A dynamic, multilevel (individual or organisation), dual process model of behaviour for the economic agent.
Thomas Foulquier, D.B.A candidate
Chaire de recherche en géomatique d’affaires
Faculté d’administration, Université de Sherbrooke
Claude Caron, Ph.D.
Chaire de recherche en géomatique d’affaires
Faculté d’administration, Université de Sherbrooke
Abstract
An examination of the role of procedures in organizations and for individuals in crisis situations has led us to investigating the question of compliance and derogation to rules and models of behaviour internalized by the economic agent. Drawing from this analysis we propose in this position paper a new theoretical, dual-process model of behaviour useful to describe the economic agent, individual or organization.
The dynamic interaction between 2 modes of processing, S1 and S2 results from the competing influences of signals of compliance or derogation to rules of behaviour – internalized models – stored in the agent’s long term memory. Two new structures, complier (s1) and derogator (s2), respectively emitting those signals, are together responsible for monitoring the fit between long-term memory models and reconstruction of the environment in the short-term memory. We hope this model will contribute to the endeavour of “tracing out the aggregate implications of individual behaviour.” (Loewenstein et al., 2008)
Introduction
Internalized rules are so essential to economic agents, individuals or organizations, that they are in fact constitutive of identity. We all know how people may feel strongly about their national culture, professional ethics, and we know banks that boast about their stringent control procedures. For Spybey, “Structural and systemic elements within the organisation are what the actors reproduce in their continual maintenance of the organisation. (Spybey, 1984) At the same time, applying internalized rules is not sufficient to ensure survival of an economic agent in a complex environment, and so an agent constantly learns new rules to cope with it. New information in the form of models is retained in the memory after being processed, by people or organisations, just like an individual learning a new word, or an organisation adopting a new process.
Sometimes however, systems need to derogate to rules they have internalized to adapt to their changing environment; for instance, an organization facing what it defines as a crisis, or someone having to learn a new language – a new set of rules - when living overseas.
The focus of this article is to propose a theoretical, descriptive model for a command system that allows learning and use of rules internalized as well as derogation to rules when necessary to the system, human or organisational.
Role of procedures in organizations and for individuals in crisis situations
After a blazing fire got out of control on August 4, 1949, 13 smokejumpers died in the Mann Gulch area, Montana, for not adopting the unexpected, counterintuitive behaviour of Foreman Wagner Dodge, that would have saved their lives. If our globalized news network let us aware of dramatic situations of this kind every day, the specific interest of this event is that it has been thoroughly studied by Karl Weick to the great benefit of organisation studies. This paper witnesses our belief that Weick’s insight into how organisations and individuals make sense of their environment will continue to challenge our understanding of economics.
Weick’s study of the Mann Gulch fire disaster (1993) shows the limits for a crew, “a simple organizational structure”, of facing a crisis by sticking to rules and procedures that were designed in a stable environment. In separate incidents, Weick (1999) reports the death of firemen that were outrun by fires and died in sight of a safety zone, without dropping the tools that symbolized their status of firemen, backpacks or chainsaws (hence one of his famous sentences: “drop your tools”). This observation will be the starting point of a paper that aims at giving insight into the dynamic management of rules – tools for dealing with the environment - by the economic agent. In other words, we will try to answer this question for individuals or organizations: when do we drop our tools?
This paper will be organized as follows: before presenting the circumstances that can justify to renounce its rules for an organisation, we need to present the classic organisation scholar’s view on why and how organisations apply rules. More recent developments allowing derogation to rules will be described, and then we will present how we apply the principle of compliance-derogation to human behaviour. The following section of this paper will then be the presentation of the dynamic interaction of modes of processing information, at the individual and organizational levels. Finally, we will present the insight of our model into cognitive dissonance, crisis, resilience and adaptation to change.
