Category Archives: PhD

70 – The Essence of Decision: Explaining the Cuban Missile Crisis (Allison, 1971)


Allison, Graham T.
The Essence of Decision: Explaining the Cuban Missile Crisis
Little, Brown, Boston, 1971 (Ch. 1, 3, 4 and 5)


Summary and citations:

o Treating national governments as if they were centrally coordinated, purposive individuals provides a useful shorthand for understanding problems of policy. But this simplification –like all simplifications- obscures as well as reveals. –p3
o 1-Professional analysts of foreign affairs (as well as ordinary laymen) think about problems of foreign and military policy in terms of largely implicit conceptual models that have significant consequences for the content of their thought … 2- Most analysts explain (and predict) the behaviour of national governments in terms of one basic conceptual model, here entitled Rational actor or “classical” Model (Model I). …3) two alternative conceptual models, here labelled on Organizational Process model (Model II) and a Governmental (Bureaucratic) Politics Model (Model III), provide a base for improved explanations and predictions. – p5

1.- Model I: The Rational Actor
o Thomas Schelling: In a situation of mutual deterrence the probability of nuclear war is reduced not by the “balance” (the sheer equality of the situation) but rather by the stability of the balance, i.e. the fact that neither opponent in striking first can destroy the other’s ability to strike back. –p12
o For every analyst, enemy reactions constitute a critical but elusive factor. … the analyst think about what he would do if he were the enemy – p19
o Sovietology: the inference is from a physical fact –the Soviet failure to acquire a substantial first-generation or second-generation ICBM force-to what they “must have believed”.-p21
o …assumption of rational decision making. This assumption is central to the classical model. –p22
o Most analysts attempt to understand a nation’s force posture as the chosen means of implementing strategic objectives and military doctrine. –p24
o The less the information about the internal, affairs of a nation or government, the greater the tendency to rely on the classical model. –p24
o Lack of strategic doctrine and a coherent military policy as the cause of the deterioration of our position in the world –p25
o The Theory explores 1) the sociological influences on the “stakes of the conflicts among states, and the goals which the participants choose, 2) the international systems or diplomatic constellations in which states pursue these goals, and 3) the historical characteristics of the present international system
o What rationality adds to the concept of purpose is consistency: consistency among goals and objectives relative to a particular action; consistency in the application of principles in order to select the optimal alternative. – p29
o In economics, to choose rationality is to select the most efficient alternative, that is, the alternative that maximizes output for a given input or minimizes input for a given output. –p29
o The basic concepts of these models of rational action are: 1) goals and objectives; 2) alternatives; 3) consequences; 4) choice. –p30
o Rationality refers to consistent, value-maximizing choice within specified constraints. –p30
o Comprehensive rationality, limited rationality , “optimal choice”…-p31
o The likelihood of any particular action results from a combination of the nation’s 1) relevant values and objectives, 2) perceived alternative courses of action, 3) estimates of various sets of consequences (which will follow from each alternative) and 4) net valuation of each set of consequences .. Two propositions: A. An increase in eh costs of an alternative…. reduces the likelihood of that action’s being chosen; B. A decrease in the costs of an alternative… increases the likelihood of that action’s being chosen.
o Specific propositions: A. Deterrence: 1. A stable nuclear balance reduces the likelihood of nuclear attack. 2. A stable nuclear balance increases the probability of limited war. –p34
o A second type of analysis focuses not upon nations in general, but rather upon a nation or national government with a particular character – p36

3.- Model II: Organizational Process
o A government consists of a conglomerate of semi-feudal, loosely allied organizations, each with a substantial life of its own. –p67
o At any given time, a government consists of existing organizations, each with a fixed set of standard operating procedures and programs.
o This approach… relation between the Organizational Process Paradigm for international politics and models of other types of organizations. –p69
o Organizational theory: march and Simon, Simon, “comprehensive rationality”; ‘Bounded rationality” –p71
o Simon: 1) factored problems; 2) satisficing; 3) search; 4) uncertainty avoidance; 5) repertoires
o Cyert and March: 1) Quasi-resolution of conflict; 2) problemistic search; 3) organizational learning
o Organizational Process Paradigm:
1. Basic units of analysis: governmental action as organizational output.
2. Organizing concepts: A) Organizational Actors; B) Factored Problems and fractionated power; C) Parochial priorities and perceptions; D) Action as Organizational Output; 1) Goals: constraints defining acceptable performance; 2) sequential attention to goals; 3) standard operating procedures; 4) programs and repertoires; 5) uncertainty avoidance; 6) problem-directed search; 7) organizational learning and change: a) budgetary feast; b) prolonged budgetary famine; c) dramatic performance failures; E) Central coordination and control; F) Decisions of Government Leaders;
3. Dominant Inference Pattern
4. General propositions: A) Organizational implementation; 1) SOPs; 2) programs; 3) repertoires; B) Organization options; 1) Alternatives built into existing organizational goals; 2) alternatives requiring coordination of several organizations; 3) alternatives in areas between organizations; C) Limited flexibility and incremental change; D) Long-range planning; E) Goals and tradeoffs; F) Imperialism; G) Options and Organization; H) Administrative feasibility
o Model II thus brings into question the traditional (Model I) conception of an “arms race” between the USA and the Soviet Union… Military organizations tend to keep doing what they are doing… at least until a catastrophe in war occurs. – p98

4. – Cuba II: A second Cut
o 22.000 Russians. There can be no doubt that the Soviets were engaged not only in a provocative, but also in a really massive, military build-up in Cuba.-p106
o Why the Soviets were so insensitive to the possibility of U2 observance of their operational
o Why the soviets failed to coordinate the timing are still inexplicable p 106. Behaviour of the Soviet military personnel in Cuba seems mildly schizophrenic. Though they made considerable effort to disguise their identity…indelible signals… p109
o That there was a deep split between the Party, especially Party boss Khrushchev, and the military, is no secret. –p112
o At 7pm on October 22, 1962, President Kennedy delivered the major foreign policy address of his career. –p117
o The ten-day delay constitutes some form of “failure”. –p123
o “Pearl Harbor in reverse” : surgical air strike
o Organizations defined what the President believed US military equipment and personnel were capable of performing in the Cuban missile crisis. – p124
o Interesting meeting of McNamara and Anderson (“It’s all in here”)
o As the climax of the crisis drew near, developments were, in the American phrase, “approaching a point where events could have become unmanageable” –p132
o The soviet decision to place missiles in Cuba must have been taken within a very narrow circle and implemented with utmost secrecy. –p135
o President Kennedy had initiated the course of events, but he no longer had control over them. –p137
o Established, rather boring, organizational routines determined hundreds of additional, seemingly unimportant details –any one of which might have served as a fuse for disaster. –p139
o …strike against a single SAM site. But now that the time had come to implement that decision, killing Russians in the process, and possibly leading to war, the President reconsidered…”wait one more day… –p140
o At this point …murmuring about American “fold-in” –p140
o Was he, the President of the United States, in charge of this incredible machine called the US government or not? –p142
o The Turkish missiles had “stickability”.
o Soviet leaders announced that they were withdrawing their missiles in Cuba, without reference to eh Turkish missiles.

5. – Model III: Governmental Politics
o Men share power. Men differ about what must be done. The differences matter. This milieu necessitates that government decisions and actions result from a political process. – p 145
o …is that you can no more divorce government from politics than you can separate sex from creation. (James Forrestal, Secretary of Defense)– p147
o Presidential power is the power to persuade – p148
o This model directs attention to intra-national games, the overlap of which constitutes international relations. –p149
o Almond and Lindblom: American foreign policy as pluralist politics… character of bargaining…incremental muddling as opposed to comprehensive choice.
o A Governmental (Bureaucratic) Politics Paradigm
1. Basic Unit of Analysis: Governmental Action as Political Resultant
2. Organizing Concepts: A) Who plays 1) Players in Positions; B) What determines each player’s stand? 1) Parochial Priorities and Perceptions; 2) Goals and Interests; 3) Stakes and Stands; 4) Deadlines and Faces of Issues; C) What determines each players’ impact on results? 1) Power; D) What is the game? 1) Action-channels; 2) Rules of the game; 3) Action as Political Resultant
3. Dominant Inference Pattern
4. General Propositions: A) Political Resultants ; B) Action and Intention; C) Problems and Solutions; D) Where you stand depends on where you sit; E) Chiefs and Indians; F) The 51-49 Principle; G) Inter- and Intra-national Relations; H) The face of the issue differs from seat to seat; I) Misperception; J) Misexpectation; K) Miscommunication; L) Reticence; M) Styles of Play
5. Specific Propositions: A) Nuclear Crises; B) Military Action
6. Evidence
o Nuclear Strategy: Rather than the Model I’s focus on balance and stability, or Model II’s focus on organizational routines, a Model III analyst is concerned with the features of the internal politics of a government that might produce this decision. –p183
o The “kings” are partners in the game against nuclear disaster. Both will be interested in private communication with each other. If channels can be arranged, such communication offers the most promising prospect of resolution of a crisis. –p184

Personal comments, interesting issues and findings:

o This book makes us think about many fields, not only management and decision making but also US foreign politics, international relations…
o Model II does not justify the “arms race” but the routine of the militarisation. In fact, after the communism debacle, the US has been looking for other enemies in order to avoid stopping the militarization and the decrease of the weapon industry.
o The story is only from the US side. It would be interesting to hear the Cubans’ and the Russians’ versions of the crisis. But we can imagine that it was also chaotic: the Russian “forgot” to claim the Turkish missiles when withdrawing their missiles for Cuba!
o What is amazing is the big amount of failures on both sides (did Russians want to keep the secret with 22,000 soldiers in Cuba? Bases with the same shape as the missile bases in URSS? Without hiding the bases? What about the story of the Castro’s drunk pilot? Truth is stranger than fiction). The American failures are also inexplicable (concentration of the planes on the US military bases, the pilot flying over the URSS).
o It is frightening the separation between the politicians and the militaries. On both sides, in URSS and USA. Do really politicians have the control on the military staff? I.e. Kennedy’s order about the Turkish missiles was ignored.

Commonalities of Bower and Allison:

o Bower, as well as Allison (in first part of his book), consider the organization (the country in the case of Allison, the company for Bower) as monolithic. Bower says:”in almost all financial theory, the firm is considered to be a unitary monolith managed in the interests of its ownership”. They both later consider the organization ruled in a big extend by “Bureaucratic politics”

74 – Managing the Resource Allocation Process: A Study of Corporate Planning and Investment (Bower, 1972)


Bower, Joseph
Managing the Resource Allocation Process: A Study of Corporate Planning and Investment
Irwin, Homewood, Illinois, 1972 (Ch.1-3, 6, and 8-10)

Topic: The business and the investment planning systems.

