ILRID 1535 In-Class Writing Assignment #2

Organizational Sociology

“Examines how [group] structure…influences, limits, and defines human interactions within a given organizational context”

Rational Systems

Organization are goal-oriented bureaucracies (a focus on procedure)

• exhibiting relatively highly formalized social structures

Natural Systems

Organizations are messy collectives that may pursue multiple goals (a focus on people)

Open Systems

Organizational boundaries are flexible. Organization are dependent upon, and react dynamically to, external factors (a focus on the environment)

Rational Systems Perspective

• “Organizations are collectives oriented to the pursuit of relatively specific goals and exhibiting relatively highly formalized social structures”

• Organizations are carefully constructed to achieve predetermined outcomes with maximum efficiency

• Characterized by a focus on data, optimization, and implementation

Natural Systems Perspective

• “Organizations are collectives whose participants share a common interest in the survival of the system and who engage in collective activities, informally structured, to secure this end”

• Member interactions may be disordered and complex

• May pursue multiple goals

• Potential disconnect between expressed goals and actual goals

• Orgs. are “social groups” attempting to adapt and persist

Open Systems Perspective

• “Organizations are systems of interdependent activities linking shifting coalitions of participants; the systems are embedded in the environments in which they operate”

• Org. boundaries are less well defined, for instance though the use of contractors or key suppliers

• Orgs. are dependent on resources/ exchanges with external actors

• The org. (ideally) self-regulates in response to external changes

What do Organizations as a Central Actor shape?

• Labor market inequality

• The production of goods/services

• Workplace culture

• Information access

• Responses to external environments

Application of Organizational Sociology: WeWork

Rise and fall

• WeWork rents office spaces, known for trendy communal designs

• Strong organizational culture, appealing to a largely Millennial workforce looking for more than just work in a job

• Charismatic CEO in Adam Neumann

• In 2019, WeWork received a $47 billion valuation (!)

• The Disastrous WeWork Initial Public Offering (IPO)

• Disclosed a history of dramatic losses ($2.9 billion) and lease obligations of $47.2 billion; illogical investments

• Insider deals to founders

• Significant concern re: CEO Neumann

• IPO document also contained language criticized as being cultish and comically vague

Structural Inequality

• A system of procedures and processes that advantage or disadvantage different demographic groups

  • Also referred to as “Systemic Inequality” and “Institutional Inequality”

  • Examples: Starting endowments of wealth; Child rearing expectations; Police profiling and incarceration; Gatekeeping activities… among many

Supply-Side Ineqaulity

• Individuals’ choices (subject to constraint) that may lead to disparate activities

• Examples:

  • Education investments

  • Selection of job or employer

  • Persistence through adversity

  • These shape access to, or eligibility for, certain opportunities

• *Important:

  • This is not ‘victim blaming’ - Systemic factors shape available choices

  • Public policies/laws rarely target supply-side factors

Demand-Side Inequality

• (typically organizational) factors that may lead to disparate outcomes.

• Examples:

  • Decision maker bias/prejudice (may be conscious or unconscious)

  • Recruitment and selection systems that reward different things

  • Promotion and termination decisions

  • These play a gatekeeping role to potentially lucrative opportunities

• Important:

  • Even ostensibly ‘merit-based’ systems may produce unequal outcomes b/c of supply-side processes

  • Public policies/laws more frequently target demand-side factors

Physical Capital

• Tangible assets (often created by humans) that may be used in the production process

• Examples:

  • Buildings

  • Machinery

  • Computers

  • Tools and equipment

Human Capital

• The economic value of an individual’s skill set

• “The more able will succeed”

• Examples:

  • Education

  • Training

  • Intelligence

  • Experience

  • Health

What is human capital? [More Detailed]

• Any stock of knowledge or characteristics the worker has (either innate or acquired) that contributes to his/her ‘productivity’

• Human capital cannot be separated from a person, in contrast to financial assets

• Human capital includes schooling, training, skills, expertise, personal attitude, and innate intelligence, among others

• Education and training are two of the most important human capital investments

  • Highly correlated with economic outcomes in labor markets

Key Sources of Human Capital Differences

• Innate ability

• Pre-Labor market socialization (exp: norms of interaction)

