the decision-maker in the

THE DECISION-MAKER IN THE ORGANIZATIONi

BY

BRIAN J. LOASBY

Organi2adons do not make decisions. Decisions are made by people.Yet much theoretical discussion of decision-making is based on the assump-tion (not always explicit) that an organizadon can be treated as a ficddousperson. This is especially true of economic analysis, which postulates thatmodern large organizadons behave in very much the same way as the old-fashioned entrepreneur. Economists will readily admit, when asked, that alarge firm will have major problems of co-ordination and communicadon;but they nevertheless take for granted the ability of the organization theoristand the management accountant to devise an administrative system whichwill ensure that the decisions taken within the firm, whoever may actuallytake them, will be for all theoredcal purposes idendcal with the decisionsthat would be taken by a single all-seeing executive.

The Acceptance of Orgamt(ational Goals

A major bulwark of this posidon has been the sharp disdncdon tradi-donally made between the decision to join a firm and the decisions takenwhen acting as an officer of that firm. The decision to join an organizationhas traditionally been held to include a decision to accept organizadonal goalsas the only criteria to be used when making dedsions in an organizationalrole. To use the terms popularized by Chester Barnard, ̂ this is one of themost important 'contribudons' expected of managers in return for the'inducements' offered.

Explanadons of the power of authority to make a whole organizadonconform to the image of its creator, though sometimes calling in aid thealleged preference of many people for accepdng orders rather than usingtheir own discredon, and also the moral injunction to obey those set inauthority over one, have relied heavily on organizational controls. Thestructure of the administradve hierarchy (it is argued), if properly designed,provides a clear and continuous chain of command from the head of the

1 This article originated in a brief papet prepared for a discussion group in Arthur D. Little,Inc., Cambridge, Massachusetts. In addition to the members of that group, and the referencescited, it owes a good deal to an unpublished paper by Peer Soelberg, of the Sloan Schoolof Management, M.I.T. entitled 'Structure of Individual Goals: Implications for OrganizationTheory' (M.I.T. Sloan School of Management Working Paper 143-65, 1965)-

2 Barnard, Chester I., The Functions of the Executive, Cambridge, Mass.: Harvard University Press,1938, PP- 92-4.

THE DECISION-MAKER IN THE ORGANIZATION 353

organization to the lowliest dedsion-maker, and thus ensures that the wishesof the former are understood throughout; and a wide variety of sancdons,ranging from mild disapproval to (in military organizadons) death affordsthe means to enforce obedience to these wishes.

Within the last ten years, the serious defidendes in both of these explana-tions (in terms of cash incendves or the sancdons of authority) have begunto be realized. The first of these deficiencies is a difficulty with the implicationsof 'authority'. This difficulty can be explained by drawing an analogybetween the two pairs of concepts 'authority — independence' and 'monopoly— perfect compedtion'. In a state of perfect compedtion every unit in themarket is completely independent of every other unit: none has any controlover price. Unfortunately, monopoly is not the precise andthesis of perfectcompeddon. If it were, a 'perfect monopolist' would have absolute controlover price; but such absolute control (implying a completely inelasticdemand) is not possible. A substandal obstacle to the measurement of'degrees of monopoly' has been the absence of any unique relationshipbetween the propordon of the total supply of a commodity in the hands ofa single producer and his ability to influence its price. It is possible for afirm with a large share of the market to be nevertheless faced with a highlyelasdc demand for its product. Monopoly status is not the same as monopolypower. That power depends on the alternative means open to consumersfor sadsfying their wants (including their ability and willingness to do withoutthe monopolist's commodity altogether) and also upon the possible con-sequences (such as legisladon, counter-acdon by customers, or the emergenceof a new compedtor) which may follow too ruthless an exerdse of the powerwhich the monopolist does possess. The disregard of these consequenceswhich is implicit in the use of a short-period demand curve to determinelong-period equilibrium is a major element in P. W. S. Andrews' attack oncurrent theories of the firm.*

Similarly, although complete independence implies complete absence ofcontrol, there can be no posidon of authority which confers absolute powersof control. Even where there is no possibility of escape from a superior'sjurisdiction, the exerdse of authority is restricted by the alternadves toobedience open to subordinates, which can be subde and devious, as everysoldier knows, and also by the risk of provoking acdons which will seriouslylimit the superior's nominal authority. (One remembers the descripdon ofthe Czarist system of government in Russia as 'absoludsm tempered byassassinadon'.) The concept of 'countervailing power' is of some relevanceto organisadonal as well as economic reladonships.