Summary and citations:

Ch.1: Capital budgeting as a general management problem
o The corporate setting: The scope of the problem is relevant because clearly no one manager can be assumed to have the knowledge or the time to generate detailed programs to use these funds. – p9
o The value of quantitative measures: a project can be described as the net present value of all cash flows associated with a proposed investment.
o The kind of project: estimates of the benefits from cost reductions are far more accurate and less variable than those firm sales expansions, and these estimates in turn are more reliable than the estimates of the return from new products. –p12
o The Kind of Business: the objections to a quantitative summary extend beyond the kind of project to projects within a class, for it is certainly true that different businesses involve different levels of risk. – p13
o The Kind of manager
o The role of top management choice: the objective of management of a large corporation … are not in any way a sufficient description of the objectives which direct and motivate action at the critical, resource allocating levels of the organization. Hence, a model which prescribes procedure for resource allocation based on the maximization satisfaction of “management objectives” is not a complete picture. – p17
o The problem rephrased formally: 1) business planning process, 2) investment process; 3) these two processes as critical ; the principal observed change in a firm may be explained by a sequence of planning and investment decision. 4) a Business planning system; 5) An investment planning system; 6) Decentralization – p19
o New strategic ideas are developed at the business level. Such an idea is shaped as it proceeds up managerial levels until it emerges fully packaged as a request for capital or a business plan for consideration for corporate management. –p20

Ch 2: Findings
o The forms of specialization: raw material site/ Facility / Process / Product / Industry Market / Customer / Customer Location / The functions /
o The Business Plan is intended to present a condensed but critical review of the division’s current business position problems, and opportunities, its updated longer-term market and earnings objectives, and its plans for achieving them, the specific program and expected financial results for the ensuing year -1966:and a forecast for 1967
o Investment planning: Goals. 1) Plans should meet the demands for capacity, 2) Plant costs should not rise; 3) Product quality should be competitive or better
o Exhibit 2-2 p53
o The forces influencing definition –p54
o Impetus: the definer must get his project approved by his division general manager…. The source of a project’s impetus is the power of a general manager at the officer level of the division. The general manager must sponsor the project and shepherd it successfully
o The forces influencing Impetus. Quality of the project; …technical aspects are accepted to be technically qualified….during the definition process – p58
o Structural variables may be manipulated by top management – p59
o When managers that have taken the corporation into exciting new but unprofitable fields are promoted, it is clear that “creativity and imagination” are important bases for reward. – p59
o In short, both the group management committees and the executive provided a review of all CARs.

Ch 3: A process model of a project
o Definition: Definition is the process by which the basic technical and economic characteristics of a proposed investment project are determined. –p67
o The cycle of discrepancy, analysis, and choice, of course, is the basic format of all problems. -p67
o Impetus: Impetus, the force that moves project toward funding, has been defined as the willingness of a general manager at the division president’s level, or one level below, to commit himself to sponsor a project in the counsel of division officers and before the division general manager. In making the decision, he puts his reputation for good judgment on the line. – p68
o Context: Context has been defined as the set of organizational forces that influence the processes of definition and impetus… corporate structure; situational context; … structural context. –p71
o The purposive manager: … then is a manager to be pursuing corporate and personal goals guided by a structure that helps him relate the two. His personal goals are assumed to be: 1) economic wealth, and 2) power to influence affairs. –p73
o The phases of definition: … because the information requires for strategic planning is spread widely throughout a large organization, indeed because in some instances it cannot be comprehended centrally, the planning activity usually has to be delegated to product / market organized sub-units of the corporation. –p74
o Whereas financial planning implies measurement in terms of return on investment, strategic measurements may focus on market size and share, price, margins, operating efficiencies, technological competitiveness, and other qualitative as well as quantitative measures. – p75
o The phases of impetus: exhibit 3-2 p77
o The phases of determination of context –p78
o exhibit 3-4 p80 ; exhibit 3-6 p82

Ch. 6: Fireguard

Ch. 8: The projects compared
o The development of a proposal for a new facility:
o Exhibit 8-1: The four cases compared –p245
o In a world where uncertainty is great and men are judged by results rather than plans, a definer is in a better position to elicit impetus when the pressure of the market reinforces whatever problem he perceives from a technical point of view. – p254
o The process of developing impetus: the willingness of a general manager, performing the integrating level task, to provide impetus for a project was described as depending upon the measure which that manager perceived were being applied to his judgment and management skills. –p254
o The role of context. In discussing the way in which projects were defined and acquired impetus, it has already been necessary to consider the influence of the organization, the measurement and information systems, and the reward and punishment system – what has been called structural context. – p261
o Exhibit 8-3 p 262: It is evident that context often has negative effects on the projects. What does it mean? –p262
o One of the most significant aspects of structural context observed was the provision –or lack of provision. It made for interaction across levels of hierarchy and thereby for the bringing to bear on the capital budgeting problem of well-developed generalist skills. –p264
o A critical aspect of the information and control system, the capital appropriations procedure, seems to have had a minimum degree of influence. – p264
o Where systems of measurement and reward are not integrated with the planning and investment process, problems result: projects serve the needs of functions rather than businesses; their timing reflects politics rather than the market; and coordination among projects is lost. – p269
o The business planning and investment planning processes are closely interrelated. The degree to which they are coordinated in their delegation is critical to their usefulness. Where traditional financial techniques focuses attention on individual project plans separate from the businesses they are meant to serve, severe distortions in focus and timing can result, and coordination of business sub-units with the corporation is often list. The Planning and investment process are continuing and are substantially affected by a range of structural phenomena, two which are planning and capital budgeting procedures. – p279
o There are two components to the investment process: 1) definition, having to do with how the content of projects is determined, and 2) impetus, involving which projects are funded. – p280

Ch. 9: Implications for researchers
o The goal is to help management improve resource allocation by identifying components of the process – p281
o Two approaches…. One is to observe, in a clinical setting….A second approach, generally less successful, though potentially more powerful, is to begin with the construction of an abstract version of the problem which in turn permits one to prescribe the route to improved performance. – p281
o The financial model and the corporate phases of resource allocation: in almost all financial theory, the firm is considered to be a unitary monolith managed in the interests of its ownership – p282
o In the face of real-world uncertainties, there are difficulties in estimating both returns and costs. – p283
o The strategic model and the initiating phases of resource allocation: the concept conceives the task of general management to be a problem-solving process involving the direction of corporate competence toward opportunity in the environment by the vehicles of organization, measurement, and reward. – p285
o “What is the planning unit in the large decentralized company?”….most important idea. It is the notion that strategy should be developed in increasing detail at descending levels of organizational hierarchy…. Deductive cascade. –p286
o Moreover, the lines of today’s structural form also determine the rules by which managers will compete. – p287
o The integrating phases of resource allocation: It is the responsibility of those managers performing the task of “man in the middle” to use their understanding of the qualitative elements of product-market strategic considerations to evaluate long-range programs in a way that will ensure consistency between the initial definitions by product-market sub-units and the objectives of the corporate whole along the multiple dimensions of strategy. – p288
o The choice of organization, measurement, and reward play a role of central importance in the development of corporate strategy by shaping both the allocation of corporate resources through their influence on definition and impetus – and the future perceptions of those who initiate new business plans and projects. –p289
o Exhibit 9.1. p291
o The integrated company: … all three phases of task are preformed in the president’s office: this implies that the same individuals are responsible for perceiving environmental trends and defining responses in product-market terms, and for measuring their own performance critically in financial terms. – p291
o Exhibit 9.2. p295
o Structural shifts can be used to broaden the concept of the opportunity for useful influence among managers at the division and process levels of the company. –p296
o The manager in the middle must be sensitive to the inevitable imperfections in the strategy. –p297
o In a sense, life in the large organization has aspects of a “zero-sum” game….”winner” and ….”losers”
o “bureaucratic politics” by Graham Allison (Cuban missile crisis): Bureaucratic politics is the explanation or the content of the process of impetus. –p303
o …The two interrelated systems involved in the organizational process of resource allocation in these terms: the process of definition is technical-economic in content; impetus is political. – p303
o In a systematic attempt to have resource allocation serve strategy, top management should d use structure to influence those organizational forces that shape the technical and political processes at lower levels of the organization. – p304
o “Politics” is not a pathology, it is a fact of large organization. Top management must manage its influence on “political” processes and then monitor the results of its performance. – p305
o The integrating level must have the information necessary to transform strategic measures into financial ones. It must have and be able to use strategic measurements to qualify potentially misleading financial summaries. –p307
o Exhibit 9-6 p308; Exhibit 9-7 p311
o The problem is that virtually all measurement systems compare a process’s or product’s attributes against historical or other kinds of internal standards, Instead, what is needed is an external measure of the present and potential quality of an internal capability. –p315
o Use of context: There must be enough stability… but…rotation across functional and divisional lines helps to build a cooperative climate and contributes to the development of a generalist viewpoint. – p317
o Using structure to influence behaviour. … The hypothesis is that managements can manipulate those same structural forces in order to influence behaviour in desired directions. – p318
o While rotation prepares a manager to accept a generalist viewpoint, it does not directly train him for general management. –p319

Ch. 10: Implications for management
o In a large organization the same force that led the decentralization of product-market strategic planning – primarily the dispersion of specialized knowledge –in principal ought to lead to a similar decentralization do the investment planning that results in capital commitments in product-market sub-units. – p321
o Exhibit 10-1 p323
o There seemed to be important lessons to be learned concerning 1) the timing of the different phases of the processes; 2) the role of procedure in the processes; 3) the design of the structure, and 4) the use of the elements of structure by the several managers observed. –p323
o Diagnosis: general manager must look at a resource allocation in his company in the same way a doctor looks at circulation in a patient – as part of a complex system interacting in a whole variety of ways with an even more complex environment. – p324
o Like the body, an organization is a constantly changing mechanism…. The manager must constantly act is if he were a research scientists, testing his understanding of how the system operates. – p325
o The question of location: The first diagnostic question is “where in the organization are the initiating, integrating, and corporate phases of definition, impetus, determination of context, and measurement, being carried out?” – p236
o The question of quality: Standards are often lacking –p327. It is hard to evaluate anything that is not well understood. – p327
o The question of coordination: 1) The linkages across functions and levels; 2) the consistency of focus among those performing parts of the process, and 3) the timing of different phases. – p331
o The quality and timing of the planning processes: the use of formal procedure: … attacking the usefulness of traditional, formal procedure as a way of improving the content and pace of the resource allocation process. – p335
o Bottom-up is not enough… “bottom-up” is not necessarily correct. – p336
o But procedure is not the only useful tool for improving the quality, coordination, and timing of the definition process. It can also improve the relationship between the planning of investment projects and the planning of businesses. – p338
o The purpose of capital budgeting procedure is not a “go, no-go” decision on a project, bust instead 1) a review of the strategic assumptions on which a business is being conducted, and 2) an early scanning of the corporate information network to provide all relevant inputs for the project definition. – p 339
o The relationship between planning and the measurement of managerial performance emerges as soon as the issue of “results” is introduced. – p341
o Problems of rotation: 1) …boss wants a talented specialist, not a developing manager; 2) no one of whom really knows the details knows the details of the business; 3) … if a man is rotated every two or three years, he never has to live with the consequences of his own action…..On the other hand, without rotation, men become narrow and parochial in terms of product, division and function. – p343
o The general manager… must be able to diagnose complex systems of markets, facilities, and men….also able to use tools of the complex firm-the formal organization, the information system, and the reward system- to influence organizational behaviour. … balancing short and long-run opportunity, … and must take into account … requirements of the individuals….-p345

Personal comments, interesting issues and findings:

o “The principal observed change in a firm may be explained by a sequence of planning and investment decision” and also Bower underlines the trend towards decentralisation (p19): Bower might be referring to firms that base their activity by managing projects. There is a relatively new field of management called “management by projects” (see article “Management by projects’: the management approach for the future » R Gareis, (2002)). It seems a very interesting approach, mixing networks theory and project management.
o “New strategic ideas are developed at the business level” (p20): my experience in the industry (automotive sector suppliers) is that strategic ideas and new projects were mainly driven by actors external to the company, mainly by the customer (automobile brands) or by competitive pressure. It was not an idea from the business level.
o Can the definition / impetus / approval model be generalised? Many times, impetus come from the upper level (i.e. M&A), sometimes, from lower levels (i.e. projects to improve work conditions).
o Impetus is to take risk. If the project is not beneficial for the manager (see Bower’s “purposive manager”), he might be reluctant to promote it. Impetus will be reinforced in companies fostering creativity, as creativity and innovation is related to experimenting and experimenting involves a high risk of failure.
o I believe in the concepts expressed by Bower as “man in the middle” and integrated company. I think that if the project is initiated by the top management team or very near it (trust plays a major role), the approval will be easier and quicker. Initiatives from low levels of the structure will be difficult to reach top management. This case needs 1) a “man in the middle” able to coordinate all the process or 2) a very perseverant impetus (that is difficult to have).
o As Bower says, “bottom-up is not enough”. I think that each project has different origins and definition and impetus come from different sub-units, depending on the project, not the organization.
o Interesting video from Bower about the concept of “inside outsider” as a CEO that has learned inside the company but still has maintained his objectivity:

90 – Organization in Action: Social Science Bases of Administrative Theory (Thompson, 1967)


Thompson, James D.
« Organization in Action: Social Science Bases of Administrative Theory » (1967)
Transaction Publishers, 2003, 192 p., ISBN: 0-7658-0991-5

Topic: Uncertainty avoidance in complex organizations.