• Schooling

• School Quality

• Training

Firm-Specific Human Capital

• Often invested in by employers

• Skills that solely contribute to productivity within the current employer

• Examples:

  • Proprietary computer programs, skills to operate company-specific technology, floor plan knowledge

  • Expect greater firm training for skills that are non-transferable to other employers

General Human Capital

• Rarely invested in by employers

• Skills that are beneficial to the worker and frequently portable across employers

• Examples:

  • Training in public speaking, widely-used programming language

    Few employers today offer to pay for graduate school

Two Views on the Value of Education

• Education imparts skills

• Education provides a “signal”

Education imparts skills

Employers pay higher wages for workers with greater abilities and productivity (Becker 1968)

Education provides a “signal”

• Signaling Theory: Even if schooling were to provide limited skills, it may still be valuable to employers as a means of finding high ability workers (Spence 1973)

• This view would apply if high ability people find it easier to attend school (lower costs due to scholarships, or classes require less effort )

The Sheepskin Effect

• One piece of evidence that diplomas function, in part, as signals comes from comparing newly-minted bachelors graduates with those that are very nearly complete

  • Diploma VS Diploma 99% complete

• Completed bachelors degrees tend to be valued far more highly by employers relative to those that are very nearly complete

Other (Supply-Side) Sources of Pay Variation

• Compensating differentials: A worker decides to accept an job offer at an employer with more pleasant working conditions and benefits, but a lower salary

• Labor Market Imperfections: Workers may fill job vacancies at low / high productivity employers

• Occupational Choice: A worker uses her law degree to get a investment banking job on Wall Street, rather than working in the less-lucrative non-profit sector

Labor market inequalities

the macrolevel result of a whole range of microlevel decisions by employers and prospective employees

Taste-Based Discrimination

• Explicit prejudice

• Decision makers seek to avoid interaction and thus miss out on productive workers

• AKA Preference-Based

  • Decision makers may be biased against interacting with a particular group

  • Primarily due to aversion; similar to overt prejudice

  • May be intentional or unconscious

• This theory was the first to advance the argument that in the long-run, a competitive market should eliminate discriminatory practices, as organizations with biased decision makers will lose out on talented workers

Statistical Discrimination

• A statistically discriminating decision maker draws on relevant group-level performance data to assess an individual that is a member of that group (similar to “profiling”)

• Example: an employer has data on current worker productivity broken down by demographic groups. An employer that statistically discriminates would use this information to draw inferences about the expected productivity of future hires that are members of the same groups

Status Characteristics Theory

• Biased expectations

• Decision makers may hold expectations about the ideal behaviors and relative performance of different demographic groups

  • Not necessarily associated with observed group-level differences

  • Similar to biased expectations that cloud judgements

• “Status characteristics,” such as age, race, sex may be associated with cultural beliefs. These beliefs may relate social standing and ability/skill expectations to particular demographic groups

• Decision makers may thus expect high/low performance from members possessing different status characteristic

Strategies to minimize demand-side bias (in org evaluations)

1. masking/blinding

2. collect job-relevant info.

3. competency evaluation tools

4. transparency programs

5. accountability programs

6. be aware of first impressions

Masking

• Hide applicant demographic characteristics during assessments

  • Also termed Blinding

  • Goldin and Rouse (2000) studied how use of an audition screen increased the advancement of women in symphony orchestras

Reach judgements with sufficient job-relevant information

Decision makers provided with adequate data on applicants’ human capital and experiences are less likely to reference demographic characteristics

Competency Assessment Tools

• objective and quantifiable performance measures aligned with job-relevant outcomes

  • In advance of hiring, establish questions and evaluation criteria that will be uniformly applied to all candidates

Transparency Programs

publicly disclose data on the applicant pool and selection decisions to make bias difficult to obscure

Accountability Programs

• make a decision maker responsible for equitable judgements

• These programs sometimes tie bonuses or career progression to equitable hiring

Self-Reflection

• Be aware of first impressions

• Assess whether they are relevant to an individual’s job/performance

Hiring Alogrithms

Seek to help decision makers screen out applicants assessed to lack certain quantifiable job requirements

