No theory forbids me to say "Ah!" or "Ugh!", but it forbids me the bogus theorization of my "Ah!" and "Ugh!" - the value judgments. - Theodor Julius Geiger (1960)

The Social Structure of the Company

Social structures within organizations involve the relationships, roles, and interactions of various groups and individuals within the organization, and have emerging functions and dysfunctions for the organization’s culture, dynamics and effectiveness. Dahrendorf examines the formal hierarchy and structure of companies, highlighting the roles of management, middle managers, staff, bureaucracy, and worker representatives. He discusses the division of labor and authority within these groups. Significant informal groups exist within the workplace, such as social networks and cliques. These informal groups can impact cooperation, communication, and social dynamics.

Dahrendorf also explores the role of worker representation and labor unions in industrial settings, emphasizing the differences between the British "shop steward" model and the German works council system. Due to socio-economic stratification of the workforce, different layers of employees possess varying levels of authority, status, and influence within the organization. Dahrendorf analyzes the dynamics of integration and conflict within organizations, focusing on the challenges and complexities arising from the dual roles of worker representatives, especially in the German context. The book offers a sociological perspective on the inner workings of companies, focusing on the interplay between formal structures and informal social networks. Understanding these dynamics is important for effective management and organizational functioning.


Chapter one – Sociology of the business

Human behavior in society cannot be fully explained or understood using the rules of probability. Individuals in society are assigned certain roles and behaviors by the society itself, much like a director assigns roles to actors. These roles come with rights and duties, specific ways of dressing, and ways of interacting with others. The homo oeconomicus - an assumption often used in economics to simplify human behavior by assuming individuals act rationally in their self-interest - is sufficient for economic purposes. Sociology works according to a different image of man, due to its problem area and research approach. Industrial sociology is dealing with problems that can be explained by resorting to established regularities of social action.


Industrial sociology is an empirical science, focused on formulating assumptions and theories based on observations and data related to industrial organizations. Industrial sociology saw a great development after the 1930s, primarily after the Hawthorne experiments in the United States, which revealed the importance of social factors in the workplace. the author discusses the approach and methods of industrial sociology.


Several research methods are used in industrial sociology:


  1. Participant Observation: Researchers actively participate in the workplace to understand social dynamics and gather data. This method is essential for gaining insights into the social structure of the workplace.
  2. Document Analysis: Researchers analyze various documents, such as company records, negotiation agreements, organizational plans, and even historical documents. These documents provide valuable insights into the organization's structure and functioning.
  3. Surveys and Questionnaires: Researchers conduct surveys and use questionnaires to gather data from employees and other stakeholders. These surveys help in understanding the opinions and perceptions of individuals within the organization.
  4. Group Discussions: Researchers may organize group discussions among employees to explore specific topics or issues. This method aims to collect information on collective opinions and shared experiences.
  5. Experimental Research: While less common in industrial sociology, controlled experiments may be used to study specific factors while keeping other variables constant.


Industrial sociology should be studied within broader social structures, such as industry, economics, and society as a whole. The interplay between the workplace, industry, and society is an essential aspect of understanding the social dynamics within organizations. Industrial sociology is a complementary field of study for individuals in fields like law, economics, and business administration. It enhances their understanding of the complex social interactions within organizations and can aid in decision-making and management.


Chapter two - Structures of operational integration

A company can be viewed as a social system. Defining a company as a social system is distinct from understanding its specific structures and functions in practice. Simply defining a company as an entity for producing goods or services doesn't imply that all its elements are oriented toward this purpose. Factors like profitability, quality, and integration play a significant role in determining the company's societal and economic functions. The social function of a company is an integration of its various elements, combining them into an integrated whole with assigned functions for each element. The goal is to achieve alignment in the interests and behavior of all members of the organization. Stability within a company is important and is influenced by cooperation, consensus among members, and the combination of technical and organizational factors. Modern work division is characterized by extensive differentiation of tasks. Work division in modern industrial society often involves spatial concentration and mechanization. Coordination is needed to connect the fragmented elements of the production process back into a cohesive whole.


Social positions and roles in a company need to be coordinated. A functional organization alone is not sufficient for this purpose. Scalar organization is a structure of hierarchy and authority necessary to hold a company together as a social system.

Authority and power differ. Authority in a company is based on competence and is limited in scope. Every authority figure has specific responsibilities and authority over a defined group of individuals and tasks.


Management at the top of a company represents the unity of the entire organization and serves as the ultimate decision-making authority. The composition and legitimacy of management have evolved over time, with a shift from owner-managers to appointed managers and experts.

The expert staff within organizations - including technical and social experts who contribute to the company's efficiency and problem-solving – has grown in importance.