Summary and citations:

Proposition 2.1: Under norms of rationality, organizations seek to seal off their core technologies from environmental influences

Organizational Rationality

“At a minimum, then, organizational rationality involves three major component activities: (1) input
activities, (2) technological activities, and (3) output activities” (Chapter 2, p. 19)

Proposition 2.2: Under norms of rationality, organizations seek to buffer environmental influences by surrounding their technical cores with input and output components

Proposition 2.3: Under norms of rationality, organizations seek to smooth out input and output Transactions

Proposition 2.4: Under norms of rationality, organizations seek to anticipate and adapt to environmental changes which cannot be buffered or levelled

“Organizational rationality therefore is some result of (1) constraints which the organization must face, (2) contingencies which the organization must meet, and (3) variables which the organization can control” (Chapter 2, p. 24)


Proposition 2.5: When buffering, leveling, and forecasting do not protect their technical cores from environmental fluctuations, organizations under norms of rationality resort to rationing

Management of Interdependence

Proposition 3.1: Under norms of rationality, organizations seek to minimize the power of task- environment elements over them by maintaining alternatives

Proposition 3.2: Organizations subject to rationality norms and competing for support seek prestige

Proposition 3.3: When support capacity is concentrated in one or a few elements of the task environment, organizations under norms of rationality seek power relative to those on whom they are dependent

The Acquisition of Power
Cooperative strategies

Proposition 3.3a: When support capacity is concentrated and balanced against concentrated demands the organizations involved will attempt to handle their dependence through contracting

Proposition 3.3b: When support capacity is concentrated but demand dispersed, the weaker organization will attempt to handle its dependence through coopting

Proposition 3.3c: When support capacity is concentrated and balanced against concentrated demands, but the power achieved through contracting is inadequate, the organizations involved will attempt to coalesce

Defense of Domain

Proposition 3.4: The more sectors in which the organization subject to rationality norms is constrained, the more power the organization will seek over remaining sectors of its task environment

Proposition 3.5: The organization facing many constraints and unable to achieve power in other sectors of its task environment will seek to enlarge the task environment

Organizational Design

Proposition 4.1: Organizations under norms of rationality seek to place their boundaries around those activities which if left to the task environment would be crucial contingencies

Proposition 4.1a: Organizations employing long-linked technologies and subject to rationality norms seek to expand their domains through vertical integration

Proposition 4.1b: Organizations employing mediating technologies, and subject to rationality norms seek to expand their domains by increasing the populations served

Proposition 4.1c: Organizations employing intensive technologies, and subject to rationality norms seek to expand their domains by incorporating the object worked on.

Balancing of Components

Proposition 4.2: Multicomponent organizations subject to rationality norms will seek to grow until the least-reducible component is approximately fully occupied

Proposition 4.3: Organizations with capacity in excess of what the task environment supports will seek to enlarge their domains


Proposition 5.1: Under norms of rationality, organizations group positions to minimize coordination costs

Proposition 5.1a: Organizations seek to place reciprocally interdependent positions tangent to one another, in a common group which is (a) local and (b) conditionally autonomous

Proposition 5.1b: In the absence of reciprocal interdependence, organizations subject to rationality norms seek to place sequentially interdependent positions tangent to one another, in a common group which is (a) localized and (b) conditionally autonomous

Proposition 5.1c: In the absence of reciprocal and sequential interdependence, organizations subject to norms of rationality seek to group positions homogeneously to facilitate coordination by standardization


Proposition 5.2: When reciprocal interdependence cannot be confined to intragroup activities, organizations subject to rationality norms seek to link the groups involved into a second-order group, as localized and conditionally autonomous as possible

Proposition 5.3: After grouping units to minimize coordination by mutual adjustment, organizationscunder rationality norms seek to place sequentially interdependent groups tangent to one another, in a cluster which is localized and conditionally autonomous

Proposition 5.4: After grouping units to solve problems of reciprocal and sequential interdependence, organizations under norms of rationality seek to cluster groups into homogeneous units to facilitate coordination by standardization

Proposition 5.4a: When higher-priority coordination requirements prevent the clustering of similarcpositions or groups, organizations seek to blanket homogeneous positions under rules which cut across group boundaries, and to blanket similar groups under rules which cross divisional lines

Proposition 5.4b: When organizations employ standardization which cuts across multiple groupings, they also develop liaison positions linking the several groups and the rule-making agency

Proposition 5.4c: Organizations with sequential interdependence not contained by departmentalization rely on committees to accomplish the remaining coordination

Proposition 5.4d: Organizations with reciprocal interdependence not contained by departmentalization rely on task-force or project groupings to accomplish the remaining coordination

Environmental Constraints

Boundary-Spanning Structures

Proposition 6.1: Under norms of rationality, organizations facing heterogeneous task environments seek to identify homogeneous segments and establish structural units to deal with each

Proposition 6.2: Under norms of rationality, boundary-spanning components facing homogeneous segments of the task environment are further subdivided to match surveillance capacity with environmental action

Proposition 6.2a: The organization component facing a stable task environment will rely on rules to achieve its adaptation to that environment

Proposition 6.2b: When the range of variation presented by the task-environment segment is known, the organization component will treat this as a constraint and adapt by standardizing sets of rules

Proposition 6.2c: When the range of task-environment variations is large or unpredictable, the responsible organization component must achieve the necessary adaptation by monitoring that environment and planning responses, and this calls for localized units

The Organization as a Joint Result

Proposition 6.3: When technical-core and boundary-spanning activities can be isolated from one another except for scheduling, organizations under norms of rationality will be centralized with an overarching layer composed of functional divisions

Proposition 6.4: Under conditions of complexity, when the major components of an organization are reciprocally interdependent, these components will be segmented and arranged in self-sufficient clusters, each cluster having its own domain

Complexity and Change

Proposition 6.5: Organizations designed to handle unique or custom tasks, and subject to rationality norms, base specialists in homogeneous groups for “housekeeping” purposes, but deploy them into task forces for operational purposes

The Variables of Assessment

Proposition 7.1: Under norms of rationality, assessors prefer efficiency tests over instrumental tests, and instrumental tests over social tests

Proposition 7.2: At the institutional level, organizations subject to norms of rationality measure their fitness for the future in satisficing terms

Proposition 7.2a: Under norms of rationality, organizations facing relatively stable task environments seek to demonstrate fitness for future action by demonstrating historical improvement

Proposition 7.2b: Under norms of rationality, organizations facing dynamic task environments seek to score favorably in relation to comparable organizations

Proposition 7.3: When the organization cannot hope to show improvement on all relevant dimensions, it seeks to hold constant on some and show improvement on those of interest to task-environment elements on which the organization is most dependent

Proposition 7.4: Under norms of rationality, complex organizations are most alert to and emphasize scoring well on those criteria which are most visible to important task-environment elements

Proposition 7.5: When organizations find it difficult to score on intrinsic criteria, they seek extrinsic measures of fitness for the future

Proposition 7.5a: When task-environment elements lack technical ability to assess performance, organizations seek extrinsic measures of fitness for future action

Proposition 7.5b: When cause/effect knowledge is believed incomplete, organizations seek extrinsic measures of fitness for future action

Organizational Assessments of Components

Proposition 7.6: When technologies are instrumentally perfected, and task environments stable or well buffered, organizations under rationality norms measure components in terms of (past) efficiency

Proposition 7.7: Where task environments are relatively stable or well buffered and knowledge of cause and effect believed reasonably complete, organizations under rationality norms seek to account for interdependence and to assess each unit in efficiency terms

Proposition 7.8: When knowledge of cause/effect relationships is known to be complete, organizations under rationality norms evaluate component units in terms of organizational (rather than technical) rationality

Proposition 7.8a: Where interdependence is controlled through rules, such units are measured in terms of adherence to or deviation from rules

Proposition 7.8b: Where interdependence is controlled through scheduling, such units are measured in terms of quota filling

Proposition 7.8c: Where interdependence is controlled through mutual adjustment, units are measured in terms of the confidence expressed in them by coordinate units

Proposition 7.9: When units operating imperfect technologies are conditionally autonomous, they are measured by extrinsic standards

Proposition 7.10: As the organization’s posture with respect to the task environment fluctuates, the organization adjusts relative weightings of the multiple criteria by which it evaluates component units

Inducements/Contributions Contracts

Technologies and Negotiation Strategies

Proposition 8.2: Inducements/contributions contracts for jobs in routinized technologies are determined through collective bargaining

Proposition 8.2a: In collective bargaining, both parties have strong interests in governmental processes which establish the boundaries and rules for collective bargaining

Proposition 8.3: Inducements/contributions contracts at contingent boundaries of the organization are determined by (a) the power of a task-environment element and (b) the individual’s ability to handle the organization’s dependence on that element

Proposition 8.3a: To the extent that the organization gains power over task-environment elements, it reduces its dependence on the boundary-spanning jobs which deal with those elements

Proposition 8.4: Individuals in early-ceiling occupations in intensive technologies seek leverage in the negotiation process through collective action to upgrade the occupation relative to others

Proposition 8.5: Where the intensive technology employs late-ceiling occupations (professions), the
Inducements / contributions bargain rests on the individual’s visibility among occupational colleagues

Proposition 8.6: In the managerial technology, the inducements/contributions negotiation process rests on the individual’s reputation for scarce abilities to solve organizational-rationality problems

Proposition 9.1: When the individual believes that his cause/effect resources are inadequate to the uncertainty, he will seek to evade discretion

Proposition 9.1a: Organizations can thwart the exercise of discretion by establishing inappropriate Structures

Proposition 9.2: The more serious the individual believes the consequences of error to be, the more he will seek to evade discretion

Proposition 9.2a: Organizations can thwart the exercise of discretion by establishing inappropriate assessment criteria as bases for rewards and penalties

Proposition 9.2a: Organizations can produce systematic bias in the exercise of discretion by assessing performance on multiple, incompatible criteria

Proposition 9.3: Complex organizations and their supporting social structures encourage some individuals to exercise organizational discretion at considerable personal sacrifice

Multiple Consequences of Discretion

Proposition 9.4: Organizations seek to guard against deviant discretion by policing methods

Proposition 9.5: When work loads exceed capacity and the individual has options, he is tempted to select tasks which promise to enhance his scores on assessment criteria

Proposition 9.6: Where work loads or resource supplies fluctuate, the individual is tempted to stockpile

Proposition 9.7: Where alternatives are present, the individual is tempted to report successes and suppress evidence of failures

Proposition 9.8: Individuals in highly discretionary jobs seek to maintain power equal to or greater than their dependence on others in the organization

Proposition 9.8a: When the power of an individual in a highly discretionary job is less than his dependence, he will seek a coalition

Proposition 9.8b: Individuals representing precarious values in the organization become junior partners in organizational coalitions

Proposition 9.8c: To increase their power in organizations, individuals in highly discretionary jobs may form coalitions with essential elements of the task environment

Proposition 9.9: Changes in organizational dependencies threaten some coalitions and make new ones possible

Power Structure Variations

Proposition 9.10: The more sources of uncertainty or contingency for the organization, the more bases there are for power and the larger the number of political positions in the organization

Proposition 9.10a: Decentralization dilutes the power structure by creating more power positions but limiting the organization’s dependence on each one

