The Analysis of Goals in Complex Organizations
Understanding Organizational Goals: Official vs. Operative
In large-scale organizations two main categories of goals can be distinguished: official goals and operative goals. Official goals are the broad purposes of an organization as stated in official documents, while operative goals are the actual ends pursued through the organization's operating policies and decisions. Operative goals are more specific and may sometimes diverge from official goals. To gain a comprehensive understanding of organizational behavior, we need to analyze operative goals. Operative goals can be influenced by various factors, including group interests and personal ambitions; discerning them can be challenging for researchers.
The sequence of authority and control within complex organizations
Every organization must accomplish four major tasks:
- securing capital,
- securing basic legitimization,
- marshaling necessary skills, and
- coordinating activities.
These tasks may vary in importance depending on the nature of the organization's work and its stage of development. The dominant group within the organization is determined by which task area is most critical at a given time.
Different types of authority structures
Perrow did a study in hospitals. He found different types of authority structures:
- Trustee domination; these hospitals depend on community funds and are primarily controlled by trustees who ensure that funds are not misused and that community needs are met;
- Medical staff domination: these hospitals are controlled by doctors who possess the technical skills essential to patient care and treatment;
- Administrative domination; these hospitals prioritize internal and external coordination, with administrators holding significant power.
Each type of authority structure shapes the operative goals of the hospital, influencing decisions related to standards of care, resource allocation, and relationships with other organizations and patients. For example, trustee-dominated hospitals may prioritize conservative financial policies, while medical staff-dominated hospitals may focus on medical standards and research. Administrative-dominated hospitals may emphasize coordination and efficiency.
The authority structure can change over time in response to shifts in the organization's major tasks or technology. Hospitals may transition from trustee domination to medical staff domination and, in some cases, to administrative domination as their priorities evolve. These are general patterns, and there can be variations within each type of organization and authority structure. The dominant group within an organization can shape its operative goals and behavior.
Administrative dominance in complex organizations
In the hospitals that Perrow studied, administrative dominance arises from the need to coordinate increasingly complex and non-routinizable functions within such organizations. There are several bases for this type of control:
- Hospitals have undertaken a wide range of functions that doctors alone can no longer direct. This complexity necessitates coordination, making administrators more powerful.
- Health services, in general, have become more interdependent and specialized. Hospitals need to cooperate with other healthcare institutions and community agencies, leading to increased administrative responsibilities.
- Administrators can control matters that affect doctors' demands for status, deference, and time-saving conveniences by supervising employees and supporting them in conflicts with doctors.
- Administrators can also control communication between trustees and key medical staff officials, preventing alliances between these two groups against administrators.
Administrative dominance can result in different orientations for the organization's goals. If it primarily stems from the complexity of hospital activities, the organization may prioritize financial solvency, budget controls, efficiency, and minimal development of services. Preventive medicine, research, and training may be minimized in such cases. This orientation is common when administrators have backgrounds in finance or management. As hospital administrators become more professionalized, they may recognize the broader medical-social role of hospitals and become more oriented toward organizational and financial innovations, medical standards, and other medical-social goals.
Sometimes, power is shared by two or three groups to the extent that no one group can control all or most of the others. Multiple leadership is most likely to appear in organizations with multiple goals that lack precise criteria for achievement. While it can lead to the accommodation of various interests, it also poses challenges related to goal setting, assessment of achievement, and assignment of responsibility. The absence of a single ultimate power can result in conflicts being submerged, making long-range planning difficult and leaving the organization open to unintended consequences.
In a hospital with multiple leadership, trustees, doctors, and administrators each pursued their goals, sometimes in conflict, sometimes in agreement. This arrangement allowed the hospital to meet various group interests but also created challenges in terms of goal conflicts and assessment of achievement. Despite these challenges, the hospital managed to prosper and lead in various areas.
Application to other types of organizations
Voluntary service organizations like private universities, social service agencies, privately sponsored correctional institutions, and fund-raising agencies share similarities with hospitals. Initially, trustees representing the community play a defining role in these organizations, emphasizing community goals and those aligned with their social positions. As these organizations grow in complexity and the professional staff expands, professionals may challenge trustees' orientations and seek to broaden services and clientele. Coordination of activities often falls to administrators with professional backgrounds who, for a while, retain their professional identity, but trustees gradually lose the competence to interfere. Professionals may develop their own interests and ethics, potentially leading to a narrow focus on specialized goals and the neglect of broader community needs.
Non-Voluntary service organizations are sponsored by governmental agencies and include county or military hospitals, city or county welfare agencies, and correctional agencies. Authority for goal setting and regulation in these organizations does not rest with voluntary trustees but with government-appointed commissioners. Commissioners are typically less identified with the organization and do not derive much social status from it. Administrators in non-voluntary organizations face challenges from custodial staff, and the key skills may be non-professional. Nevertheless, professional influence is growing in these organizations, and administrators committed to the positive purposes of the organization may be brought in. The power structure and goals in non-voluntary organizations may differ from voluntary organizations due to the influence of administrative skills and the overriding goal of system maintenance.
Profit-making organizations may seem less characterized by multiple goals because their primary focus is on profit. In smaller firms, owners often control the organization, while larger ones may be led by professional executives. The power structure and goals in profit-making organizations may primarily be influenced by their size. Even in profit-making organizations with a primary goal of profit, there are operational decisions and variations that can shape the organization's character, including personnel practices, customer services, growth strategies, and more. Therefore, understanding these organizations requires attention to these operational alternatives.
Perrow writes that some argue that the significance of profits has decreased in large organizations, especially those with professional management. The idea is that professional managers, unlike owners, do not have a personal stake in profits and prioritize stability, growth, solvency, and liquidity over profits. A study by James Dent examined the aims of top management in various business firms. The responses did not show a significant difference in mentioning "to make profits, money, or a living" between large and small firms or between those with professional managers and owner-managers. The study primarily addressed stated goals rather than operative goals.
Historical background and the training received by executives may play a significant role in shaping management decisions and goals within a company. Historical factors, along with technology and trustees' awareness, have a decisive impact. The nature of technology, stages of growth, and the influence of skill groups within organizations can result in substantial variations in operative goals. This variation can be seen within profit-making organizations, not just between trustees and professional administrators. Different departments, such as sales, engineering, or finance, may shape the goals differently.
Perrow proposes an ideal-typical sequence for goal changes in profit-making organizations. It starts with trustee domination during initial financing and development phases, followed by skill group dominance during product or service development. Eventually, control shifts to the coordination of more routinized activities. This cycle may repeat as markets and technologies change. Critical variables influence the selection of key problem areas and the characteristics of controlling elites and operative goals. These variables include capital needs, legitimization, routinization possibilities, adaptability of technology, professionalization, and the nature of the workforce. The concepts and scheme described can be applied to analyzing the dynamics of goal setting and changing within all complex organizations, whether they are profit-making, governmental, or voluntary.
Perrow, C. (1961), The Analysis of Goals in Complex Organizations, in: American Sociological Review,Vol. 26, No. 6 (Dec., 1961), pp. 854-866.