Hidden Workers

Individuals who want to work, but are consistently screened out by algorithms

Biased Hiring Algorithms

If poorly implemented, these risk introducing inequality at various stages of the hiring process

Sourcing Stage (Biased Hiring Algorithms)

When placing ads, algorithms have been found to selectively target certain groups, reinforcing the demographic make up of certain jobs

Screening (Biased Hiring Algorithms)

Algorithms are often trained on past hiring decisions, which may unintentionally formalize past biased judgments

Interviewing (Biased Hiring Algorithms)

Algorithms can assess video/audio feeds to infer personnel characteristics based on diction, posture, and enthusiasm. Concern that evaluations are rarely job-relevant…

Algorithmic rating criteria best practices: Is the rating criteria…

1. transparent?

2. relevant to the position?

3. weighted correctly?

4. determined in advance of candidate assessments?

5. developed using employer-specific training data?

Why should we care about organizational structure?

• Organizational structure delineates how job tasks are formally divided, grouped, and coordinated

  • Structure may impact organizational performance

  • Structure is a vehicle for carrying out organizational strategy

  • Structure may shape information flows and org. culture

Why do firms exist?

To minimize transaction costs

Transaction Costs

• The expenses incurred when buying/selling

• Costs can be reduced through in-house activities and economies of scale

• Firms allow for coordination

  • EX: Directed activity, but also “collective knowledge”, “skill development”, and “corporate culture”

Firms tend to appear when…?

1. Activities are complex, and thus transactional savings can be achieved

2. Risks can be minimized

3. Prices can be reduced (EX: technology, labor, purchase volume)

Bureaucracies

• A hierarchical organization characterized by rules and regulations

  • Studied by Weber

  • He wanted to create a more nuanced social definition of “rational action” in response to Marx’s view of economic gain as a general motivatior

Rationality (in Sociology)

Social actions shaped by reason and calculation, with the further pursuit of one’s interests - why a person does something

Weber’s Idealized Types of Rationality

• Substantive

• Practical (instrumental)

• Formal

• Theoretical

Substantive Rationality

A person’s actions are based on their feelings or emotions

Practical/Instrumental Rationality

A person accepts given realities and determines efficient means of addressing needs

Formal Rationality

Traditional or conventional, shaped by habituation

Theoretical Rationality

Abstract concepts or beliefs guide actions

Rationalization in Past and Modern Societies

• Weber argued that practical, formal, and theoretical rationalization had generally come to override substantive rationalization in Western societies

• He suggested that bureaucratic structures, social expectations, and scientific advancements have resulted in the suppression of individuals’ own value-oriented action.

Outcome of Rationalization according to Weber’s Work

• The increased rationalization of social life may force individuals into systems based on efficiency, rational calculation, and control, termed an “iron cage”

  • Leading to a bureaucratization of social order

Taylorism/Scientific Management

• The analysis and redesign of workflows to improve economic efficiency, with specific attention to labor productivity

• Created by Taylor: a mechanical engineers and founder of Systems Engineering

Taylor Beliefs

• believed the interests of employees and employers were aligned

• Advocated good pay and adequate breaks for workers, but also viewed low-skill workers rather negatively

Taylor’s Scientific Management Principles

• Scientific Management is characterized by:

  • Empiricism and efficiency

  • Transformation of craft production into mass production

  • Standardization of best practices

  • Knowledge transfer from skilled workers into tools, processes, and documentation

Impact of Scientific Management Principles

• Larger increases in worker productivity

• Increase in monotonous work

• Little-to-no focus on:

  • Skill variety

  • Task significance

  • Work autonomy

  • Worker feedback

• Taylor suggested that these principles may be applied to all kinds of human activities

Customer-facing work

• jobs in which workers interact with customers directly (Aka “front-office” or “Pink collar” workers)

• Critical role as “brand ambassadors”

  • ~60% of the U.S. workforce (84M/140M) are in customer-facing roles

Emotional labor

• involves tasks in which a worker produces (or manages) an emotional state in themselves or others

  • Workers’ emotions may be suppressed through routinized performances

Surface Acting

Where an individual’s underlying emotions or feelings run counter to how they’re behaving at work. Tends to reduce personal well-being and job performance outcomes.