Proposition 9.11: The more dynamic the technology and task environment, the more rapid the political processes in the organization and the more frequent the changes in organizational goals

Proposition 9.12: When organizations commit future control over resources in exchange for present solutions to contingencies, they create limitations on their abilities to adapt to future change of technologies or task environments

Control of Decision Premises

Proposition 10.1: The more numerous the areas in which the organization must rely on the judgmental decision strategy, the larger the dominant coalition

Proposition 10.1a: The less perfect the core technology, the more likely it will be represented in the dominant coalition

Proposition 10.1b: The more heterogeneous the task environment, the larger the number of task- environment specialists in the dominant coalition

Proposition 10.2: As areas within the organization shift from characteristically computational to characteristically judgmental decision strategies, the dominant coalition will expand to include their representatives, and vice versa

Dynamics of Organizational Control

Proposition 10.3: Potential for conflict within the dominant coalition increases with interdependence of the members (and the areas they represent or control)

Proposition 10.4: Potential for conflict within the dominant coalition increases as external forces require internal compromise on outcome preferences

Proposition 10.5: Potential for conflict within the dominant coalition increases with the variety of professions incorporated

Coalition Management
Proposition 10.6: When power is widely distributed, an inner circle emerges to conduct coalition business

Proposition 10.7: The organization with dispersed bases of power is immobilized unless there exists an effective inner circle

Proposition 10.8: When power is widely dispersed, compromise issues can be ratified but cannot be decided by the dominant coalition in toto

Proposition 10.9: In the organization with dispersed power, the central power figure is the individual who can manage the coalition

Personal comments, interesting issues and findings:

In closed systems, uncertainty can be controlled with planing and control and the goal can be focused on maximization. On the other hand, in the current world, organizations are complex and are open-systems and according to Thompson, their goal is satisficing. In both organizations, it is a quest to avoid uncerainty.

Thompson writes that organizaations with similar technological and environmental problems should exhibit similar behavior. So this leads us to think that he believes in organizations’ convergence. Convergence theory argues that the advent of technology makes a trend towards convergence, that means that the different systems (organizations, countries’ institutions, etc) trend to be similar. In a way, convergence, by creating standards, could be said to reduce uncertainty because the effects of the same technology in other organizations and systems could be forecasted. But Thompson argues that tecnologies and environments are basic sources of uncertainty for organizations.
Thompson also refers to convergence when he writes “the basic functino of administration appears to be co-alignmet, not merely ofpeople (in coalitions) but of institutionlaized action –of technoloy and task environment into a viable domain, and of organizational design and strcture appropiate to it. “ p 157. This leads us to what Thompson calls the “Paradox of Administration”: organizations look simultaneously for a reduction of uncertainty and a search for flexibility. For me, there is no such paradox as flexibility is a reaction to uncertainty. Flexibility (in structure, in strategy) is what allows an organization to cope with an uncertain and ever-changing environment. As Thompson writes in his conclusion: “Uncertainty appears as the fundamental problem for complex organizations, and coping with uncertainty, as the essence of the administrative process” p159

75 – A Strategy of Decision: Policy Evaluation as a Social Process (Braybrooke and Lindblom, 1963)


Braybrooke, David and Charles Lindblom
“A Strategy of Decision: Policy Evaluation as a Social Process”
The Free Press, Macmillan, New York, 1963
(Ch.4-6 and Chapters 9-10)

Topic: The theory of “disjointed incrementalism” in policy decisions.

Summary and citations:

Chapters 4-5-6: Lindlom
• “disjointed incrementalism”
• “Decisions effecting small changes:… When is a small change? …“small” depends on the value attached to it…. Distinction between “small” and “large” change is the difference, as it is sometimes put, between structural changes and changes within a given structure…”small” change is a change in a relatively unimportant variable or relatively unimportant change in an important variable. … “Increment of change”…. To be a large or non-incremental change… a small or incremental change…. The difference is one of degree. . – p62-64
• Incremental changes: 1) social change that largely repeats; … the more repetitive the change ,…the more it is incremental; 2) non-repetitive change – p65
• Incremental politics: … an indefinite sequence of policy moves (p70)… moving away from known social ills rather than as moving toward a known and relatively stable goal (p70). … In short, the incremental character of this political pattern is central and fundamental, even if it does not wholly characterize it. (p73)… In incremental politics, political parties and leaders compete for votes by agreeing on fundamentals and offering only incrementally different policies in each policy area in which they wish to compete. (p73)… In addition, policy-making proceeds through a sequence of approximations (p73)…. In short, incremental policies follow one upon the other in the solution to a given problem. (p73)… Just how far the practice of incremental politics permeates the activity of or government can be illustrated even by decisions that, on superficial inspection, appear to be non-incremental *** (p75) i.e.: decision to convert from peacetime to wartime…. Waves of reorganization also characterize the history of other wartime agencies…. Gulick:”sequence of evolution” or “rhythm of growth and adaptation”. (p77)… The incremental character of political policy-making is often disguised,[…] by much talk of plans and planning. (p77)
• p.78: Types of decision-making
• Quadrant 1: high understanding and large change: Revolutionary and utopian decision-making. Analytical method: none.
• Quadrant 2: high understanding and incremental change: Some administrative and “technical” decision-making. Analytical method: Synoptic
• Quadrant 3: low understanding and incremental change: Incremental politics. Analytical method: disjointed incrementalism (among others).
• Quadrant 4: low understanding and large change: Wars, revolutions, crises, and grand opportunities. Analytical method: not formalized or well-understood.
• “As to what the adaptations are, they become familiar as soon as they are named. Our purpose in collecting them together under the label of disjointed incrementalism is only, as we have said before, to show that, taken together as a mutually reinforcing set of adaptations, they constitute a systematic and defensible strategy.” – p82
• The strategy outlined
1. Margin-dependent choice: “… they derive information about alternatives from historical experience, from contemporary experience in other societies or locations, and from imagination stimulated by experience” –p84 – “Incremental evaluation is clearly quite different from the construction of a rational-deductive system.” –p86. “The resolution of a conflict over two values is not expressed by a principle, as in the rational-deductive method, nor by a priorities list –nor is it implicitly embodied in a ranking of social states. IT can best be expressed by stating how much of one value is worth sacrificing, at the margin reached in a given situation, to achieve an increment of another.” P88
2. Restricted variety of policy alternatives considered: “…incremental alternatives… while…an analyst is often without adequate information, theory, or any other organized way if dealing systematically with non-incremental alternatives” – p89
3. Restricted number of consequences considered for any given policy: “… do neglect the unimportant consequences of policies, but among those they concede to be important, they often rule out of bounds the uninteresting (to them), the remote, the imponderable, the intangible, and the poorly understood, no matter how important.” P 90. “One striking feature of disjointed incrementalism: that what is omitted is often quite as important as what is considered” –p93
4. Adjustment of Objectives to policies: “although there is a fundamental sense in which ends govern means, there is an equally fundamental sense in which the proximate ends of public policy are governed by means” –p93 “…characteristics: a) some of the objectives became relevant only after the means was decided upon, and b) the group excluded certain objectives relevant to foreign aid policy only because they were irrelevant to the one means decided upon.” –p97. “The objectives are discarded, not the policy” –p97.
5. Reconstructive treatment of data
6. Serial analysis and evaluation: “…policy-making under the strategy proceeds through long chains of policy steps. This serial procedure is an important feature of the strategy in its own right” – p99. “They do not organize to solve a problem and then disband. Instead, they take it for granted that their problems will rarely be “solved” but only alleviated.” –p100
7. Remedial Orientation of Analysis and evaluation: “Since policy analysis is incremental, exploratory, serial, and marked by adjustment of ends to means, it is to be expected that stable long-term aspirations will not appear as dominant critical values in the eyes of the analyst.” -102. “… Encourage the analyst to identify situations or ills from which to move away rather than goals toward which to move” –p102. “…They are less concerned with pursuing a better world than with avoiding a worse” –p104
8. Social fragmentation of analysis and evaluation: “disjointed: …various aspects of public policy and even various aspects of any one problem or problem area are analyzed at various points, with no apparent co-ordination and without the articulation of parts that ideally characterizes subdivision of topic in synoptic problem solving” –p105. “…advantage of preserving a rich variety of impressions and insights that are liable to be “co-ordinated”…There are circumstances to which no one plan is especially suited.”- p106
• “It is easy to misconceive the strategy as having an indelibly conservative color” –p106. “Strategy specifies nothing about the speed with which change is to be carried on” –p109
• “It is also unquestionable that the strategy accomplishes an enormous simplification of the analytical task, compared to the rational-deductive ideal, the method of the welfare function, or the general synoptic approach” –p111
• “With respect to evaluation and analysis, it was shown to be incremental, restricted (both with respect to variety alternatives and to variety of consequences for each alternative), means-oriented (in a number of complex senses), reconstructive, serial, remedial, and fragmented.
• The synoptic ideal, does not adapt in any specific way to (p113):
• Intellectual capacities, information, and costs of analysis
• Adaptation through incremental and limited analysis: simplification through omission (reducing the demand for intellectual capacity and information); the role of theory (“analyst… can dispense with comprehensive theories..because he limits his analysis to changes in which the variables involved are fewer and less consequential…He does not require full information” –p118)
• Adaptation through means-orientation and fragmentation: “close reciprocity between means and ends…. Unnecessary” p119 – “Values…are seriously reconsidered with each new policy choice because values and policies are chosen simultaneously” p120
• Adaptation trough serial, remedial, and reconstructive features: “…strategy does not try to achieve an optimum or maximum… he does not try to “solve” his problem.. At the most, he attempts comprehension of a suitable remedial next step in a series.” p121 – “He disregards many other possible moves because they are too costly (in time, energy, or money) to examine.” –p123
• The problem of neglected consequences: “…harmful failures in analysis are “corrected” despite the relative narrowness of analysis by any one analyst by any one analyst at any one time” – p124
• Further adaptation through fragmentation: “Organizations, as everyone knows, are often dedicated to interests or values that the members wish to protect. What one center ignores, another does not. Values neglected at one point in the policy-making process are central to the analysis carried on at another point” – p128
• Inadequately formulated values:
o “Strategy makes the most of existing constraints on policy to reduce the areas on which social disagreement is possible” –p134. “because the strategy is remedial and serial, it takes advantage of the frequency with which we find ourselves agreeing on what we are against” –p134. “we agree in large part on a “next step”” –p134. “because the strategy is reconstructive, we add that it discourages intransigence in the defence of values” – p135
o “We are saying that where analysis and policy-making are serial, remedial, and fragmented, political processes can achieve consideration of a wider variety of values than can possibly be grasped and attended to by any one analyst or policy-maker. It is the accomplishment at the political level that makes agreement among analysts less necessary” p138

