Organizational Theory, Ethical Issues in: Part 1
Robert A. Phillips
It has been said that no one deserves more credit for victory in World War II than Henry Ford. His development of the assembly line made available the tools of victory without which the most brilliant strategy and staunchest determination are insufficient. It was the organization of productive capacity that is credited. Similar credit has been attributed to the organization of the Manhattan Project, the moon landing and, of course, General Motors and the other behe moths of twentieth century commerce. When so considered, it is not surprising that organization theory would be rife with ethical content. Indeed, Shafritz and Ott trace organization theory back to Exodus chapter 18, in which Moses’s father in law Jethro instructs Moses on how to delegate his responsibilities for rendering judicial decisions. Verses 25–6 say:
And Moses chose able men out of all Israel, and made them head over the people, rulers of thousands, rulers of hundreds, rulers of fifties, and rulers of tens. And they judged the people at all seasons: the hard cases they brought unto Moses, but every small matter they judged themselves.
The first two excerpts in Shafritz and Ott’s (2001) compendium of organization theory are from Socrates and Adam Smith – two people as well (or better) known for their moral philosophy as for their contributions to organization theory.
An overview of the history of organizational theory as an academic discipline presents a sense of oscillation between the technical and humanist approaches. In what follows, I will briefly describe the work of some of the seminal scholars in the field of organization theory and the perspective advanced by each. This will be followed by an equally brief suggestion of some of the ethical issues that surround each perspective. This discussion will be far from exhaustive. Rather, it is intended to give the reader the broadest sense of the domain of the field and the moral questions that may arise in this domain.
Classical Organization Theory
Socrates and Moses notwithstanding, it is rea sonable to begin discussion of organization theory where we might also begin a discussion of economic theory: Scotland in 1776, in the person of Adam Smith. Though widely recognized as the father of modern economics, at least for his analysis of the division of labor, Smith may also be considered the father of organization theory. Smith argues that the great benefit to the productive capacity of society arises due to the division of labor. By undertaking only one small part of overall production each individual is able to increase her dexterity, minimize time switching between jobs, and improve that part of the process through innovation.
The question then becomes one of just how many such divisions are optimal. No one is more famous for his thoughts on this aspect of the division of labor than Frederick Taylor – originator of ‘‘scientific management.’’ Taylor’s time and motion studies determined the optimal number of smaller activities for any given productive task, the proper tool for the job (e.g., what size shovel moves the maximum amount of coal), how long each activity should take a typical worker, etc. For classical organization theorists, organizations are like machines, so organization theory is akin to an engineering problem (con sider another classical work by Henry Towne, ‘‘The engineer as economist’’). Efficiency was the goal and people were typically considered interchangeable parts of the organizational ma chine. The search was for the ‘‘one right way’’ to organize production. Notably, both Smith and Taylor considered – to varying extents – the moral dimensions of their models. Though believing that the division of labor was in many ways good for society and the workers, Smith recognized, for example, that the division of labor tends to dull the mind. He writes:
The man whose whole life is spent in performing a few simple operations, of which the effects, too, are always the same, or very nearly the same, has no occasion to exert his understanding . . . He naturally loses, therefore, the habit of such exertion, and generally becomes as stupid and ignorant as it is possible for a human creature to become. (Cited in Heilbroner, 1986: 155)
Taylor (1911) was less circumspect about the effects of his program on the workers. He believed that, ‘‘Without any question, the large good which so far has come from scientific management has come to the worker.’’ To Taylor’s credit, his system was seen by many as a progressive force in its day (he counted Justice Louis Brandeis among the early defenders of Taylor ism), but questions nevertheless emerge. What are the moral implications of treating people like machine parts? Are they to be thrown out when worn down? Are people so easily interchangeable for one another? What are the effects on one’s self perception of being treated this way? Taylor was profoundly concerned with fairness (e.g., ‘‘a fair day’s work for a fair day’s wage’’), but his measure of fair was determined by the best workers working their hardest, often to their very limit. Is this a just metric? Should any provision be made for human weakness and dis parities of strength and talent? If not this, then what is the proper expectation of a fair day’s work?