Deep Acting

Where an individual aligns required and true feelings. Tends to be unrelated to measures of personal well-being but does correspond to positive job performance.

An organization characterized by McDonaldization emphasizes:

1. Efficiency: The minimization of energy or cost used to achieve an outcome. Identification of an optimum solution.

2. Predictability: Consistency and a lack of surprises for consumers. Things are the same from one time to the next time / from one place ti another place. Products and experiences conform to expectations.

3. Calculability: An emphasis on quantifiable measures, often resulting in a focus on quantity over quality.

4. Substitution of nonhuman for human technology, and the deskilling of work by humans

5. Control over uncertainty: the minimization of risk and the unknown

McDonaldized Work Systems

• More bureaucratic (very structured and hierarchal)

• Less dynamic (poor responsiveness to change)

• Not necessarily “reasonable” systems (structures may be less desirable or applicable, through they produce efficient and reproducible results)

Example of McDonaldization: Cobb-Vantress

• A “poultry R&D company” founded in 1916 with 1,000-5,000 employees

• In 1960, the average U.S. person ate 28 lbs of chicken. In 2022: 98.9 lbs!

• “By providing chicks with the right environment and nutrition... hatcheries can optimize the flock’s overall performance, and maximize profit”

• Chicken strains over time have gotten much FATTER

Make... or Buy?

• One of the most fundamental social sciences questions related to organizations surrounds “make or buy” decisions (Williamson 1981, 1985)

• Should an organization “make” something in-house, or “buy” it pre-made from the market?

• [In-House] Vs. [The Market]

Make or Buy? When to Buy Externally

Buy externally when:

• It’s less expensive to buy than make (cost considerations)

• Organizations’ production facilities are limited

• Suppliers’ have specific expertise

• Desire to maintain stable workforce

Make or Buy? When to Make in House

Make in-house when:

• It’s less expensive to make than buy

• Desire to learn/integrate operations

• Need to exert direct control over production or quality

• Suppliers unreliable

• Secrecy required

Vertical Integration

Involves control over more stages of the supply chain

Horizontal Integration

Involves increasing market share by expanding into the same level of the supply chain

Big Shifts in the Design of Modern Organizations

Two major (recent) changes in the contemporary global economy:

• The globalization of production and trade

• The vertical disintegration of multinational firms

Many firms today are highly specialized:

• This has involved the frequent externalization of non-core activities

  • For instance, Nike employs 30k workers (largely designers, marketing, compliance, accounting).

Job Design

• Details specific job expectations, responsibilities, and qualifications

• Helpful for hiring, training, and developing performance metrics

• U.S. Government offers related tools:

  • Dictionary of Occupational Titles (DOT)

  • Occupational Information Network (O*NET)

Formal structure

• Refers to the official division of responsibilities, definitions of how work is to be done, and reporting relationships

• Frequently details authority and lines of communication

The Importance of Job Design and Organizational Structures

• Allows members to identify specific responsibilities and allocate their time to advance work-related tasks

• Coordinates activities and minimizes duplication of effort

• By design, these structures are generally well-defined and inflexible

• Such structures are often inert (difficult to change)

Departmentalization

• the subdivision of a business into units

• The basis by which jobs are grouped together so that common tasks can be coordinated (integration)

• At the same time, it distinguishes different jobs from one another (differentiation)

• Many organizations use multiple (typically nested) types of departmentalization

• The grouping of departments often reveals what types of division are important to the organization (and what coordination challenges the structure seeks to address)

Common bases of departmentalization

• Function/Process: Finance, R&D, marketing, customer service

• Product: E.g. Microsoft: Windows, Surface, Xbox, Xbox games

• Geography: North America, Asia, Europe, etc.