Chapters 9-10: Braybrooke

o “…on the one hand, the collapse of utilitarism; on the other, the rise of emotivism” p204
o “Utilitarism… insists more strongly …on forcing moral judgments to the test of facts” p206; “…explicate the criteria for intelligible moral judgments” p 206; “…several features of the strategy of disjointed incrementalism make it easy to associate the strategy with utilitarism” p206
o Emotive theory of ethics: “The thesis is that moral locutions are intelligibly used in accordance with the present conventions of ordinary language, if they are used only emotively or imperatively –that is, to do no more than express emotions and convey prescriptions” p210
o Enlightened peremptory objections: “The judgments in question are all peremptory ones” –p213; “…peremptory rules such as these: that one should keep promises, even when the consequences of doing so in a particular instance would be less happy than the consequences of breaking them;…Subscriptions to such rules almost suffices by itself to qualify a person as morally enlightened. A literal application of utilitarianism might nevertheless conflict with them. Some of them are at the root of long-standing objections to utilitarism.” –p213
o The felicific calculus, it will recalled, presumes that the utility of an actions (or policy) can be reduced to the “value of a lot of pleasure or pain” –p214
o “it is supposed that, according to utilitarism, the average or total happiness of the group is to be increased, regardless of how many or how few people are made happy, some perhaps at the expense of making others unhappy and regardless even the continued presence or absence of certain members.” –p216
o Overcoming peremptory objections in alliance with strategy: “Utilitarism can avoid these difficulties and a number of others by abandoning the felicific calculus and allying itself, at least for the present, with the strategy of disjointed incrementalism.” –p217; “the census notion already incorporates in practice some provisions for fair and equal treatment that the felicific calculus, as it is usually interpreted, lacks.” P217
o “…strategy helps to save utilitarism from many conflicts with peremptory rules by insisting on a remedial orientation” –p219
o “When it is allied with the strategy of disjointed incrementalism, utilitarism thus anticipates some peremptory moral judgments that have in the past been made objections to it.” –p219
o “Utilitarism, utilitarism with the strategy better than utilitarism with the calculus thus supplies the demand constituted by the principles of justice” – p222
o “The strategy of disjointed incrementalism is, in ways both morally convincing and philosophically illuminating.” –p223
o The questionable feasibility of the calculus:
o “Possible or not, however, an entirely convincing design for the felicific calculus has not yet emerged from these efforts” p 227.
o “subjective utility”: one person’s satisfaction with a certain policy as against another person’s dissatisfaction”p229
o “the strategy responds to this need in two ways: by redesigning policies so that, as far as possible, they satisfy multiple demands, and by supersession. Supersession in effect establishes an order of priority among different values.” P229
o The problem of consequences:
o “”utilitarism requires that persons evaluating policies consider the consequences of those policies as they affect happiness.” –p230; “there are two things that have to be done in answer to the objection about consequences. First, it must be shown that utilitarism can be associated with reasonably specific ways of selecting the consequences that are to be considered in evaluating actions and policies. Second, it must be shown that utilitarism deals as prudently as possible with the inevitable fact that some important consequences may be overlooked (partly because not all the consequences will have been formulated).” –p233
o “use of strategy does not imply that the analyst ignores information… only that he defines his task so as to leave out information that will have to be dealt with in the course of other tasks.” –p234.
o “The strategy of disjointed incrementalism maximizes the chance, and thus it mitigates fears about undetected consequences. As we have said, it encourages extensive and varied discussion yet provides means of giving the discussion focus” p.238
o “…They are safer because they leave so much more room, in the way of other factors that can be adjusted, for remedying unforeseen consequences.” P239
o Shift or reference groups: “The problem in question is one of identifying suitable reference groups, the consequences for which are to determine the rankings of policies”. p240; “… in the absence of challenges, the references groups should be the ones used in the past” –p242
o Social pluralism and use of information: “….the shift of reference groups would take place between one group and a larger group that wholly includes it, ultimately reaching a group as comprehensive as “society as a whole”” –p243

Personal comments, interesting issues and findings:
• Incrementalism versus synoptic: reminds me of my engineering studies. It is the same difference between, algebra and numeric calculus. Algebra gives you an exact result, through the application of a resolution process and numeric calculus gives an approximate result, following iterative calculations. Numeric calculus can be applied in very complex mathematical problems, because it pretends to trend to the right solution in progressive steps. Algebra finds just the right result or the process is stuck (for example, due to mistakes in concepts, in the applications of rules or due to complex and time-consuming process).
• The comparison of incrementalism versus synoptic also reminds me of the extreme positions of “the paralysis by analysis” and the “extinction by instinct” (see article of Ann Langley about these two extreme strategic approaches). Incrementalism is more agile and allows a quick action (that can be corrected or readapted later). A synoptic approach requires much more previous knowledge before action is taken.
• Both books:
o They both agree on the fact that considerations of consequences are quite simple (p96 in Cyert & March) and that will be faced when the consequences appear (not when forecasted).
o Incrementalism in actions
o Problems fo neglected consequences: harmful failures are corrected after implemented
o Limited analysis disregarding possibilities
o Decisions are taken without adequate information

79 – A Behavioral Theory of the Firm (Cyert and March, 1963)


Cyert, Robert M. and James G. March
“A Behavioral Theory of the Firm”
Prentice Hall, New Jersey, 1963. Second Edition1992

Topic: An explanation of the theory of the firm from a behavioral perspective.

Summary and citations:

1- Introduction
o “The modern firm has some control over the market; it has discretion within the market; it sees the market through an organization filter” p1

2- Antecedents of the behavioral theory of the firm
o Theory of the firm: “asserts that the objective of the firm is to maximize net revenue in the face of given process and a technologically determined production function” p5; “maximization of profit is accomplished by determining the optimal mix of products (products) and inputs (factors), that is, the equilibrium position.” –p5. “Two major difficulties…1) the motivational and cognitive assumptions of the theory appear unrealistic…2 )has few of the characteristics…of actual business” – p8
o Rothschild: “primary motive of the entrepreneur is long-run survival” p9; Baumol: “the firm seek to maximize sales subject to a profit constraint” –p9
o “information is not given to the firm but must be obtained” –p10
o Papandreou: “views the firm as a cooperative system. The executive tasks are accomplished by a “peak coordinator”. The firm’s has certain goals, and it is a peak coordinator’s job to achieve these by allocating resources rationally” –p11
o In defence of orthodoxy: Friedman: “the function of economic theory is to build propositions with which the world can be analyzed and not to reproduce the world” –p13
o “The organization can be viewed as an information-processing and decision-rendering system” – p21; “in order to develop an alternative theory, we need more satisfactory theories of organizational goals, organizational expectations, organizational choice, and organizational control” – p22

3- Organizational Goals
o The problem of collective goals: “1) People (ie individuals) have goals; collectivities of people do not; 2) to define a theory of organizational decision making, we seem to need something analogous –at the organizational level- to individual goals at the individual level.” –p30
o “Let us view the organization as a coalition…some of them organized into subcoalitions” –p31; “any theory of organizational goals must deal successfully with the obvious potential for internal goal conflict inherent in a coalition of diverse individuals and groups” –p31
o Classic devices for defining organization goals: 1) Goals of the entrepreneur; 2) goal of “public interest” or “social welfare” – p32
o The goal formation process: “1) the bargaining process by which the composition and general terms of the coalition are fixed; 2) the internal organizational process of control by which objectives are stabilized and elaborated; 3) the process of adjustment to experience by which coalition agreements are altered in response to environmental changes” –p33
o Organizational slack: “Because of these frictions in the mutual adjustments of payments and demands, there is ordinarily a disparity between the resources available to the organization and the payments required to maintain the coalition. This difference between total resources and total necessary payments is what we have called organizational slack. Slack consist in payments to members of the coalition in excess of what is required to maintain the organization.” –p42 “when environment becomes less favourable …represents a cushion… slack permits firms to survive in the face of adversity” p43. “Slack operates to stabilize the system in two ways:1) by absorbing excess resources, it retards upward adjustment of aspirations during relatively good times; 2) by providing a pool of emergency resources, it permits aspirations to be maintained (and achieved) during relatively bad times” –p44
o “Finally, we have argued that, because of the form of the goals and the way in which they are established, conflict is never fully resolved within an organization, Rather, the decentralization of decision making (and goal attention), the sequential attention to goals, and the adjustment in organizational slack permit the business firm to make decisions with inconsistent goals, under many (and perhaps most) conditions.

4- Organizational Expectations
o Theory of search. “Modern entrepreneurs do not scan all alternatives nor do they have all information about all alternatives. They invest in information only so long as the expected marginal return from the information gained exceeds the expected marginal cost.” –p53
o “We wish to test the proposition the individuals can and do modify their subjective estimates of reality to accommodate their expectations about the kind of payoffs associated with various possible errors” p 80. “cost analysts will tend to overestimate costs and that sales analysts will tend to underestimate sales” –p81
o “The decision making system in the experiment had 4 critical organizational characteristics: 1) subunit interdepence: …the major decision-making units base their actions on estimates formulated at other points in the organization and transmitted to them in the form of communications,. The estimates so received cannot verified directly by the decision-making unit ***; 2) subunits specialization; 3) Subunit discretion; 4) Subunit conflict” –p86
o “An organizational coalition does not require either consistency or completeness in information; “ –p93
o “we do not find anything like a constant level of search” p93
o Resource allocation:
• “decisions considered here arose primarily as responses to “crisis” situations” –p94
• “in every case, once an alternative was evoked, it was accepted if it satisfied the general cost and return constraints…This support in turn came through a rather complex mixture of personal, suborganizational, and general organizational goals.” P94
o Search activity:
• “search became more and more intensive as the decision approached implementation” –p95
• “”search” consists in large part of evoking from various parts of the organization considerations that are important to the individual subunits” –p95
• “search will be much more intensive where organizational slack is small than where it is large” –p95
• Mating theory of search “Not only are organizations looking for alternatives; alternatives are also looking for organizations” –p96
o “Computations of anticipated consequences used by the organizations seem to be quite simple…. awkwardness of developing a single dimension on which all relevant considerations could be measured” –p96
o “Expectations are by no means independent of such things as hopes, wishes, and the internal bargaining needs of subunits in the organization” –p97 “…both conscious and unconscious bias in expectations is introduced” ,-p97 “,…there is some conscious manipulation of expectations” –p97
o “Communication includes considerable biasing, but also considerable bias correction” p97 “…is not passive” p97 “most biases are recognized by other parts of the organization” –p98
5- Organizational Choice
o “1) organizational perceptions are influenced by some characteristics of the organization and its procedures. … 2) Organizations consider only a limited number of decision alternatives. … Finally, organizations vary with respect to the amount of resources they devote to organizational goals on the one hand and suborganizational and individual goals on the other.” P99
o The decision process (p100); 1) forecast competitors’ behaviour; 2) forecast demand; 3) estimate costs; 4) specify objectives; 5) evaluate plan; 6) re-examine costs; 7) re-examine demand; 8) re-examine objectives; 9) select alternative –p102
o The firm as an adaptive institution: “a business form is constrained by the uncertainty of its environment, the problems of maintaining a viable coalition, and the limitations on its capacity as a system for assembling, storing, and utilizing information. … the firm as an adaptively rational system rather than an omnisciently rational system” p117
o “In particular, so long as the environment of the firm is unstable (and predictably unstable), the heart of the theory must be the process of short-run adaptive reactions. The long-run properties o the processes under stable conditions are relevant primarily as indicators of logical properties (and therefore consistency with the general concepts)” p119
o Standard Operating procedures: “we should note that organizations make decisions typically by solving a series of problems” p121 “devote rather little time to long-run planning” –p121. “They move from one crisis to another” p121 “Three basic principles: 1) uncertainty.. 2) maintain the rules… 3) Use simple rules” p121
o Specific standard Operating procedures: 1) task performance rules; 2) Continuing records and reports; 3) Information-handling rules; 4) plans” –p123 “Thus, rules not only transmit past learning: they also control (make predictable) behaviour within the firm” –p124 “good practice … tends to be shared among firms… standardization provides a defense” p125
o Records and reports “two main purposes: control and prediction” p125
o Information handling rules: “there are two aspects to standard operating procedure for information flows. Routing rules and filtering rules” –p129. “The departmental organization defines reasonably well the groups within which sharing of information is needed. Since information needs and task specialization are highly correlated, it is appropriate to process information through the hierarchy defined in terms of task specialization.” –p129
o “Thus, the internal biases in the organization increase the pressure (from external uncertainty) to develop decision methods that do not require reliable information (other than the simplest, most easily checked information). –p130
o “decisions are used as devices for learning about their hidden consequences” –p131
o “The budget in a modem, large-scale corporation plays two basic roles. On the one hand… management control…to check achievement…On the other hand, .. determine feasible programs” –p131
o “1) a plan is a goal,…2) a plan is a schedule,…. 3) a plan is a theory… 4) a plan is a precedent…”p132
o “rules are the focus for control within the form; they are the result of a long-run adaptive process by which the form learns; they are the short-run focus for decision making within the organization” –p134
o “1-Multiple, changing, acceptable-level goals; 2-an approximate sequential consideration of alternatives; 3-the organization seeks to avoid uncertainty by following regular procedures; 4- the organization uses standard operating procedures and rules of thumb to make and implement choices. In the short run these procedures dominate the decision made” –p134

