.

Boundary-maintaining: members and non-members, therefore efforts to enforce memberships (symbols such as dress style and special vocabulary).

And socially constructed systems of human activity (Aldrich, 1979): specialization of functions, routines (interpersonal and interaction with machines), control structures for evaluation and compensation.

Evolutionary Processes

Variation

•Change from current routines, competencies and organizational forms.•Intentional: when people actively try to generate alternatives and look for solutions to problems (e.g. Problemistic search, innovation incentives)•Blind: occurs independently of environmental or selection pressures (e.g. mistakes, luck, and idle curiosity).

Selection

•Differential elimination of certain types of variations.•External: Environmental forces affect organizational routines and competencies (e.g. market, competitive and regulation pressures).•Internal: Forces internal to an org. that affect its r&c (e.g. pressures toward internal stability and homogeneity, past selection criteria no longer relevant, escalation of commitment)

Retention

•Selected variations are preserved, duplicated or reproduced.•Within Organizations: Specialization and standardization of roles limiting discretion.•Between organizations: Institutionalization of practices in cultural beliefs and values.

Struggle

•Contest to obtain scarce resources because their supply is limited.•Struggle within organizations, since members pursue individual incentives as well as organizational goals.

Organizational EmergenceAdult Population• Conception

Nascent Entrepreneur• Gestation

Fledging New Firm• Infancy

Established New Firm• Adolescence

The Stages of Nascent Entrepreneurship – Adapted from Reynolds (1994)

I. Think about business opportunities.

II. Entrepreneurial Activities (e.g. business plan, workforce- and finance-seeking).

Not linear, step-by-step process.

Resource requirements for initial efforts are low.

Fierce selection pressure. Outcomes of the

founding process are highly uncertain.

Nascent Entrepreneur

Social Network

• Diversity in network composition

• Strong and long-duration ties may avoid opportunism and uncertainty

• Brokers as channel to resources and opportunities (e.g. high-status people).

Knowledge

• To Apply under extreme time pressures (Improvisation).

• Sources: Previous work experience (constraint?), Experts and Imitation.

• Codify or Share valuable knowledge?

• Knowledge needs validation from external sources.

Resources

•Contained personnel when formed.•Own funds preserves autonomy.•Informal (Family, Friends, Business Angels) and Formal (Banks, Venture Capitalists) sources of capital.

REPRODUCER OR

INNOVATOR?

The majority of organizations start as small reproducer.

If too innovative, will not survive.

Competence-enhancing innovations of start-ups are absorbed by incumbents

Many organizing attempts fail (Intentions misguided or impossibility to mobilize resources).

Organizational Boundaries

Development of

Organizational Boundaries

Different Selection Pressures

Routines and

Competencies kept alive

Transform

population’s

knowledge

Contribution to

population

dynamics

How do hiring decisions shape new organizations?

New recruits bring own skillsets and preferences which tend to be retained

Members keep performing routine and differentiated tasks unless a change is

forced

Caution: Organization’s ability to respond creatively to changing environmental conditions may be hampered by too much internal homogeneity and organizational inertia.

Emergence of a Community of Practice

Patterned social

interaction between members

Sustains organizatio

ns knowledge

Facilitates reproductio

n

Community ofPractice Integration Differentiatio

nAmbiguity

Consensus Organization-wide

Only within clusters

Fluctuating across issues

Consistency

High Low Fluctuating

Sources of change

External events or managerial directives

Inter group conflict

Individuals and groups

Focus Narratives, Rituals

Behavior, routine

Cognition, Behavior

Organizational Culture: 3 Threads of interpretations

Founders and

members of new

organizations create

communities of

practice

Organizational boundaries

become more salient as contrast

between org activities and environment

deepens

Organizational

coherence can be

increased by sharing knowledge

through community of practice

Organizational Transformation

Activities

• Changes in an organization’s activity system that have a major effect on organizational knowledge

Boundaries

• Expansion or contraction involving members or other organizations

Goals

• Major Changes in domain claimed of in breadth of products and services

Transformation involves a major change in an organization over time and represents a substantial variation, planned or

unplanned, that has been selected and retained

Organization that cannot change

will constantly be at risk, if its

environment is evolving and it

cannot keep pace

If a substantial number of organizations are unable to

make the transformation and new organizations don’t replace them, the

population will not sustain

If most organizations are constrained from

undergoing transformation then

population will persist through founding of new

organizations

Emergence of New Populations

Acceptance of new kind of venture as a taken for granted part of environmentWhen an activity becomes so familiar & well known that people take it for granted consumers point of view, cognitive legitimacy means people are committed users of a product or service