Men/women in the middle of the organizational structure of a company, including supervisors, inspectors, foremen, and similar positions, play a crucial role in bridging the gap between upper management and workers in the company. They have a dual role in mediating between top-down orders from management and bottom-up feedback and concerns from workers. Middle management serve as a link between upper management and the workers. They translate management's directives into practical instructions for the workers, ensuring that orders are specific, relevant, and understandable for those on the shop floor. These individuals also represent the interests of the workers to management. They convey workers' suggestions, complaints, and other feedback to higher-ups in the company. In this role, they act as advocates for the employees. This dual role is challenging, as they must balance the trust of both management and workers. They are vulnerable to conflicting expectations and must navigate this delicate position effectively. Yet, these individuals fulfil a crucial role in maintaining the smooth functioning and integration of the organization. They help ensure that communication flows effectively both from the top down and from the bottom up. The role of these individuals has evolved over time, and their functions have been increasingly delegated to specialized positions in the organization, especially in large companies.

The emergence of formalized employee representatives, such as workers' councils or unions, has become common in many developed industrialized nations. These representatives play a significant role in advocating for the interests of the workers within the company. In Germany, work councils represent the common economic interests of workers to employers and support the employer in achieving the company's goals. This dual role can create challenges and conflicts.


Informal groups within the workplace, such as informal social networks, complement the formal organizational structure. Informal groups can affect workplace dynamics, cooperation, and communication.


The socio-economic stratification within the workforce influences varying levels of authority and status for different levels of employees.


Chapter three - Structures of operational conflicts

Conflicts exist within organizations. Aristotle thought that humans naturally submit to others, because some are born to rule while others are born to serve. Instead, as Kant has written, while humans have a social tendency, they also possess an inclination to resist others. Conflict and change are not diseases of social institutions but rather essential for their existence and future. Conflict arises within the structure of organizations due to various factors, including personal forces, technological developments, and social dynamics. The organization, such as a business, is held together not only by consensus but also by a system of authority and hierarchy, which can be a source of conflict. Common interests exist among all members of an organization but conflicts emerge because different individuals have varying stakes in maintaining or changing the status quo. Conflicts within organizations persist regardless of changes in ownership or the socioeconomic status of participants.


Informal conflicts within a workplace are those that are not formally organized or structured and often involve tensions and difficulties among employees. These conflicts can manifest in various ways, such as spreading rumors, rejecting authority figures, initiating absenteeism, or resisting changes in the workplace. Informal groups within the organization often play a role in these conflicts, either by supporting or opposing certain actions.

In redirected conflicts, individuals express their frustrations or conflicts in ways that may not directly relate to the underlying issues. For example, someone experiencing work-related stress might have conflicts at home or engage in absenteeism or workplace accidents as a form of protest. These informal and redirected conflicts can be symptomatic of underlying issues within the workplace's social structure, and they may indicate problems that need to be addressed to maintain a healthy and productive work environment.


Manifest conflicts are organized conflicts primarily involving power struggles between solidarity groups, often represented by employers and employees. These conflicts are characterized by the involvement of organized groups and can significantly impact all parties involved. The practice of industrial relations has evolved over time, with extreme forms of strikes and lockouts becoming a last resort. Tariff agreements often regulate the forms of conflict resolution between parties. Labor disputes can vary from year to year and be influenced by various factors. Structural organizational issues within companies can contribute to conflicts, including unclear roles and responsibilities, blocked opportunities for advancement, and problems related to functional work organization that may lead to informal groups and cooperation issues.


Technological developments influence industrial conflicts as well. Historically, workers opposed machines, fearing job displacement, but over time, they adapted to and sometimes even embraced technology. But the progress of mechanization can still lead to conflicts today, primarily due to concerns about job security and social consequences, rather than opposition to the machines themselves. Also, working conditions can contribute to conflicts in the workplace, and some conflicts might be redirected from their true social causes to more immediate concerns like technology or working conditions. Wage-related issues are important too in industrial conflicts. Wage disputes, whether directly or indirectly related to strikes, underlie most workplace tensions and conflicts. Businesses are economic institutions, and when employees perceive their income or living standards to be at risk, it leads to intense dissatisfaction and conflicts. The reasons for wage demands have evolved over the years, from securing a minimum existence to preserving a certain standard of living and, more recently, justifying wage increases based on increased productivity. Wages play a symbolic role, particularly in the context of income disparities among different employee groups. Wage differentials can symbolize an individual's status within an organization and, when challenged, can lead to tensions and conflicts.


Underlying all these factors contributing to conflicts are the power dynamics within the workplace. The structures of organizations, working conditions, wage systems, and even technological setups serve as instruments of control and power. Consequently, any protest against these conditions inherently challenges the existing power dynamics. This power struggle is at the core of workplace conflicts, which ultimately lead to outcomes favoring one party over the other. A shift in focus towards the management of power structures is a means to address and resolve workplace conflicts. Changing ownership structures in industrial enterprises have become a focal point in labor union ideologies. Both labor unions and management often have misconceptions about the possibilities and limitations of regulating workplace conflicts, so there may be misunderstandings when addressing the root causes of these conflicts.