6- A specific price and output model

7- A summary of basic concepts
o “The four major concepts used in the theory are 1) quasi resolution of conflict [goals as independent constraints / local rationality / acceptable-level decision rules / sequential attention to goals]; 2) uncertainty avoidance [feedback-react decision procedures / negotiated environment]; 3) problemistic search [search is motivated / search is simple-minded / search is biased], and 4) organizational learning [adaptation of goals / adaptation in attention rules / adaptation in search rules]” –p164
o “The order in which various alternative solutions to a problem are considered will change as the organization experiences success or failure with alternatives” –p174

8- Some implications
o Descriptive analysis: the firm :
• 1) Price and output determination (excess resources, organizational slack, decentralising, reduce uncertainties using standards)
• 2) Internal resource allocation quasi resolution of organizational conflict, search behaviour, uncertainty avoidance, organizational learning): “In general, for an alternative investment opportunity to have a significant chance of being introduced in the system, two conditions have to be met. A problem must be perceived by the organization, and the investment must be visible to that part of the organization in which search is stimulated by the problem” p180
• 3) Innovations (“failure induces search and search ordinarily results in solutions” p188: “firms that have made specific significant technological improvements, we find that they were made by firms with substantial slack (and thus mostly successful firms).” –p189
o Descriptive analysis: non-business organizations: “the behavioural theory of the firm is one the important potential sources of evidence about the validity of this structure and there mechanisms” –p196
o “These implications for descriptive economics, for studies of non-economic organizations, and for normative analysis are not always easy to see at this stage. They are even harder to validate” – p211

9- An Epilogue
o Three related but largely independent ideas:
1. Bounded rationality: “rational actors are significantly constrained by limitations of information and calculation” –p214. “They set targets and look for alternatives…rather than try to find the best imaginable solution; they allocate attention by monitoring performance with respect to targets. They attend to goals sequentially, rather than simultaneously. They follow rules-of-thumb and standard operating procedures.” –p214
2. Imperfect environmental matching: “behavioural theories emphasize the inefficiencies of history” –p215
3. Unresolved conflict: “multiple actors with conflicting interests not entirely resolved by the employment contract” –p215
o Developments in economic theories of the firm:
• Theory of teams
• Control theories of the firm
• Transaction costs economics: “two behavioural assumptions about “contracting”, as opposed to “maximizing”. The first assumption is bounded rationality…. The second, assumption is opportunism, the notion that there is conflict of interest within, as well as between, organizations, that participants in an organization will lie, cheat, and steal in their own self-interest if they can” *** p220; “,…when asset specificity is low, debt financing is likely…where asset specificity is high, costs of debt will have to grow to cover the risk” -p221; “the flexibility of the definition of transaction costs tends to make the concept amore powerful tool for interpreting historical outcomes than for predicting future ones” -p221
• Agency theory: “…bounded rationality has tended to fade into the background, and attention to conflict of interest has become paramount” p222; “In practice, the theory is written from the point of view of one side of the contract. From this perspective, there is a cascade of principal-agent relations” –p222
• Evolutionary theories: “they see firms as being selected upon by virtue of their fit to the environment” –p224
o Developments in behavioural studies of organizational decision making:
Four interrelated visions: (p225)
1. Decisions resulting from intentional, consequential action
2. Decisions by a logic of appropriateness implemented through a structure of organizational rules, roles, and practices
3. Decisions influenced by the interactive ecological character of decision making (“hierarchies but they tend to function as less hierarchical networks of relations” p233: “this ability to learn from others is one of the most powerful of adaptive tools available to individuals and economic organizations. It depends, however, on a structure of linkages among forms… and… capability of learning the lessons” p234
4. Decisions as artifactual rather than as central to understanding decision making. “Individuals fight for the right to participate in decision processes, but then do not exercise the right.” –p236; “very little time spent in making decisions…managers seem to spend time meeting people and executing managerial performances” p236; “choices as artifacts… the focus has shifted from the “substantive” to the “symbolic” components of decisions” p236; “On the one hand, the processes of choice reassure those involved that the choice has been made intelligently, that it reflects planning, thinking, analysis, and the systematic us of information: and that the choice is sensitive to the concerns of relevant people, that the right people are involved.” -p237. Symbolic action: “It is the process that gives meaning to life, and meaning is the core of life” –p237

Personal comments, interesting issues and findings:
• I think the notion of slack is real: salaries and policies are revised in periods of difficulties. This means that there was a cushion to cost reduction. This is also true that negotiation can be more flexible in the presence of evidence of bad times. I.e. a worker would not accept a wage reduction if the bad conditions cannot justify it.
• The influence and applicability of the theory of Cyert & March is very wide. For instance, in International Studies (that I study in Dr Farashahi’s course), the main two streams are OLI theory (based on Transaction cost theory) and Organizational Capabilities theory. Both can be explained using the behavioural theory of the firm.
• The behavioural theory of the firm tries to reflect better the firm’s reality. Let me do an analogy: If the firm is the territory, the classical theory of the firm is the map and the behavioural theory of the firm is a photo from an airplane (with an inclination to see land’s imperfections).
• The behavioural theory of the firm is based on highlighting all firms’ imperfections and explaining how they are faced to coexist with them.

69 – A concept of Corporate Planning (Ackoff, 1970)


Ackoff, Russel L.
“A concept of Corporate Planning”
Wiley, New York, 1970 (Ch.1,2,3,7)

Topic: Corporate Planning: definitions, concepts and framework for its development

Summary and citations:

• Planning is the design of a desired future and of effective ways of bringing it about. It is an instrument that is used by the wse, but not by the wise alone. (p1)
• Planning is one of the most complex and difficult intellectual activities in which man can engage. (p1)
• Nature of planning: 1) canticipatory decision; 2) system of decisions; 3) process (p4)
• Strategic planning is lnog-range corporate plaaning is ends oriented (p5)
• Philosophies of planning: satisficing, optimizing, and adaptizing
• Satisficing : more concerned with survival than with development and growth
• Optimizing: use of mathematical models (p9) Optimizer tries to a) minimize the resources …B) maximize the performance …c) to obtain the best balance of costts and benefits (p12)
• Techniques of optimization have in general been more useful in tactical than in strategic planning (p15)
• Adaptizing: innovative planning (p15); 1) Process is our most important product; *** 2) design an organization that will minimize the future need for retrospective planning 3) knowledge of the future: certainty, uncertainty and ignorance – p17
• Adaptive responses are ppassive or active (p18).
• The more that corporate planning is pushed from satisficign toward adaptizing, the greater the requirement for scientific methods, techniques, and tools.- p21
• Optimizing planning requires more understanding of an organization’s behavior than dies satisficing. Adaptative planning requires even more than does optimizing – p21
• The required understanding of collective and individual beahvior is dconsedeably greater than that currently possessed by many corporate planners and managers – p21
• Desired states or outcomes are objectives. Goals are objectives that are scheduled for attainment during the period planned for. Objectives are of two types, stylistic and performance. P-41
• Performance objectives require operational definition – p41
• Profit maximization is commonly taken to be the most general formulation of a company’s performance objectives. But profit is often ill defined. It can be operationally defined and transformed into goals by constructing gain and loss euqations for each product line… – p41
• One cannot fix goals until at least the means to be employed in pursuing them have been considered. – 41
• It is usually much better to dissolve a problem than it is to solve it. Dissolution of a problem requires innovation, whereas it solution requires only evaluation – p43 ***
• The key to both creating and evaluating courses of action and policies lies in understanding the system involved. – p 43
• A manager is unlikely to be aware of how little understanding he has of some of the operations for which he is responsible – p47 **
• Few companies understand why their products are consumed although they think they do – 51 ***
• Thus there are three attitudes toward the future, which, ordered from the most to the least prevalent are a) wait and see, b) predict and prepare, c) make it happen. P56 ***
• Reinventing the system: understanding a system increases our ability to find innoative and superior courses of action and policies. … Polisy innovation depends critically on our ability to brong these self-imposed constraints into question. P59
• Modeling efforts should be directed at acquiring understanding of the form, its supply system, its distribution and marketing system, its consumers, its competitors, and its environment. – p64
• Creation fo new alternatives can often be facilitated by redesigning (from scratch) the system being planned for, with no constraints. – p64
• The probability of success of a planning effort decreases as the organizational autonomy of the planning activity increases. – 129
• Remember that successful planning cannot be done to or for an organization; it can only be done by the organization itself. – p132
• The value of planning to managers lies more in their participation in the process than in their consumption of its products. – p137

Personal comments, interesting issues and findings:

• Philosophies of planning: Satisfacing might aim eficacity and otimizing maybe efficciency
• I think that in current business (also social and political) world, uncertainty and ignorance are a major trend. From this point of view, contingency planning and rsponsiveness planning are important because they make companies flexible and adaptable to changes (ie crisis management).
• How do we take into consideration individual and collective behavior into planning? Has our knowledge of behavior increased to have a better planning?
• Ackoff affirms that technology (in the 70’s) is the limit to optimizing planning: which is the current state of the art of technology and planning?
• Planning reminds me of the concept of quality: 1) affects all departments in the firm; 2) is an on-going process and can always be improved; 3) quality costs are high but non-quality costs are higher. The same could be said of risk management.
• Ackoff says that the book is not a handbook (it is what should be done, not how it should be done). (Preface) But I think it is quite practical and even says details of how to do it (“The scenarios themselves should be from 10 to 20 (double-spaced) typewritten pages in length…. I have found it convenient to organize each scenario into three sections” p29
• Ackoff is very didactic, step-by-step and with plenty of examples. To explain his theory, many concepts are defined. He had 30 years involvement with universities when he wrote the book and we can feel his interest in pedagogy (see expample p61-63)
• What I liked the most in Ackoff is his effort in transmitting the message that the system has to be reinvented. The importance of what an organization should be like “as a whole and ideally” (p59)
• “Process is our most important product” and “It is usually much better to dissolve a problem than it is to solve it”: the two stronger ideas

Comparative analysis: Ackoff and Drucker

• Both Ackoff and Drucker, uses the same example: the answer of the carpenter “Puttting some pepices of wood together” ot “putting up a door frame” or “bulding a house”. Ackoff to explain different types of objectives (means and ends), Drucker to show the difference between a non-manager and a manager.
• Ackoff and Drucker have a common point: “Maximize profit cannot be a goal”. But for different reasons. Ackoff says that to maximize profit(ability) is a matter of definitions and a matter of financial and accounting policy. Drucker says that this is not the goal, but the sastisfy the customer.
• Ackoff and Drucker both analyze the consumers. Ackoff studies the models of consumers and says “Few companies understand why their products are consumed, although they think they do” (p51). Drucker says that this understanding and serving the customer is the goal of the company.
• Ackoff and Drucker –p61- both consider that objectives have to be reexamined continually
• This requires each manager to develop and set the objectives of his unit himself – p129 says Drucker. Ackoff agrees when he says that an outsourced firm can’t make your planning.