Thus it is not surprising that, at a dme when there has been a seller's

' Andrews, P. W. S., On Gompetition in Economic Theory, London: Macmillan, 1964.

354 THE JOURNAL OF MANAGEMENT STUDIES OCTOBER

market for managers as well as for workers, and when therefore the availablesanctions have lost much of their force, there has been more emphasis onthe nodon that authority is something accepted from below, rather thanenforced from above. Superiors are now exhorted to lead rather than todrive. But before accepting that the efficacy of sancdons is limited solely bysuch factors, it should be nodced that among military commanders, who havethe strongest sanctions at their disposal, qualides of leadership have alwaysbeen very highly valued. It must be conduded that authority, though itmay be of considerable, indeed indispensable, value in securing the acceptanceof organizadonal goals, cannot guarantee their acceptance.

If conformity to organizational objectives cannot always be enforced,neither can it always be bought. The flaw in the economists' approach isthe assumpdon that sadsfacdons are obtained always with the proceeds ofwork, never in the process of work. That this assumpdon quite often appearsto be jusdfied, at least on the shop floor, cannot be denied: but one isnowadays likely to hear it argued quite strongly that this is a self-jusdfyingassumption rather than a basic truth. If workers are given no opportunityof gaining any sadsfacdon from their work, they will inevitably appear tobe interested only in their pay.

Whatever may be the truth on the shop floor, it is surely the case thatmanagers seek to satisfy some of their most important wants through thework that they do, and not only by spending the cash which they earn. Thesadsfacdon of these wants, espedally for higher management, is likely toimpinge direcdy upon the objecdves of the organizadon. In these circum-stances, organizadonal goals, far from being accepted in return for profferedinducements, must act as significant inducements themselves. Instead ofhiring managers to carry out a predetermined policy, a firm may have toformulate a policy which will succeed in attracting managers. Thus thedistincdon between 'inducement objecdves' — what do we need to do tostay in business — and 'direcdon objecdves' — what is our business —breaks down. Inducement objecdves become direction objectives.

The Formulation of Organivâtional Goals

From the growing recognidon of the defidencies of both the 'incendve'and the 'authority' theories there have emerged two modern explanadonsof the relationship between individual and organizadonal goals. The earlier,and in our terms the less revolutionary, is assodated particularly with thename of Douglas McGregor,* who, denouncing authoritarianism both forits ineffidency and for its failure to meet some of the basic needs of managersârgues that conformity between individual and organizational goals can best

•McGregor, Douglas, The Human Side of Enterprise, New York: McGraw-Hill, i960, esp.Chaps. 2-4, 9.

1968 THE DECISION-MAKER IN THE ORGANIZATION 355

be achieved if the latter are the product of a consensus: if a manager helpsto set organizadonal goals, he will accept them as his own during the workingday.

As a prescripdon for enlightened management, McGregor's advice hasmuch to recommend it. But it does not solve our problem. As PresidentJohnson would no doubt be the first to admit, it is not easy to maintain aworking consensus. Genuine conflicts of interest do exist, and some of theseconflicts must somehow be accommodated within any large organization.American polides are normally discussed, and practised, far more openlyin terms of interest groups than British polides; political alliances rely onbargaining as well as limited consensus. In both countries this bargaining issupported by the use of phrases which can be — and are intended to be —interpreted quite differendy by different groups. This has been a notablefeature of Harold Wilson's technique. In some circumstances, free and opendiscussion may produce a true 'meedng of the minds'; in others, poor com-munications and misunderstandings may be among the most effecdve forcesholding an organizadon together.

