Connecting the dots: institutional theory and organisational management 1

Guest blogger:
Professor Brian SmithProfessor Brian Smith, Visiting Research Fellow at The Open University Business School, Adjunct Professor at SDA Bocconi in Milan.
 

When I was a young graduate trainee, I sometimes wondered how it felt to be one of those senior guys (they were almost always men then) whose word was law and who seemed to me to be all powerful. I imagined feelings of power and authority and looked forward to the day I’d get there. When I reached that level, those memories seemed innocent and naïve as my dominant feeling, and those of my senior peers, was that of frustration. Why, I wondered, was it so difficult to get anything done?

cc by Victor1558When I moved into academia, I was surprised and, to be honest, a little irritated that there existed a whole body of research that spoke directly to these frustrations of senior managers. Surprised because I considered myself a pretty well-read executive and irritated because if I’d known this stuff earlier it would have helped me get things done. The problem is, as with much management research, all the good stuff is wrapped up in jargon and published in journals that managers never get to read.

A good example of this work is institutional theory, generally acknowledged to be the creation of Philip Selznick. In essence, this body of work describes organisations like big companies as being confined by the values of their external environment. DiMaggio and Powell expanded on this, describing three sets of pressures: coercive (legal), normative (cultural) and mimetic (seeking to imitate). Their paper’s title, “The Iron Cage Revisited,” is a pretty good description of how many of my management colleagues felt.

When I first read this work, coming from a corporate background, the scales fell from my eyes. Some of the pressures had obvious manifestations (e.g. coercive regulatory pressures) but others only became understandable when I put my experience in the context of institutional theory. The hassle I had received from the doctors in medical affairs (I worked in the pharma and medical technology sectors), for example, or from the sales team, were obvious examples of normative pressures stemming from the sub-cultures of their professions.

And mimetic pressures were clearly seen in all the pressure to adopt ‘industry best practice’ that, whilst we justified it in rational terms, often seemed a senior management whim that we were forced to serve. This rationalisation of emotional whims is also discussed by the institutional theorists, who talk about ‘rationalised myths’ as a way firms maintain ‘social legitimacy’ in their business environment.

I now use institutional theory in my work trying to understand how firms compete. I’ve discovered that the jargon and journals aren’t the only reason this valuable knowledge isn’t used much by practising executives. The other reason is that they usually prefer simple, quick answers and institutional theory doesn’t do quick and simple easily. It needs thought and careful application. Take, for example, the pharmaceutical industry’s current problems with pricing and government pressure to reduce costs. To many of us in the industry, the picture of ‘big bad pharma’ painted by activists and pressure groups seems unfair and to neglect the contribution the industry has made to the incredible health outcomes we now have. If the industry had used the ideas of institutional theory, we would have understood the cultural pressures we face and predicted the situation we now face. As an industry, pharmaceutical companies have lost a lot of social legitimacy, which sounds academic until you realise that it’s the direct cause of the industry’s pricing and political activity.

So, whilst I try not to have regrets, I regret that I’d not learnt about institutional theory earlier. It would have made me a more effective, and rather less frustrated, executive. Still, if you’re an executive reading this, there’s still time for you. Brave the jargon, throw out your suspicion of the academic and learn some more about institutional theory. Or of course you could create a rationalised myth for why you don’t and stay in your iron cage.

Professor Brian D. Smith, is visiting research fellow at the Open University Business School and Adjunct Professor at SDA Bocconi in Milan, Italy. He y. He welcomes comments or question.

Further reading

1. Selznick, P., Leadership in Administration: A Sociological Interpretation (1st Edition), New York, Harper and Row (1957).

2. DiMaggio, P. & Powell, W., The Iron Cage Revisited: Institutional Isomorphism and Collective Rationality in Organisational Fields, American Sociology Review, 48, 147-160 (1983).

Follow me on twitter @drbriandsmith

P.S My New Book, The Future of Pharma, is now available at Amazon or www.pragmedic.com/bookstore

One comment

  1. Interesting piece, particularly the sub-text regarding the accessibility (or otherwise) of much academic research.
    To what extent should business school academics be writing to serve the needs of a constituency of practising managers, rather than just for their academic peers?

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