The speed and depth of change in workplace structures and social situations are influenced by the intensity and violence of the conflicts. The level of violence and intensity in workplace conflicts can be controlled through certain institutions and principles. The first principle of industrial relations is the recognition that conflicts in the workplace are inevitable, legitimate, and meaningful. Denying the necessity of tensions and disputes can exacerbate conflicts. Acknowledging the legitimacy of disagreements is crucial for effectively managing them. The second principle is that the resolution of workplace conflicts should focus on regulating their forms rather than eliminating their underlying causes. Most causes of workplace conflicts cannot be entirely eliminated, but their expressions can be managed through agreed-upon rules and procedures. The institutionalization of conflicts - formalizing the processes for addressing and resolving them – exist in forms such as collective negotiations, mediation, arbitration, and even compulsory arbitration. These institutionalized processes help ensure that conflicts are addressed in an orderly and regulated manner. Third parties can serve as mediators or arbitrators to help resolve disputes when direct negotiations fail. Mediators have no decision-making authority but can facilitate dialogue, while arbitrators can make binding decisions if both parties agree in advance. Conflict resolution should be approached politically rather than legally. This means treating conflicts as issues to be resolved through negotiation and agreement rather than as legal disputes. While industrial relations systems can help mitigate conflicts, they cannot entirely eliminate the possibility of strikes or lockouts. Workplace conflicts often persist, but a well-structured system can reduce the likelihood of violence and contribute to more peaceful resolutions.


Societal values and structures influence the way workplace conflicts are managed. Differences exist between Germany and Anglo-Saxon countries in how industrial relations are organized. In Germany, many employer-employee relationships are based on mutual understanding rather than written agreements, and many aspects are regulated by laws rather than collective contracts. This difference is attributed to the absence of an autonomous level of industrial relations in Germany. Changes in workplace structure are used to address conflicts in Germany, often leading to alterations in the working and living conditions of those involved. Some structural changes may not effectively address or regulate conflicts, particularly if they attempt to eliminate the root causes of all conflicts, such as altering the power structure within a company.


Workplace governance differs from the broader social order within a company. Types of workplace governance range from absolute authority by management to constitutional authority with employee participation. One has to weigh the feasibility and limitations of implementing industrial democracy and the challenges associated with transposing political democracy concepts to workplace governance.


These concepts are subject to various constraints, including the size and type of the company. Different workplace settings necessitate a unique understanding and application of these ideas.


Chapter four - Structures of company behavior

Company climate refers to the specific atmosphere within a workplace where all internal social relationships occur. This term lacks a precise definition and can encompass various aspects, such as workplace culture and interpersonal relationships. It's challenging to define company climate, as it exists in a somewhat ambiguous and fluctuating state. Company climate is influenced by multiple factors, including individual perceptions, interactions with colleagues and superiors, job satisfaction, and more. Researchers have attempted to measure company climate through social-psychological opinion research methods, but it's a complex phenomenon with many contributing factors. A study conducted by the Frankfurt Institute for Social Research used a set of eight questions to assess employees' attitudes toward their workplace. Based on the responses, they categorized employees into different groups to evaluate the overall workplace climate. These questions may not capture all aspects of company climate.


There is a widespread phenomenon of workers expressing satisfaction with their jobs in modern industrial settings, which seems surprising given the commonly held belief that industrial work is monotonous and alienating. Various surveys and studies indicate a significant portion of industrial workers reporting job satisfaction, ranging from around 70% to 80% in some cases. Despite the reported job satisfaction, there are concerns among workers about issues like wages, job security, and career advancement opportunities. The explanation for this apparent contradiction lies in the complex nature of industrial work and the various factors at play. Industrial work often leads to habitualization, where tasks become automatic and require less conscious thought. This can reduce the perceived difficulty of the job. Modern industrial work involves cooperation and technical skills, which can provide a sense of accomplishment and satisfaction. A balanced ratio of work and leisure time can make the demands of industrial work more tolerable. Work is a crucial part of a person's social identity, and individuals tend to value what occupies a significant portion of their waking hours. Job satisfaction in industrial settings is influenced by a combination of these factors and labeling all industrial work as inherently alienating oversimplifies the complex nature of modern jobs.


The effectiveness of incentive systems in improving productivity cannot be generalized because it varies based on the specific context. Factors such as age, gender, personal situations, and social backgrounds of workers influence their motivational structures. A tailored approach to incentives is needed in each workplace and industry due to these variations in motivation among workers.


Human Relations are important in the context of business sociology. The human factor was initially overlooked. Over time, the importance of human relationships in the workplace has gained recognition. It’s a misconception to treat employees solely as labor. Psychological needs and social relationships within the workplace need to be considered as well. While the workplace is a social structure, it cannot be reduced to a mere self-purpose of humans. Establishing a separate department for human relations is not to be advised. The organization of human relationships in the workplace is not a function that can be detached from other aspects of the business.


Chapter five – Company and society

Relations between companies and society steadily evolve. Businesses have become integral to society, affecting and being affected by various social, economic, and political factors. Initially, businesses were isolated units, but over time, they have become intertwined with broader societal structures. The changing dynamics within businesses include shifts in the roles of individuals, the impact of industrialization on family life, and the transformation of workplace conflicts from being purely internal to having broader political implications. The traditional view of businesses shaping society has evolved into a more complex interplay, where societal changes also shape the structure and dynamics of businesses.



Dahrendorf, R. (1959), Sozialstruktur des Betriebes, Wiesbaden: Betriebswirtschaftlicher Verlag Dr. Th. Gabler GmbH.