It is in this spirit of polidcal realism that Cyert and March discuss the forma-tion of organisadonal goals.® Arguing that a consensus is in any largeorganizadon difficult to construct, that where there are major conflicts ofinterest (which is not unusual) it is impossible to achieve, and furthermorethat organizadons can funcdon quite successfully without it, they suggestthat organizadonal goals are best viewed expliddy as the outcome of abargaining process, which is likely to leave many issues unresolved. Theseunresolved issues are submerged by four factors: first, the inability of thepardes concerned to appreciate them all (limited radonality); second, theinfrequent need to face more than one or two of them at a time (sequendalattendon to goals); third, the use of phrases, such as 'an aggressive markedngpolicy' or 'purposive and pragmadc government', which provides nounambiguous standard of measurement (non-operadonal objecdves); andfourth, the possibility, as long as the organizadon is not fully stretched tomeet its external commitments, of simultaneously sadsfying potendallyconflicdng minimum demands (organizational slack). These issues aresubmerged, not settled, and when the relevant factor ceases to be effective —when, for example, a fresh problem forces a hitherto-avoided confrontadon,when a non-operadonal objecdve becomes operational, when organizadonalslack dwindles in hard dmes — they break surface again, and can cause agreat deal of trouble.

Its power to explain the emergence of formerly-suppressed conflicts withinorganizadons is just one of the many attractions of the Cyert and March

= Cyert, R. M. and March, J. G., A Bthavioral Theory of the Firm, Englewood Cliffs, N.J.:Prentice-Hall, 1963, Chap. 5.

3 5 6 THE JOURNAL OF MANAGEMENT STUDIES OCTOBER

approach. They have opened the way to a treatment of the firm as both aneconomic and a political unit. (Incidentally, it is notable how much progresshas been made in integrating political and economic issues in analysingdevelopments in Communist countries.) But this particular merit is largelyneglected in their own work. Though their theory is far removed from theold assumption that organizational goals are either sold to or imposed upondecision-makers within organizations, though on the contrary they insist thatspecific attention be given to the process of goal-formation, yet they stilladhere to the even more fundamental assumption that a knowledge oforganizational goals — an understanding which they have notably advanced— is sufficient to explain decisions within organizations. This assumption issurely wrong.

The Inadequacy of Organisational Goals as Determinants of Behaviour

The decision to join an organization as a manager implies the perceivedcompatibility — or potential compatibility, if there is a chance of modifyingthe latter — of personal and organizational objectives. It does not implythe acceptance of organizationally-determined criteria for decision-making.Even if a manager should identify himself completely with the goals of hisfirm, it is usually not rational for him to pursue them without personalincentives. For a corporate goal is a collective good to all those who desireit; and unless the contribution required is very small, it is not usually rationalto contribute to the supply of a collective good. As one manager amongmany, one's own contribution can make little difference either way; the resultdepends on other people's efforts. What is generally desired, and must bemade freely available, if available at all, will not be individually sought.^The theory of collective goods demonstrates the fallacy in the argumentthat members of an organization should share a common purpose. It is notjust that a common purpose is unnecessary as a rational incentive; it isactually worthless. Joint purposes, not common purposes, are the efficientengines of action.''

A collective good may provide a rational incentive if it is common toonly a small group; for then the contribution of a single person may signifi-cantly affect the supply of the good, and his share of the benefit may outweighthe cost of his contribution. Thus corporate objectives may motivate topmanagement; and lower levels of management may be activated by sub-groupobjectives. But often the strongest incentive will be to pursue individualobjectives. Thus the natural tendency of the rational manager is to pursuefirst his own objectives, second, his sub-group's objectives, and the objectives

'Olson, M., The hogic of Collective A.ction, Cambridge, Mass.; Harvard University Press, 1965.' This point has been emphasized by my former colleague, Mr. D. K. Clarke, now Principal of

Swinton Conservative College.


of larger groups feebly if at all. How closely his decisions conform to theoverall goals of the organization depends on the degree of discretion he isallowed and on the organization's control system — interpreting the latter,as will be explained shortly, in the widest sense.

Decisions cannot be delegated without giving the decision-maker thepower to make organizationally-perverse choices. Yet delegation can scarcelybe avoided. In an organization of any size, no one man can have either thetime or the information to make all the decisions; moreover the attempt tokeep all decisions in his hands is likely seriously to reduce the quality ofhis subordinates, and thus to impair the information used in making hisdecisions, of which they must remain a major source. How closely the actionsof a decision-maker within an organization conform to the interests of thatorganization depends on the effective jointness of his own and the organiza-tion's objectives. The link between the two is the management controlsystem.