Cognitive Legitimac

y

Socio Political

Legitimacy

Acceptance by key stake holders the general public, key opinion leaders and government officials as appropriate & right

Moral acceptance referring to conformity with cultural norms and values, Regularity acceptance, referring to conformity with government rules and

regulations

Cognitive Strategies

Organizational

Create Knowledge base through Experimentation

Link new ventures to Past via social behaviors

Build on local networks of trust

Avoid entanglement of government agencies

Within Population

Encourage convergence around a dominant design

Collaborate for standard setting bodies

Foster perceptions of Reliability by mobilizingTo take collective action

Present a united front toPolitical and government officials

Between populations

Promote alliance & third party activities

Create cross population groups and associations

Negotiation and Compromise with other industries

Co-opt govt. agencies as allies against competing populations

Communitycreate linkages with established educational cirricula

Cooperate with independent certifying institutions

Organizing collective Marketing and lobbying efforts

PAC’s and hiring ofFormer government officials

LearningCognitive Legitimac

y

Moral Legitimac

y

Regulatory

Legitimacy

Cognitive strategies Socio-political Strategies

Reproducing Populations

DisbandingRate

• Disbanding rate is “ Death Rate” of organizations in populations

• Its importance lies in “ identifying favored forms and which criteria would work”

Entrepreneurial knowledge &

intentionsEntrepreneurial

access to resources

Factors affecting Emerging & Disbanding Rate

Intra-Population Conditions

Density Dependent model

N- Population Density (No. of organizations at any

given time)r- intrinsic rate of growth in

population (Hypothetical rate at which it would grow

in the absence of constraints from competitors )

Factors affecting population reproduction

• They decrease current organizations likelihood of disbanding by freeing up resources

• Likely to affect founding rate negativelyPrior Disbanding

• Likely to increase subsequent disbanding drawing overly optimistic & poorly prepared organizations

• Organizations founded during higher density experience high disbanding rate

Prior Founding

• Resources become more competitive• A “U” shaped affect on disbanding • Measuring density (regional/city/national level)

depends on industry (newspaper vs. breweries or banks vs. insurance)

Density Dependence

• Organizational form that gains a selective advantage by concentrating on a narrow niche

• Gaining a selective advantage by spreading itself over a broad niche

• Organizational forms that gain advantage by reproducing rapidly when carrying capacity is under exploited

• Gaining a selective advantage by making effective use of resources when it approaches its carrying capacity

R vs. K strategists Generalists vs. Specialists

G3G2

G1

Four Types of Organizations Evolving

K- SpecialistThey survive with small & stable market share

K-GeneralistEarly followers are likely to be k- generalists through subsidiaries etc

4 Types

G1+G2+G3

S1 S3

S2 S4

Un concentrated

Market

concentrated Market

Resource Partitioning

Community Evolution

Commensalism

Full Competition

Partial Competition

Predatory Competition

Neutrality

Partial Mutualism

Full Mutualism

Full Competition

Partial CompetitionPredatory

Competition

Neutrality

Partial Mutualism

Full Mutualism

Growth in each population detracts growth in other

Inter-population relations are asymmetric with only one having negative affect on other

One population expands at the expense of others ex: Television over radio

Two populations in the same community have no affect on each other ex: Savings bank vs financial services

Inter-population relations are asymmetric with only one benefitting ex:

Two populations are in overlapping niches benefitting from presence of each other

Symbiosis Two populations are in different niches and benefit from presence of each other Ex: Venture capitalists & Technology Firms

DominanceAs commensalistic and symbiotic relations develop within emerging communities, a hierarchy of influence & power emerges Ex: Lender to borrower , wholesaling to retailing , supplier to customer (B2B)

Formation of Organizational Communities

• Catalysts to generate new communities • Shifts in societal norms and values/ changes in laws and regulations• Technological innovation (World wide web is an example)

Role of Entrepreneurs Funding Sources Favored form organizations entry

Steady Stream of organizational founding for the growth population

Radio, retail stores, educational institutions

Symbiotic role of venture capitalists

Semiconductor, biotechnology firms, technology firms

Changing favored mixResource partitioning

effectMature populations with K-specialists, K-generalistsNew & entering first time; Old and diversifying into new market

THANK YOU!