The Organizational Behavior Perspective
At least in part as a response to the mechanistic perspective of classical organization theory, there emerged a more humanistic stream of re search around questions concerning how individuals acted and reacted within organizations and groups. Research on issues such as motivation, group dynamics, leadership, teamwork, and the effect of organizational environment on individual behavior came to the fore. Beginning with the famous Hawthorne Experiments of Roeth lisberger and Mayo, researchers began to con sider the effects of group norms, workplace socializing, treatment of and attention paid to employees by management, and the interaction effects among these and other factors on work place performance. Mary Parker Follett wrote important treatises on the giving and taking of orders and the psychological influences in play in organizations. Douglas McGregor (1960) contrasts Theory X (essentially the assumptions of Taylorism) with Theory Y. The latter provides a more optimistic picture of human nature that assumes that, rather than lazy and opportunistic, people take pride and fulfillment from work. Often the assumption that workers see work as a necessary evil can be self fulfilling because of the way managers treat them using this assumption. Chester Barnard (1968) argued money is of limited value as a motivator and that other incentives (e.g., prestige, pride, association with desirable others, etc.) play an equal or overriding role in motivating people.
But ethical questions emerge from this more humanistic perspective as well. When does altering the environment to produce desired individual behaviors cross into illegitimate psychological manipulation? Can social psycho logical perceptions of justice be used to replace actual workplace justice? Can the other incentives Barnard describes be used opportunistic ally by companies, perhaps even cheating employees out of their material due? What if the majority of employees of a given company or industry are irredeemably lazy and shiftless? Is it morally permissible to treat these people more instrumentally rather than risk being taken advantage of? In short, do the moral rules change when the chary assumptions of the organizational behavior perspective do not hold? Finally, if managers and organizations are able to exert this sort of influence over the actions and perhaps the personality of others, what sort of people are they obliged to mold? While more subtle, such questions are nevertheless vital to the project of organization theory.
Organizational Economics
As the pendulum between humanist and technical approaches swung back toward the latter, the field of organizational economics emerged. Preeminent in this area are Williamson’s trans action cost economics and Jensen and Meck ling’s ‘‘agency theory.’’ Like Chester Barnard, agency theory is concerned with incentives and motivations of individuals in organizations. However, agency theorists and organizational economists have a far less charitable view of human nature. The fundamental premise of organizational economics is that the separation of risk taking (often simplistically referred to as ‘‘ownership’’) and decision making (a.k.a., control) creates an agency problem. Given that people are opportunistic (self interest seeking with guile), what can be done to prevent man agers from shirking their duties and/or using a firm’s resources for their own benefit rather than that of the principal?
The moral issues attendant to the organizational economics perspective are enormous. Are people truly opportunistic? Does the assumption of opportunism tend toward self fulfillment? As with Taylorism, what constitutes shirking? Who is the principal? Who, if anyone, ‘‘owns’’ the firm? What moral baggage comes with such ownership? What is the nature of the ‘‘property rights’’ assumed of principals? What responsibilities are concomitant to these property rights? What role do concepts such as trust and reputation play in minimizing agency and transaction costs?
Power and Politics Organization Theory
Whereas the organizational economics literature perceives the organization as an institution primarily characterized by rationality, the power and politics perspective sees the organization as a place where relationships of power – and often conflict – play out. Whereas the ‘‘structuralist’’ school focuses on the authority of the formal hierarchy (e.g., relationships as viewed on an organization chart), the power and politics perspective examines power derived from a variety of relations (e.g., expertise, charisma, connections, etc.). The power and politics lens is per haps the most obviously morally laden of the frameworks examined so far. The ends to which power is applied are often taken as given. The obvious moral question for such studies is the legitimacy of these ends. What means are justified to achieve what ends? Equally obvious is the fact that any time there is conflict, there will be issues of distributive and procedural just ice. What duties are owed to the powerless?
Obviously, much is omitted from this limited introduction. Among the areas not covered are the vital topics of systems theory, organizational culture, organizational development and change, the social psychology of justice, the effects of boundaryless and virtual organizations, critical theory and postmodernist approaches, and many other topics. As non state organizations increase in power and influence around the globe, one may reasonably expect the field of organization theory to examine all the more closely the moral issues attendant to the various perspectives.
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