Management Control Systems

The technical problems of constructing a system which will measure amanager's performance in terms of the desired objectives are well understood,though, as the literature of the subject clearly demonstrates, they are farfrom completely solved. What are the elements of good performance ? Howcan the non-measurable elements be dealt with, in order to avoid a concen-tration of the manager's attention upon the measurable ? How can one avoida situation in which a manager can improve his own recorded performance atthe expense of the organization as a whole ? Such questions are the staple ofdiscussion, and there is plenty of guidance available.

The companion problems, of devising an incentive system that willeffectively motivate the improvement of the performance so monitored, hasalso attracted a good deal of attention, but it has not been so well resolved.There is disagreement over the relative effectiveness of different incentives;and this disagreement is unnecessarily exacerbated by a failure to realizethat different managers may seek different kinds of satisfaction, and also bya failure to realise that a manager, like anyone else, is entitled to forgo aproffered incentive if he chooses; he cannot be compelled to conform to thepreferences of the control system.

The trouble is that discussions of the incentive elements in managementcontrol systems have not yet completed their escape from the outwornassumptions that confornaity between organizational and individual goalscan be secured by a combination of sanctions and financial reward. Theconsequences of escape are far-reaching. To a manager who is seekingsatisfactions from the content of his work, the management control system,instead of providing a mechanism for directing his activities, becomes

5 5 8 THE JOURNAL OF MANAGEMENT STUDIES OCTOBER

itself part of the inducement. The whole organization must be regarded asa control system. This view is supported by R. I. Tricker,^ who writes(privately) that 'we must look on business control systems within the contextof a business total system, rather than as a controlling mechanism added ontop. In other words, we must study man/machine systems instead of account-ing paper work systems.'

The kind of management control system used in an organization may bea vital influence on an individual's decision whether to join. The absence oftight control is frequently argued as essential to the recruitment of gooduniversity staff and of good industrial scientists. But if the freedom to makedecisions with a substantial element of discretion is used as an inducement tojoin, then the organization is offering, not merely the right to join in theformulation of organizational goals, but the right to pursue, within somelimits, individual objectives when making decisions within the company.In these drcumstances it is not only the distinction between inducement anddirection objectives that breaks down, but also the distinction betweenorganizational and individual objectives.

Such freedom of action is particularly likely to be offered to managersnear the top of an organization, who may indeed be allowed to pursue theirown objectives and also to attempt to impose these objectives on theirsubordinates as organization objectives. If this is so, then, as has been arguedby a senior officer in a large consulting organization, • one ought to talk ofthe objectives of a group of senior executives, rather than of the objectivesof a firm. Many of that company's corporate planning assignments reflectthis attitude. The consultants set out to elicit the objectives of the majordecision-makers — objectives which are by no means always apparent totheir colleagues — and then attempt to devise a policy which takes explidtaccount of them. This approach is in the spirit of McGregor's recommenda-tions; it has also been advocated in an article by Guth and Tagiuri.^"

So far, we have discussed managerial discretion as a deliberate grant inorder to recruit and stimulate good managers. But some discretion is inevit-able in the absence of perfect knowledge. This discretion may arise from threecauses. First, the uncertainty surrounding most dedsions often makes itdifficult to assess the correctness of the choice made. Second, it is almostimpossible to review a dedsion by a specialist — and even more impossibleto review a dedsion by a group of spedalists — without having the dedsionmade afresh by another spedalist (or group of specialists); and this, besidescosting time and money, is Ukely to lose one the services of the spedalists

' Barclays Bank Professor of Management Information Systems at the University of Warwick.» Magee, J. F., of Arthur D. Little, Inc." Guth, W. D. and Tagiuri, R., 'Personal Values and Corporate Strategies', Harvard Business

Reviea, September-October 1965.


SO treated. Authority, in the sense of having one's word accepted, can flowupwards as well as down. Third, subordinates have a good deal of controlover the information which their superiors use, induding the informationon which they are judged.

