The Concept of Equilibrium in Organization Theory

Many organization theories consist of an interpretation frame and an idea about the ideal equilibrium state. This article explains how the equilibrium concept is used in four organization theories: the theories of Fayol, Mintzberg, Morgan, and Volberda. Equilibrium can be defined as balance, fit or requisite variety. Equilibrium is related to observables dependent on the definition of organization as work organization, formal organization or artifact organization. Equilibrium can be explicitly related to performance in the theory used, enabling crosssectional research. The discussed theories can be mapped on a state space model in a way that clarifies the equilibrium concept, namely a mu-space (Fayol and Morgan), or a gamma-space (Mintzberg and Volberda). 1. Why the Equilibrium Concept is Needed in Organization Theory Why are organization theories so difficult to formalize? The answer to this question might be that managers and consultants use organization theories as instruments for diagnosis and therapy, and that popular organization theories are formulated in a way that is suitable for this task. This means that most organization theories have not been built based on the idea that they have to offer clear rules for explaining and predicting organization behavior. Instead, they offer a framework for perceiving to what extent an organization differs from an idealized healthy state, and receipts or mechanisms to let an organization return to that healthy or vital state. In many cases, the idea of an healthy organization is related to the idea of maintaining equilibria. For instance, Fayol (1916) speaks of equilibria between personal interest and general interest, contingency theory (Lawrence and Lorsch, 1967; Drazin and Van de Ven, 1985; Venkatraman, 1989) speaks about fit between organization structure and organization environment; Maturana and Varela (1984) speak about autopoiesis; and Mintzberg (1967) speaks of stable configurations. Researchers trying to formalize organization theories can make a mistake when trying to 'jump to the rules', skipping the interpretation frame of the organization theory, which often is the most important part of the theory from the point of view of the manager or consultant trying to apply organization theories in a diagnosis-andtherapy process. Sometimes, it is prematurely concluded that an organization theory does not have rules, while the theory is based on the equilibrium concept and therefore implicitly contains rules. The CAST method (Gazendam, 1992; 1993) tries to avoid these mistakes by making a number of deliberate steps from verbal organization theory to semi-formal description. In order to be able to make better formal descriptions and computer models of organization, for instance aiming at computer-supported organization diagnosis and therapy, it is necessary to investigate the equilibrium concept in organization theory further. How is equilibrium defined? How is it related to observables? How is it related to performance? What data structure does it have? These questions will be answered for a collection of theories that have been analyzed using the CAST method, namely the theories of Fayol (1916), Mintzberg (1979), Morgan (1986) and Volberda (1992). These theories cover a broad spectrum of organization theory: classic (Fayol), modern (Mintzberg) and postmodern (Morgan). Volberda’s theory is a synthesis of several theories based on a contingency framework. It has been chosen because a working diagnosis instrument based on this theory exists, and its equilibrium concept has an interesting structure. 2. Equilibrium in Four Organization Theories Page 1 of 11 The concept of equilibrium in organization theory 2-6-2015 http://www.econ.uba.ar/servicios/publicaciones/journal2/CONTENTS/gazendam/gazendam.htm 2.1. Equilibrium as balance between interests: Fayol Fayol (1916/ 1956) is the inventor of the concept of organization. In his theory, Fayol relates the characteristics of personal behavior to the characteristics of the organization as a whole (Gazendam, 1993: 200-251; 1994). Fayol distinguishes several equilibria. Each of them is related to an aspect of the task of a manager or worker. Furthermore, mechanisms are distinguished to maintain the equilibria. This means that equilibrium is seen as resulting from a dynamic process. It has to be maintained and fluctuations around the equilibrium state are normal. The equilibrium state may temporarily be disturbed, but the equilibrium maintaining mechanisms will restore the equilibrium state after some time. The following equilibria can be identified (numbering of hypotheses according to Gazendam, 1993) 1. the equilibrium between authority and responsibility (Hypothesis 2.2.); maintaining mechanisms: . rewards and penalties (Hypothesis 2.3.); . sanctions for undisciplined behavior (Hypothesis 3.3.); 2. the equilibrium between individual interest and general interest (Hypothesis 6.1.); maintaining mechanisms: . means for reconciliation of individual interest and general interest (Hypothesis 6.3.); . equitable remuneration of personnel (Hypothesis7.1.); 3. the equilibrium between the organization's need for personnel and its personnel resources (Hypothesis 10.4.; Hypothesis 12.2.); maintaining mechanism: . hiring and firing of personnel; assigning tasks to people; 4. the equilibrium between learning time and productive time (Hypothesis 1.4., Hypothesis 12.1.); maintaining mechanism: . hiring and firing of personnel; assigning tasks to people. The maintenance of equilibria is seen as the task of the managers in the organization. Fayol distinguishes the following performance criteria: equity; stability of personnel;