To start with, Morgan makes two important distinctions. The first distinction is between two different notions of rationality, and the second involves two contrasting uses of the "brain" metaphor.
Mechanistic or bureaucratic organizations rely on what Morgan calls "instrumental rationality", where people are valued for their ability to fit in and contribute to the efficient operation of a predetermined structure. Morgan contrasts this with "substantial rationality", where elements of organization are able to question the appropriateness of what they are doing and to modify their action to take account of new situations. Morgan states that the human brain possesses higher degrees of substantial rationality than any man-made system. (pp78-79)
Morgan also observes a common trend to use the term "brain" metaphorically to refer to a centralized planning or management function within an organization, the brain "of" the firm. Instead, Morgan wants to talk about brain-like capabilities distributed throughout the organization, the brain "as" the firm. Using the brain metaphor in this way leads to two important ideas. Firstly, that organizations are information processing systems, potentially capable of learning to learn. And secondly, that organizations may be holographic systems, in the sense that any part represents and can stand in for the whole. (p 80)
The first of these two ideas, organizations as information processing systems, goes back to the work of James March and Herbert Simon in the 1940s and 1950s. Simon's theory of decision-making leads us to understand organizations as kinds of institutionalized brains that fragment, routinize and bound the decision-making process in order to make it manageable. (p 81) According to this theory, the organization chart does not merely define a structure of work activity, it also creates a structure of attention, interpretation and decision-making. (p 81) Later organization design theorists such as Jay Galbraith showed how this kind of decision-making structure coped with uncertainty and information overload, either by reducing the need for information or by increasing the capacity to process information. (pp 82-83)
Nowadays, of course, much of this information processing capacity is provided by man-made systems. Writing in the mid 1980s, Morgan could already see the emergence of the virtual organization, embedded not in human activity but in computer networks. If it wasn't already, the organization-as-brain is now indisputably a sociotechnical system. The really big question, Morgan asks, is whether such organizations will also become more intelligent. (p84)
The problem here is that man-made systems (bureaucratic as well as automatic) tend towards instrumental rationality rather than substantial rationality. Such systems can produce goal-directed behaviour under four conditions. (p87)
- The capacity to sense, monitor and scan significant aspects of their environment
- The ability to relate this information to the operating norms that guide system behaviour
- Ability to detect significant deviations from these norms
- Ability to initiate corrective action when discrepancies are detected.
- Division of responsibilities cause a fragmentation of knowledge and attention.
- Bureaucratic accountability and asymmetric information produce ethical problems such as deception. (This is a form of the principal-agent problem.)
- Organizations also suffer from various forms of collective self-deception, resulting in a gap between "espoused theory" and "theory-in-use".
- Encourage and value openness and reflectivity. Accept error and uncertainty.
- Recognize the importance of exploring different viewpoints.
- Avoid imposing structures of action. Allow intelligence and direction to emerge.
- Create organizational structures and principles that help implement these principles.
- Redundancy of function - each individual or team has a broader range of knowledge and skills than is required for the immediate task-at-hand, thus building flexibility into the organization.
- Requisite variety - the internal diversity must match the challenges posed by the environment. All elements of an organization should embody critical dimensions of the environment.
- Minimal critical specification - allow each system to find its own form.
- Learning to learn - use autonomous intelligence and emergent connectivity to find novel and progressive solutions to complex problems.
- The realities of power and control. (p 108)
- The inertia stemming from existing assumptions and beliefs. (p 109)