As was stated earlier, the technical problems of constructing a systemwhich will measure a manager's performance in terms of the desired objec-tives are well understood; but the problems are not merely technical. It isfar too readily assumed (as it is for instance in David Solomons' DivisionalPerformance: Measurement and Controiy^ that both the recorded performanceand the standards against which it is judged represent objective truth. Buta budget is a political as well as an economic document, as Cyert and Marchhave pointed out; many budget items represent commitments rather thanconstraints.

In addition, budgetary standards are liable to suffer from the attempt toachieve two conflicting aims. One aim is to provide a guide to action by themanager himself, by drawing attention to problems through the recordingof variances; the other is to assist in evaluating the manager, by recordinghis shortcomings. On the first criterion, an unfavourable variance indicatesthe need for action; on the second criterion it indicates the failure of previousaction. It is not surprising, therefore, that, as W. F. Pounds of the SloanSchool at M.I.T. has found, there is liable to be an emphasis on the settingof budgetary standards which will indicate neither problems nor failures. ̂ ^Sometimes this emphasis is supported by the superior of the manager beingevaluated (probably because he does not enjoy giving a reprimand^^ andalso because any failure by his subordinates may harm his own standing)and may become an open conspiracy throughout the company. When thishappens, the control system is occupying a good deal of time, and someingenuity, in making management less effective by concealing problemswhich deserve attention.

Even if such inflation of budgets is not a general implicit policy, the indi-vidual may still have some control over the standards by which he is judged.Indeed it is an artide of the modern budgetary controller's faith that abudget must be accepted by the manager to whom it is to be applied. Thebudget then is the result of bargaining; it is not analytically determined. Anexperienced consultant, writing about the control of his own work, says,'A technique which I enjoy . . . is to have a sufficiently large cushion in each

1̂ Solomons, D., Divisional Performance. Measurement and Control, New York: Financial ExecutivesResearch Foundation, 196J.

" Pounds, W. F., 'The Process of Problem Finding' (M.I.T. Sloan School of ManagementWorking Paper, 165-65, 1965), pp. 16-18.

" For evidence of this attitude, see Rowe, K. H., 'An Appraisal of Appraisals,' fournal ofManagement Sjudies, Vol. I, No. i, March 1964, pp. 1-25.


case that it isn't necessary to keep a close and continual watch on actualexpenditure'.^*

If budgets do not embody political commitments, guaranteeing a certainexpenditure, then they are liable to be fudged, with or without generalapproval. If neither of these measures are adequate to frustrate the controlsystem, there are often means available to influence the recorded figures.If there is a danger of underspending, it is not usually difficult to spend alittle more (and there are surely not many managers who have never beenasked to suggest some supplementary expenditure in order to use up abudgeted allowance); if there is a danger of overspending, there are a numberof methods for hiding or misreporting expenditures.

What can happen even in a technically efficient management controlsystem is illustrated hy the following example. ̂ ^ 'Asked what data he usedfor making decisions about the running of his department [a productionmanager] produced a sheaf of his own running notes on relative plantperformances under various conditions. Questioned why the controlaccounting data did not reflect similar patterns, he explained that the controldata was originated hy him for the accountants and he told them what hethought they wanted to know. He had found that there was much criticismat the monthly meetings if his weekly performances fluctuated a lot. Infact, he explained, because of a multitude of variables, the results did reallyfluctuate. What he did in reporting was to average the figures to show reason-able consistency, keeping the excesses on good weeks to ease the results inbad weeks. As he put it, "I keep a bit of production up me sleeve to savemy neck'."

Why should we assume that managers are less skilful than operatives incontrolling the reported results of their work? Neither the target nor thereported figures of an accountant's control system necessarily representreality; on the contrary, all formal control systems nuy he expected to generatemisinformation.

The Extent of Managerial Discretion

Thus a manager often has a freedom of choice which is not merely nominal.Organizational objectives specify the limits (though as we have seen, notalways precisely) but they do not prescribe the choice. The extent of thisremaining freedom is obscured by the ambiguity of the word 'judgement'.Managerial judgement does not consist solely in making a good estimateof the situation and evaluating various courses of action; it also consists indeciding how to choose within the limits which organizational criteriaprescrihe. That such an effective freedom exists is adnutted hy any salary

1* Private communication." Tricker, R. I., The Accountant in Management, London: Batsford, 1967, p. 83.


scheme which rewards responsibiHty; it is made expUcit in Eliot Jaques'Equitable Payment,^^ which advocates a salary structure related to the 'time-span of discretion'.