80 – The Practice of Management (Drucker, 1993)


Drucker, Peter F.
“The Practice of Management”
Harper and Brothers, New York, 1993
(Introduction, Parts 1,2, 5, Conclusion)

Topic: Comprehensive theory of the management tasks and responsibilities

Summary and citations:

• The first definition of management is therefore that it is an economic organ, indeed the specifically economic organ of an industrial society – p8
• Management is a practice, rather than a science or a profession, though containing elements of both. – p10
• Managing is not passive, adaptative behavior; it means taking action to make the desired results come to pass. – 11
• To manage a business means, therefore, to manage by objectives – p12
• Second function is therefore to make a prodctive enterprise out of humna and material resources. P 12
• It must be a genuine whole: a greater than –or at least different from- the sum of its parts with its output larger than the sum of all inputs. – p12
• The final function of management is to manage workers and work – p14
• Time dimension of management: has to live always in both present and future p 15
• The popular belief that the new technology will replace human labor by robots is utterly false – p21
• A business enterprise is created and managed by people. It is not managed by “forces”. P34
• Profitaibility is not the purpose of business enterpise and business activity, but a limiting factor on it. – p35
• There is only one valid definition of business purpose : to create a customer – p37. It is the customer who determines what a business is. P 37. Because it is its prpose to create a customer, any business enterprise has two –and only these two- basic functions: marketing and innovation. They are the entrepreneurial functions. – p37
• Innovation goes right through all phases of business – p40
• Innovation can no more be considered a separate function than marketing – p40
• Productivity means the balance between all factords of production that will give the greatest output for the smallest effort – p41
• First duty is to survive (p46), not maximizatino of profits but avoidance of loss (p47), creative rather than adaptative task (p47)
• What is business is not determined by the producer but by the consumer. – p50
• Business must be managed by setting objectives for it. – p60
• Developments may change objectives. This is one reason why all objectives have to be reexamined continually –p61
• Objectives are needed in every area where performance and results directly and vitally affect the survival and prosperity fo the business. P63
• There are eight areas in which objectives of performance and results have to be set: market standing, innovation, productivity; physical and financial resources; profitability; manager performance and development; worker performance and attitude; public responsibility. – p63
• Its performance is the performance of human beings. And a human community must be founded on common beliefs, must symbolize its cohesion in common principles. – p64
• There are three basic systems of industrial production known to us so far: unique-product production, mass production (old style and new style) and process production. – p96
• New-style mass production: It does not rest on uniform products. It rests on uniform parts which can then be mass-assembled into a large variety of different products. – p100
• Management must therefore develop new markets for any new products as well as maintinaa steady market for the old – p105
• Managers are the basic resource of the business enterprise and its scarcest … Are the most expensive resource in most business – p111
• Upward relations are properly a manager’s first concern. – p112
• Henry Ford’s misrule was a systematic, deliberate and conscious attempt to run the billion-dollar business without managers. – 114
• The first requirement in managing managers is management by objectives and self-control. ***– 119 – may legitimately be called a “philosophy” of management (p136)
• Story of the stone-cutters: p 122
• Emphasis should be on teamwork and team results. These objectives shold always derive from the goals of the business enterprise. – ‘126
• This requires each manager to develop and set the objectives of his unit himself – p129
• One of the major contributions of managemnent by objectives is that it enables us to substitute management by self-control for management by domination. – p131
• Authority…derives from knowledge rather than from rank – 138
• The span of control, we are told, cannot exceed six or eight subordinates – p139
• A team does not normally make a good superior manager – p140
• Every manager has the task of contributing what his superior’s unit needs to attain its objectives. This is indeed his first duty…. He has secondly a duty towards the enterprise…Finally, the manager has responsabilities downard, to his subordinate managers – p142
• The vision of a manager should always be upward –toward the enterprise as a whole. But his responsibility runs downward as well– p143
• It is performance, not conformance – p145 (constant improvement, neutralizae weaknesses of its members)
• The focus must be on strengh – p145 (not weaknesses)
• The danger of safe mediocrity: nobody learns except by making mistakes The better a man is the more mistakes will he make –for the more new things he will try. – p147
• Promotion decisions are what I call “life-and-death” decisions for managers.- p155
• Lack of character and integrity, …destroys people..spirit…performance – p158
• Leadership: making common men into uncommon men – p158 – but leadership cannot be created or promoted. It cannot be taught or learned.. But management cannot create leaders – p159. Leadership requires basic aptitude… but also requires basic attitudes.
• The chief-executive team alone can adequately solve the problem of succesion.- p169
• The much publicized divorce of ownership from control which makes it absurd that the business enterprise be directed by the representatives of the share-holders – p179
• The Board must also be detached from operations.- p181
• Sudden emergence of manager development as a major concern – p183
• No one can develop himself unless he works on the development of others – p189
• A manager has two specific tasks: 1) creating a true whole that is larger than the sum of its parts; 2) harmonize in every decision and action the requirements of immediate and long-range future. – p342
• 5 basic operations: 1) sets objectives; 2) organizes; 3) motivates and communicates; 4) job of measurement; 5) develops people p343-344
• 5 phases of decision making : definig the problem, analyzing the problem, developing alterante solutinos, deciding uupon the best solution, converting the decision into effective action.– p353
• It must create customers and markets by conscious and systematic work. Above all, it must focus continuously on creating mass purchasing power and mass purchasing habits. – p371
• 7 new tasks of the manager – p373
• The tasks must be simplified. … to convert into system and method what has been done before by hunch and intuitino… a logical and cohesive pattern. – p374
• … is neither education nor skill; it is integrity of character – p 378
• Private enterprises is an organ of society and serves a social function – p381
• The public responsibility of management must therefore underlie all its behavior (ethics of management) – p383
• The first responsibility to society is to operate at a profit, and only slightly less important is the necessity for growth. – p386
• The company is not and must be never claim to be home, family, religion, life or fate for the individual. It must never interfere in his private life or his citizenship. He is tied to a company through a voluntary and cancellable employment contract. – p387
• Business has the responsibility to make its best contribution to the defensive strength of its country. – 388

Personal comments, interesting issues and findings:

• One man show: Drucker writes about all aspects: strategy, functions, marketing, innovation, structure, competition (recalls Porter in p53), goals for each area, productivity, “instrument panel” (Balanced Scorecard?), production, two-way communication within the company, reports and procedures, authoritym, rank of control, constant improvement, compensation and reward, develop managers,…
• Drucker puts the manager as the one creating value for society and as the most important element in the company. Sees the manager as one person (the isolation of the CEO) in the whole the book, except when he talks of management teams. That shocked me.
• Interesting: the Ford story (p116). Strategy (on strong command) precedes structure (Centralisation) and it failed. “The greatest change perhaps –certainly the most visible- is in organization structure” p117. Confirms Chandler “structure follows strategy”
• Drucker has several first duties or tasks for the manager. Sometimes it seems as the last element is more important than the previous.
• Contrasting what MBA’s are told in BS, Drucker says that leadership can’t be taught.
• Drucker emphasizes the importance of integrity, which is the base for CSR.
• Conclusion is very pro-capitalism and pro-America.

71 – The Concept of Corporate Strategy (Andrews, 1971)


Andrews, Kenneth J., “The Concept of Corporate Strategy”, Irwin, 1971 (Ch. 1-5)

Kenneth R Andrews (1916 – 2005) was an academic who wrote and thought on business policy or corporate strategy at the Harvard Business School. He is regarded as one of the ‘fathers’ of modern business strategy and has been credited with giving corporate strategy its dominant strategy[1]. Originally, a schloar of American literature (his PhD was on Mark Twain)in 1946 he was persuaded by Edmund Learned to join Harvard Business School[2] where he taught for forty years. His books are a popular source of SWOT analysis in business strategy. [Source: Wikipedia]

Topic: Formulation and implementation of corporate strategy.

Summary and citations:

• General Management tasks: “…assignable to three roles – organization leader, personal leader, and architect of organization purpose” p3
• “The complexity of the general manager’s job and the desirebility of raising intuititve competence to the tlevel of verifiable, conscious, and systematic analysis suggest the need,… for a unitary concept” p10
• “The basic determinants of company character, if purposefully institutinoalized, are likely to persist through and shape the nature of sbstancial changes in product-market choices and allocation of resources.”p14
• “Incrementalism might have… the appearence of consciously formulated strategy, but may be the result… of skillful improvisatory adaptation”. P17
• “In a dynamic company, moreoever, where strategy is continually evolving….”p17
• “Corporate strategy is an organizarion process, in many ways inseparable from the structure, behavior, and culture…”p18
• “The ability to identify the four components of strategy –(1) market opportunity, (2) corporate competence, (3) personal values and aspirations, and (4) acknowledgede obligations to segments of society other than stockholders- is easier to exercise than the art of reconciling their implications in a final pattern of purpose”. P19
• Uniqueness: “The most important characteristic of a corporate pattern of decision that may properly be called strategic is its uniqueness” p22
• Forced-growth Strategies : 1) Acquisition of competitors; 2) Vertical integration; 3) Geographical expansion; 4) Diversification (p24)
• Brice Scott’s stages: 1) Single product (single business) ; 2) single-product with functional specialization; (dominant business) 3) multiple product lines organization based on product-market (related business) –the most successful strategic pattern; 4) unrelated business p25
• Criteria for ealuation: “A strategy must be explicit to be effective and specific enough to require some actinos and exclude others. Clarity should not imply rigidity” p27 “Uniqueness is morethe produc tof imagination than experience” p28; “Vulnerability to competition is increased by lack of interest in market share” p28; “….consistency becomes a viatl rather than merely an esthetic problem” p29 “the riskiness of any plan should be compatible with the economic resources of the organization and the temperament of the managers concerned” p29
• “… a high risk srategy that failed was not necessarily a mistake” p32
• Company environment: technology, ecology, economics, industry, society, politics (p38)
• “to conceive of a new development in response to market information and prediction of the future is a creative art” p45 –more than economic analysis-
• Consideration of all combinations of 1) Environmental conditions and trends; 2) opportunities and risks; 3) Dinstinctive competence; 4) Corporate resources
• Importance of personal values: “what they personally want to do” p53
• “… actions taken can be rationalized so as not to seem quite so personal as I have suggested they are” p55
• “Finally, at a higher level of sophistication, the strategy should have some appeal for all employees” p55
• “A change in corporate directino and the energy and innovation required to make it successful usually call for a cultural adaptation that is better encouraged than forced” p59
• “Strategic innovation is a practical alternative to violent restructuring” p60
• “The effort to formulate personal purpose might well acompany each individual’s contributions to organizational purpose” p62
• “As much as a leader wishes to trust others, he has to judge the soundness and validity of his subordinates’ positions” p63
• “Strategy is a human construction; it must in the long run be responsive to human needs. It must ultimately inspire commitment. It must stir an organization to successful striving against competition. People have to have their hearts in it.” P63
• Ethical values: “strategists might and can do to what they want to do. We now move to what they ought to do” p65
• “The decentralization of authority that makes large organizations possible requires trust rather than suspicion in the granting of appropiate autonomy to subordinates” p67
• Concern about the world: “The willingness to undertake joint ventures…share management,…cooperate…to train nationals… oppportunity for combining entrepreneurship with responsibility…” p71
• “Governments everywhere are active claimants to a voice in individual corporate strategy” p72
• “Business cannot remain healthy in a sick society” p73
• “Overregulation of the individual by corporate policy is no more appropriate than overregulation of the corporation by government” p75
• “…a company should not venture into good works that are not strategically related to its present and prospective economic functions” p76
• The determination of strategy: “1) appraisal of present and foreseeable opportunity and risk in the company’s environment, 2) assessment fo the firm’s unique combination of present and potential corporate resourcess or competence; 3) determination of the noneconomic personal and organizational preferences to be satisfied, and 4) identification and acceptance of the social responsabilities of the firm” p78

Personal comments, interesting issues and findings:

• The book distinguishes very clearly the formulation and the implementation of corporate strategy. The formulation is progressively explained, in a very clear way, the concepts are clearly explained and Andrews gives a lot of examples. I think it is a book written for practitioners, managers and CEO’s.
• Importance of the Personal Values: I have found a strong will of rationalizing causes (i.e. reasons for internationalization). This might be because normally, the facts are analyzed after the phenomenon happened (ie the company is already international) and not when the decision was taking place. I think there is a strong component on strategic decisions (and any decision) consisting on the influence of personal values. For instance, in class, Guillaume explained to us the way he discarted a supplier, mainly by personal reasons. But these reasons would never be reported as personal, he said. The importance of personal values is showed in the case of strong-personnality leaders and founders: the character of Richard Branson is in the base of its risky and broad diversification.
• I like the balance that Andrews shows between the separation of the economic analysis and calculation of ROI and the personal interests of managers.
• As Chandler “structure should follow strategy” p20
• Mimetism (effects of instittionalisation?) : “Sometimes the companies of an industry run like sheep all in one direction” (p32) instead of uniqueness. Personal interest of the manager – problem of agency.