Rules and procedures - Useful tools for the organisation
We can hardly conceive organisation, the process and product of organizing, or the coordination of any number of people for a purpose, without rules to follow. And this intuition apply to the smallest of organisations. A man who wants to get a little more organized will start to make a “to do list” - a rule for himself to follow - that he will then proudly display saying “Look how I organized myself this week”. If personal organisation implies the formalization of rules for the individual, as constantly remind us self-management gurus, the absolute necessity of formalization for organizing has led early organisation scholars to consider that rules and procedures are constitutive of organisations. In other words, we will now see that when we say organisation, we often mean formalization of rules of behaviour.
From Weber’s (1947) bureaucratic socio-technical view of the organisation, where the activity is organized in a rational way by the use of procedures, to Fayol’s (1946) description of planning, organizing, directing and controlling functions, rules and procedures are are seen as useful tools of coordination and control, and are in fact inseparable of organization. In America, Taylor already stated for instance that the management has to gather all the traditional knowledge of the workmen and “reduce this knowledge to rules, laws and formulae, which are immensely helpful to the workmen in doing their daily work”. (Taylor, 1911) Later, considering an organization runs itself “automatically”, Alfred Sloan, quoted by Pelfrey (2006), states that “an organization does not make decisions: its function is to provide a framework, based on established criteria, within which decisions can be fashioned in an orderly manner.”
However, organizations face challenges such as innovation, continuous adaptation and crisis situations where the strict adherence to internalized models – especially formalized models - has been questioned by scholars, as we shall see now.
Limitations of strict adherence to rules
Critics of the rational organisation (Young, 2003 ; Eminet, 2005) have addressed the lack of autonomy of the employee and its obligation to conform to rules (Thompson, 1976), especially when the process of innovation implies the necessity to questions the organization’s rules (Alter, 2000 ; Dougherty et Heller 1994). For Adler, Goldonfras, and Levine (1999), bureaucracies are ill-equipped to succeed in a complex environment where procedures and formalizations lose their usefulness.
Also, it is mentioned that the sub optimal practice of division of work may not address efficiently questions relating to the organization as a whole (Dougherty and Hardy, 1996 ; Van De Ven, 1986).
Factors like the increase of the pace and volume of information treated by organisations, the emergence of more complex interactions in a globalized world (Baden-Fuller and Volberda 1997) and the managers willing to align their organizations with their environment (Dijksterhuis and Van den Bosch 1999), have led to the development of new forms of organizations. The examination of 20 years of literature on new organizational forms suggests that “post-bureaucratic forms were more relevant to the turbulent business environment of the 21st century than were traditional bureaucratic forms.” (Palmer, 2007). This rich literature on new organisational forms includes for instance Ciborra’s platform organisation (1996), where decision makers rely on “schemes, visions, mecanisms and arrangements”, rules that are rather tacit (Nonaka, 1994) than explicit and expressed in a narrative form.
The same need also applies to organizations involved in sustained product innovation, with scholars stressing the need for integrating social constraint and social action as “people cannot act together without some common structures such as rules or shared frameworks”. (Dougherty, 2008)
Palmer et al. (2007) shows that publications in the field are numerous, and epistemology fragmented, but new organizational forms witness the intent to deal with a more turbulent reality and the necessity of some form of shared models of coordination.
Using Mintzberg’s classic structure in 5’s for examining organisations’ efforts to establish rules for coordination or supervision, and to allow adaptation to a changing environment, one can observe that mechanisms of coordination differ in importance and nature (e.g. formalization, mutual adjustment…), but that from direct bureaucracies to adhocracies, some sort of models of coordination are internalized by members of organisations, with the organisation’s project itself becoming the means of coordination of the “administrative adhocracy”. (Mintzberg, 1983)
Finally, when organisations face extreme situations, which happens increasingly in a turbulent environment, the question of adhering – or derogating - to rules of behaviour designed in stable environment –the agent’s tools for dealing with its environment - is even sometimes a matter of survival, for organisations and their members, as already illustrated in this paper.