The existence of managerial discretion poses a problem for modern, aswell as for old-fashioned, theories of decision-making. Contrary to the claimsof its exponents, satisfying theory does not provide a unique criterion fordecision. The organization does not require above-satisfactory performance;,but it does not necessarily penalize it. The requirements of satisficingprescribe a feasible set of solutions — the set may of course be empty — butit offers no rule for making a choice within that set. The concept of managerialslack may be seen as an attempt to preserve organizational objectives asadequate predictors of behaviour by postulating that no attempt will bemade to improve upon satisfactory performance." But the attempt cannotsucceed. The preference for slack over improved performance must be anindividual, not an organizational decision; it cannot be deduced fromorganizational goals alone.

This is not the only objection. Even if satisfactory performance, by thestandards of the organization, were to be accepted as a criterion, and notsimply as a constraint, individual preferences still could not, in general, beexcluded. There is no general reason why the subset of minimum solutionswithin the feasible set should contain only a single element; satisfactoryperformance can often be achieved in several ways. It is up to the decision-maker to choose. Indeed, one of McGregor's recommendations is thatmanagers should allow subordinates to follow their own preferences inchoosing between several ways of achieving a desired result." This difficultycannot be evaded by postulating a process of sequential search. Such aprocess leads to the acceptance of the first satisfactory solution to be dis-covered, but it does not explain which of the various satisfactory solutionswill be discovered first. What appears to be the most obvious solution toone man, with a particular pattern of experience, does not necessarily appearto be the most obvious to another, whose experience has been different.Company histories may tend to over-emphasize the importance ofindividuals, but to deny them any importance would be absurd.

The reason why Cyert and March's book ignores this problem is probablythat their detailed model is designed to explain repetitive decisions withina stable organization. These are the conditions which produce 'organizationallearning' and standard solutions.is But if the situations calling for actionrepeat themselves only infrequently, and there is a good deal of movement

" Jaques, E., Equitable Payment, London: Heinemann, 1961.'" Cyert and March, op. cit., pp. 36-8." McGregor, op. cit.. Chap. 9." Cyert and March, op. cit., pp. ioo-i.


of managers into the organization, hringing diverse kinds of outside experi-ence with them, then organizational learning will be rudimentary at best,and there will be no standard solutions.

Cyert and March's concentration on short-period, repetitive problemsalso leads to the neglect of another issue. Why should the first satisfactorysolution produced by a sequential search procedure necessarily be a minimumsolution? If" the searcher has a repertoire of standard solutions, the assump-tion may he reasonable; but for long-term, non-repetitive problems suchrepertoires, and such minimum solutions, are a good deal less likely. Themajor innovations of economic development are indeed striking instancesof solutions which rise well heyond the requirements of satisficing.

In general, the Carnegie school provides a better analysis of short-termthan of long-term decision-making. But even in short-period situations it isimpossible to eliminate the individual. It is surely illegitimate to assume thatmanagers who are capable of performance above the level required by theirorganization should always choose to employ those abilities in ways that haveno effect on that organisation. The abandonment of such an assumption doesnot require the abandonment of the satisficing approach; it simply meansacknowledging that the individual's standard of satisfaction may well beabove the level prescribed by organizational objectives.

W. F. Pounds has observed that plans are organisationally defined limitsof managerial independence; as long as a manager's performance does notfall short of the plan, he is free to choose his own problems, free of organiza-tional control (though not of course free of many influences).^" Some organi-zations, recognizing that some freedom of managerial action cannot beprevented, have deliherately chosen to increase that freedom in the hope ofstimulating individuals to set themselves higher standards than the organiza-tion could ever hope to impose. A large consulting company, for instance,uses the ahsence of an elaborate formal control system as an essential elementin its overall managerial system. In such an organization decisions cannotbe explained without reference to individual objectives; for example in theconsulting company the kind of new business brought in is substantiallydependent on the initiative of individual consultants.