72 – Corporate Strategy (Ansoff, 1965)


Ansoff, H. Igor, “Corporate Strategy”, McGraw Hill, New York, 1965 (Ch.1-6)

H. Igor Ansoff (December 12, 1918 – July 14, 2002) was a Russian American, applied mathematician and business manager. He is known as the father of Strategic management.
Professionally, Ansoff is known worldwide for his research in three specific areas: 1) The concept of environmental turbulence; 2) The contingent strategic success paradigm, a concept that has been validated by numerous doctoral dissertations; 3) Real-time strategic management.
Marketing and MBA students are usually familiar with his Product-Market Growth Matrix, a tool he created to plot generic strategies for growing a business via existing or new products, in existing or new markets. [Source: Wikipedia]

Topic: Analytical approach to the definition of a corporate strategy.

Summary and citations:
• “The purpose of this book is to synthesize and unify these into an overall analytic approach to solving the total strategic problem of the firm” (preface)
• Classes of decisions: strategic, administrative and operating
• A new method for modelling for strategic decisions because the Capital Investment Theory (CIT) is not applicable to strategic management decisions (chap 2)
• “..decision rules for search and evaluatino of products and markets are not the same for all firms.” P22
• “Our concern must be not only with evaluation of projects for given rules, which is the main concern of CIT, but also with formulation of the rules for each individual firm” p23
• Adaptative search method: “1) a “cascade” procedure of successive narrowing and refining the decision rules, 2) feedback between stages in the cascade, 3) a gap-reduction process within each stage, and 4) adaptation of both objectives and starting-point evaluation” p28
• System of objectives: “both economic (exert primary influence) and social objectives (secondary)”; “The central purpose of the firm is to maximize long-term return on resources employed within the form” p38 “influences: responsibilites and constraints”
• “Contrary to Cyert and March, we assume that the business form dies have objectives which are different and distinct from the individual objectives of the participants” p39
• “…significant aspect of the adaptative search method… is the circular dependence of the goals on the environment and of the choice of environment on the goals” p49
• External (defensive, aggressive) flexibility or internal flexibility (liquidity of firm’s resources)
• Types of synergies: 1) Sales synery; 2) Operating synergy; 3) Investment synergy; 4) Management Synergy. P80
• “The problem of strngths and weaknesses and the problem of synergy are seen to be related” p91
• Grid of competences: 1) R&D; 2) Operations; 3) Marketing; 4) General Management (p100)
• “The major ise of the competence profile is in assessment of this balance in four different parts of the strategic problem: 1) Internal Appraisal; 2) external Appraisal; 3) Synergy Component of Strategy; 4) Evaluation of individual opportunities” p102
• Growth vector components – table 6.1 p109

Personal comments, interesting issues and findings:
• This is a book for managers, with concepts and procedures to be used. I think though that it is quite dense to be applied.
• The corporate strategy is too ROI-centered
• Ansoff was mathematician and it can be viewed in his approach: First defines the problem, then gives definitions of the tools, then solves the problem with the defined tools. Very deterministic and carthesian.
• Agrees with Andrews about the influence of the environment. Also sees strategy as a always-adapting process with feed-back.
• Bases strategy on decisions made on quantitative values (rates, ratios, ROSales, networth, inventory, assets, etc), based on finance.
• As personal objectives of individuals, the author also considers goals as: 1) maximum current earnings; 2) Capital gains 3) Liquidity of estate; 4) social responsibility – Enlightened self-interest; 5) social resposibility – Philanthropy; 6) attitude toward risk (p62). No consideration of more ‘soft’ values (!). Even 4 and 5 are considered for profit (but not economical) !!
• “Is strategy necessary?” p112 might be a question that many authors might take for garanted but I think that is good to be asked.
• Last diagram p202 makes me think (and smile) if this is a book really for managers to be used in a practical way. It is more an informatic algorithm than an ‘enlightning’ vision.

77 – Strategy and Structure: Chapters in the History of the Industrial Enterprises (Chandler, 1962)

Chandler, Alfred D.
Strategy and Structure: Chapters in the History of the Industrial Enterprises
The MIT Press, Cambridge, Mass., 1962

Alfred DuPont Chandler, Jr.[1] (September 15, 1918 – May 9, 2007) was a professor of business history at Harvard Business School, who wrote extensively about the scale and the management structures of modern corporations. Chandler graduated from Harvard College in 1940. After wartime service in navy he returned to Harvard to get his Ph.D. in History. He taught at M.I.T. and Johns Hopkins University before arriving at Harvard Business School in 1970. He received a Pulitzer Prize for his work, The Visible Hand: The Managerial Revolution in American Business (1977). [Source:]

Topic: The creation and the spread of the multidivisional form of organization in American industry.

Main questions :
Thesis: Structure follows strategy
How multidivisional structures were created?

Data and Methods :
Analysis of 4 industrial cases. Chandler described how the chemical company Du Pont, the automobile manufacturer General Motors, the energy company Standard Oil of New Jersey and the retailer Sears Roebuck managed a growth and diversification strategy by adopting the revolutionary multi-division form

Summary and citations:

• “The initial proposition is then, that administration is an identifiable activity, that it differs from the actual buying, selling, processing, pr transporting of the goods, and that in the large industrial enterprise the concern of the executive is more with administration than with the performance of functional work” p9
• “A second proposition is that the administrator must handle two types of administrative tasks when he is coordinating, appraising and planning the activities of the enterprise” p9 (1-long-run health and 2-day to day operation)
• “Strategy can be defined as the determination of the basic long-term goals and objectives of an enterprise, and the adoption of courses of action and the allocation of resources necessary for carrying out these goals” p13
• “Structure can be defined as the design of organization through which the enterprise is administered”. P14 . Two aspects. 1) lines of authority and communication and 2) information and data that flow in these lines.

I – Historical settings
• “The more common road to the formation of the vertically integrated enterprise was by way of horizontal combination and consolidation.” P29
• “After 1890’s, administrative innovations [standardization of procurement and processes] were much more important to the development of American business than legal ones [i.e. New Jersey amendment]”. P31
• “And by 1900, some of the very largest of the new enterprises were already responsible for the administration of integrated multifunction subsidiaries as well as single-function departments” p38
• “After 1900…three types of strategies. Growth came either from an expansion of the firm’s existing lines to much the same type of customers, or it resulted from a quest for new markets and sources of supplies in distant lands, or finally it came from the opening fo new markets by developing a wide range of new products for different types of customers.” P42
• “…structure does follow strategy, and the different types of expansion brought different administrative needs requiring different administrative organizations.” P49

II – DuPont
• The Finance Committee was taken in charge by the top management, Pierre and Coleman DuPont.
• “From this time on [1914], the criterion for promotion was competence rather than family background.” p64
• “This strategy of product diversification was a direct response to the threat of having unused resources” p90
• “The structure accepted in Sept, 1921, has serve the du Pont Company effectively ever since. Losses were soon converted into profits… “p112
• “The strategy of diversification quickly demanded a refashioning of the company’s administrative structure if its resources, old and new, were to be used efficiently and therefore profitably” p113
• “And in transforming the highly centralized, functionally departmentalized structure into a “decentralized”, multidivisional one, the major achievement had been the creation of the new divisions.” P113

VI – Organizational innovation – A comparative analysis
• Importance of the financial department. DuPont introduced a 3rd role of this department. “Planning, coordinating, and appraising the work of other departments and the enterprise as a whole”. P288’. “Thus these departments became increasingly part of the central and even of the general office organizations” p288
• “The central office activities that tied the work of the functional departments to the changing market usually came about only after a slowing of market demand”. P291
• More attention was paid in bringing together departments to improve products than to coordinate product flow. P292
• “(Managers) had to be encouraged to concentrate on entrepreneurial rather than operational activities” p294
• “the initial awareness of the structural inadequacies … came from executives close to top management , but who were not themselves in a a position to make organizational change” p303
• “it took sizable crisis to bring action “ p303
• “the men who make the critical decisions in any economy can be defined as those who have the actual or real, rather than merely the legal, power t o allocate the resources available to them and who, in fact, determine the basic goals and policies for their enterprises. Clearly the general executive is such a man”…”stockholders and legal owners long ago abdicated this function” p312
• “The general executive of the large corporation is then a crucial and identifiable a figure mid-twentieth century economy as Adam Smith’s capitalist was in the late eighteenth century, and Jean Baptiste Say’s entrepreneur in the early nineteenth” p314
• “Unless structure follows strategy, inefficiency results” p314
• “the empire builder rarely became an organization builder” p315

VII – The spread of the multidivisional structure
Technologic changes and market diversity are the main drivers for companies to adopt multidivisional structures. Metallurgic companies (Steel, Aluminium, Copper, Nickel) don’t accept the new structure. Others (processors of agricultural products, rubber, petroleum) accept partially the new structure and other industries (electrical and electronics, machinery and chemicals) accept widely the new structure.
• Those who accept widely the new structure: “The leading companies in all these industries have increasingly developed new product lines sold in markets quite different from their original one.”p362
• “the fewer the markets and the simpler the marketing process, the easier will be the administration and coordination of functional departments” p343
• Family-firms have tended to be slower in changing both structure and strategy than the others. p380

• “Structure has been the design for integrating the enterprise’s existing resources to current demand; strategy has been the plan for the allocation of resources of anticipated demand”. P383
• “Thus four phases or chapters can be discerned in the history of the large American industrial enterprise: the initial expansion and accumulation of resources; the rationalization of the use of resources; the expansion into new markets and lines to help assure the continuing full use of resources; and finally the development of a new structure to make possible continuing effective mobilization of resources to meet both changing short-term market demands and long-term markets trends.” P385.

Personal comments, interesting issues and findings:

• P29: When Chandler says “marketing”, he is referring to logistics and distribution of finish products. Chandler’s marketing together with “the procurement of raw materials” would now be called supply-chain management (SCM). Chandler calls marketing “advertising”. Also, in the chart 1 p10, there are not represented the departments of Quality (came later, in the 80’s with the Japanese methods), Human Resources, Logistics or Marketing (included in Sales?).
• I think that the person makes the position. Some persons do less that what their position implies and in opposition, some people go beyond the responsibilities of their position. But I agree with Chandler (p290), multidivisional structure is needed in order that the character and training of the mid-executives matter.
• Ch VII: On the spread of the multidivisional form, the author focuses on technological and market diversity as the mains drivers for its acceptance in specific groups of industries. I think that now, the use of technologies and knowledge-based economies tend to collaborative networks organisations but it is true that industrial companies still adopt the multidivisional structure.
• A new book “The New How: Building Business Solutions through Collaborative Strategy” by Nilofer Merchant (2010) says that the multidivisional structure creates an “Air Sandwich” between top management and workers. This is the consequence of top management setting strategies and workers implementing them. According to Merchant, collaborative networks can bring a solution to this “gap”.
• A conclusion of this book is that to change, you need a crisis. DuPont implemented the new structure not in the “happy” years of the WWI but after the war, when sales decreased.
• As seen in the book, top management is initially against change (ie Irénée DuPont)