Reliability
For organization in search for reliability, Blatt et al. (2006) describe the distinction made by organisation scholars between prevention, that relies on anticipating adverse events and creating procedures to avoid them, and resilience, as the intent to “maintain positive adjustments under challenging conditions”, and control the effect of untoward events “as they occur.” For instance, Manyena describes resilience “as a process that induces positive outcomes like skills to bounce back and capacities for recovery” (Manyena, 2006)
In fact, despite efforts to allow organisation to deal with surprise (Pina e Cunha, 2006) by relying on all sorts of rules and procedures, “familiar norms and templates” (Roux-Dufort and Vidaillet, 2003), the potential for the manifestation of unexpected, unprepared situation is too great, and crisis do occur. The difficulty of dealing with crisis situation with improved planning and preparation – better internalized models - has been presented by McConnell and Drennan (2006). For these authors, crises and disasters are low probability events and contingency planning requires ordering and coherence of possible threats, cooperation of fragmented and often conflicting interests, all unlikely occurrences. Consequently, attempts to address crisis before they unravel is difficult and costly.
To address this challenge organizations need to be ready for improvisation (Weick, 1993), defined for instance as “near-simultaneous development and deployment of new management procedures” (Mendonça and Wallace, 2007), because “maximal improvisation occurs in situations where no routines have been designed to deal with a situation.” (Roux-Dufort and Vidaillet, 2003)
However, showing the danger for the field of crisis management to restrain itself to “exception management, Roux-Dufort (2007) seeks to “building a theory of crisis that is in closer relation with the mainstream of organization.“ Lalonde (2007) goes as far as proposing a dual approach as she stresses the differences and complementarity of organisational development that deals “with the strengthening of organizations’ capacities to cope with lasting changes”, and crisis management, for specific events.
Attempts to accommodate those needs have for instance included “Normal Accident Theory” (Perrow, 1999), “HRO” High Reliability Organisations (Weick et al.,1999), or “ICS” Incident Command System (Bigley, 2001).
Finally, for Weick (2006) the organisation reveals itself an emergent structure evolving between two symbolic images, a stable, regular cristal and a dynamic, varied, complex smoke, or in considering the organisation’s constituting narratives, between text and conversation.
Compliance and derogation to rules and models of behaviour
Young (2003) proposes that organisational reliability depends in fact on derogation to procedures and discretionary action, as procedures have been designed from the assumption that what happened in the past will be in the future. His work investigates the question of compliance and derogation to rules and models of behaviour internalized by the organization.
Improvisation and bricolage
To cope with crisis, ICS organisations ally a bureaucratic structure and efficacy with reliability in extreme conditions (Bigley and Roberts, 2001). It is noticeable that these organizations too are subject to common models internalized by individuals in the form of ”operational representations” shared by the system’s participants. However, important questions remain to be addressed. Why is it that sometimes organisations are expected to bounce back to their previous state after they have been affected by the environment (resilience), while at other times they are expected to embrace change and adapt to a new reality? How is the central instance, strategic management of the organisation, making sense of its situation?
To address these questions we will rely on sensemaking, as it “involves turning circumstances into a situation that is comprehended explicitly in words and that serves as a springboard into action.” (Weick et al., 2005)
Organization will be seen in this paper as emerging “in the interplay of the textual world of ideas and interpretations and the practical world of an object-oriented conversation.”(Cooren et al., 2006) Considering those narratives constitute the way the organisation perceives itself and the environment, 3 related functions intervene in its dynamic of choice between adherence to internalized rules, and change, as derogation to organisational rules. These functions are short term memory, fed by perceptions and where are developped the narratives reconstructing the environment of the organisation, long term memory were models are stored and can be recalled to be used in the reconstruction process, and a central instance of decision making (strategic management), the ultimate deciding function of the organisation.
In highly turbulent environment, Young points that an organization should derogate to its rules to be able to adapt, although these same rules were useful in a more stable environment. In other words, the behaviour of compliance to internal model was to be applied by the system, unless there was a signal of derogation to that model. This implies that a double monitoring system is constantly checking the fit between the reconstructed narratives and the models, signalling it to the central command. This double command mode of processing information evoked S1 and S2 (Stanovitch, 1999, Kahneman and Fredericks, 2002), and leads us to the individual level of analysis of our compliance-derogation model.