Even if there is no deliberate attempt to make productive use of theresources which are not needed to meet minimum objectives — even if'slack payments' are designed to meet purely personal objectives — theseobjectives may still be relevant to the history of the firm. For example, ifan unnecessarily large research department is established solely to satisfythe Research Director's empire-building ambitions, without any referenceto the needs of the firm, that research department may nevertheless produceideas which have a major impact on the company. As Cyert and March

"• Pounds, op. cit., p. 16.


themselves observe, 'Slack provides a source of funds for innovations thatwould not be approved in the face of scardty but that have strong subunitsupport.'21 But the implications of managerial discretion for their owntheory do not seem to be recognized.

The Influence of the Organi^âtion on Individual Objectives

It is necessary, therefore, to consider individual objectives in explainingdedsions, as well as in explaining the formation of organizational objectives.Individual objectives, however, are not completdy independent objectives.A potentially useful way of analysing individual objectives is provided bythe dassification of problem-finding models suggested by Pounds.

Such an analysis of a particular manager's objectives in terms of his ownexperience (historical models), the experience of others (extra-organizationalmodels), and the demands of the organization (planning models) appears tooffer a way of focusing upon the individual dedsion-maker without treatinghim in isolation. When considering the individual, it might be particularlyconvenient to distinguish between extra-organizational models which areentirely outside the organization in which the individual works and extra-organizational modds — perhaps better called extra-personal models —which are yet within that organization. As an example of the use of this kindof analysis, it is possible to suggest some influences which would tend tokeep the standards in the individual manager's problem-generating modelsdown to the levels prescribed by the organization — so that satisficing forthe individual would mean the same as satisfidng for the organization, asthe present Carnegie theory assumes.

The organization's apparent, if implidt, models of managerial behaviourare influences of obvious importance. This indeed is the burden of McGregor'sargument: if a firm dearly expects managers to do no more than the firm'sformal control system can compel them to do, then those managers arelikely to accept the consequences of Theory X as their own model too, touse managerial slack to fulfil personal objectives which are irrelevant tothe performance of the company. If on the other hand, says McGregor, thefirm's model is Theory Y, then there is a very good chance that the firm'smanagers will use Theory Y also — and Theory Y implies that individualtargets will be set higher than the firm's targets, and that managers willseek to satisfy their personal objectives in ways which assist the company.

The models of fellow-managers are also important. The phenomenonof group control is not confined to the shop floor, and managers can learnfrom their peers not to spoil the job. (The managers studied by Pounds, whowere disturbed by the possible effects of this year's good performance on

^' Cyert and March, op. cit., p. 279.

24


next year's targets, obviously had some such model of behaviour.)^^ Theexistence of many submerged issues may also be a restraining factor. Above-minimum solutions are liable to have a wider impact within the firm, andthus risk raising some of these issues. Past experience of the consequencesof raising them, and a knowledge of the conflicting objectives that exist, arelikely to be important influences on the choice made by a manager who canopt for an adequate or for a better solution.

In the last resort, the organization which wishes to be highly successfulcannot rely on organizational objectives to secure that success. At least itcannot rely on organizational objectives which are subject to organizationalcontrol. The routine and the regular can be thus dealt with. Procedures forinitiating action can be established and solutions can be closely linked toproblems. Armies have shown that men can be trained to react instinctivelyto foreseen situations. But initiative cannot be commanded. Operationalmodels cannot be provided in advance for unforeseen problems. There islogically no way in which one can tell that a problem should have beenrecognized until it has actually been recognized. If it was not recognized intime, when it is recognized it is too late to demand earlier recognition.Thus for long-run problems, the establishment of operational objectivesis of limited use. One must rely on the individual; and one may have to relyon a fairly low-ranking individual to give timely warning that action isneeded. This is not to say that the organization has no control over thesituation. It has; but its control lies in its ability to influence the standardswhich the individual sets for himself. Such influence results from the impres-sion which it gives of its conception of good management (and detailedperformance targets may not give the impression they are intended to give)and from the scope which it offers for the individual manager to achieve hispersonal objectives in (and not merely by means of) his performance as amanager.

Pounds, op. cit. p.

Documents

the decision-maker in the