• Customer: Individual, corporate

Samsung’s Partial Organizational Structure

• Each team (or department) is granted different time limits for different products

• Departments are also granted different bonuses depending on the product sales and market share

Chain of Command

a company's hierarchy of reporting relationships -- from the bottom to the top of an organization, who must answer to whom

Authority

The power or right to give orders, make decisions, and enforce obedience

Unity of command

A principle that any given subordinate should report to no more than one supervisor. The corporate ladder goes from top to bottom without disconnect

Span of Control

• the number of employees that a manager can efficiently and effectively direct

• This has implications for the size and composition of groups in a firm

• A narrow span of control may allow for closer supervision

• A wider span of control can result in a more efficient organization (associated with reduced bureaucracy and lower management costs)

“Tall” or Centralized

• Decisions made at the top and communicated down via authority relationships

• Use when goals/activities are generally clear

• May suffer from bureaucracy, excessive management

• Examples: Federal Government, U.S. military

“Flat” or Decentralized

• Decisions/tasks completed through groups with similarly-ranked members

• Suggestive that indivs. closer to problems may have better knowledge/info

• Use when org. is small; tasks require innovation or entrepreneurial solutions

• Examples: Universities, startups (VALVE)

Advantages of Centralized Organizations

• Can be extremely efficient

• Can produce fast and consistent responses to well understood problems / situations

• Tasks and career advancement is often very predictable

Disadvantages of Centralized Organizations

• Can suffer from bureaucracy

• Highly inert (limited capacity to change), greater difficulty responding to novel problems / situations

• Potential for limited communication

Advantages of Decentralized Organizations

• Often excel at generating diverse knowledge and/or leveraging diverse expertise

• More responsive to dynamic or unclear tasks / environments

Disadvantages of Decentralized Organizations

• Job tasks and career advancement pathways are often unclear

• Often less efficient at routine tasks due to workforce redundancies and/or unclear responsibilities

• Substantial coordination challenges (as such, this structure rarely scales well to large organizational sizes)

Example of Decentralization: VALVE

• U.S. video game /digital distribution firm

• Creator of software distribution platform Steam

• Founded in 1996 as a LLC by two former Microsoft employees

• Firm estimated worth at $8-10 billion.

• Just 336 employees as of 2021…

• Employee Handbook “Welcome to Flatland” - Valve is flat, no management

Matrix Organizations

A hybrid between product- and function-based structures

• Each person reports to two managers: a department manager and a project manager

Advantages of Matrix Organizations

Facilitates coordination & communication

Disadvantages of Matrix Organizations

Bureaucracy, role conflict, role ambiguity

Boundaryless Organizations

• Entities that minimize barriers between departments in the organization

• Many approaches/sub-types exist, but these employees in such organizations often form and disband work groups as tasks arise

• Often easier to implement in young firms with few members

Advantages of Boundaryless Organizations

Adaptable, responsive to change

Disadvantages of Boundaryless Organizations

Chaotic, career management is unclear

Modular Organizations

• Retain only value-creating and strategic functions. Most all other nonessential functions are externalized (outsourced)

• This strategy emerged out of an extreme focus on investing in firms’ core competencies

Advantages of Modular Organizations

Strong focus on the firm’s exceptional capabilities

Disadvantages of Modular Organizations

Externalizing other functions introduces potentially unforeseen risks and costs

Application of Organizational Strcutures: Acme and Omega

• The contrasting organizational structures, management styles, and their impact on the companies’ ability to handle and critical, time-sensitive project

• Acme was more centralized or “tall” than Omega

• Both received a 5-7 million dollar contract offer

  • Acme’s approach was rigid and top-down heavy, leading to miscommunications and delay

  • Omega’s approach was collaborative and team-based, efficient and successful

  • Acme: Rational and Open, Omega: National and Open

• Acme’s units had a high failure rate

• Omega’s performed without issues

• Omega was ultimately selected as the supplier

Why do formally-described hierarchies not necessarily match workers’ exchanges in practice?

• Formal org. hierarchies often detail distributions of authority and power

• They don’t necessarily align well with social exchanges (e.g. communication, friendships)

Social Capital

• Relationships that provide benefits (typically through resources and/or signals)

• “the better connected will succeed”

• Examples:

  • Reciprocity or help

  • Information flows

  • Resources