colin f lane

Meyer & Rowan: Organizational Structure as Myth, Ceremony

Meyer, John W and Brian Rowan. 'Institutionalized Organizations: Formal Structure as Myth and Ceremony'. American Journal of Sociology, vol. 83, no. 2, September 1977.

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Many formal organizational structures arise as reflections of rationalized institutional rules. The elaboration of such rules in modern states and societies accounts in part for the expansion and increased complexity of formal organizational structures. Institutional rules function as myths which organizations incorporate, gaining legitimacy, resources, stability, and enhanced survival prospects. Organizations whose structures become isomorphic with the myths of the institutional environment-in contrast with those primarily structured by the demands of technical production and exchange-decrease internal coordination and control in order to maintain legitimacy. Structures are decoupled from each other and from ongoing activities. In place of coordination, inspection, and evaluation, a logic of confidence and good faith is employed.

But in modern societies formal organizational structures arise in highly institutionalized contexts. Professions, policies, and programs are created along with the products and services that they are understood to produce rationally. This permits many new organizations to spring up and forces existing ones to incorporate new practices and procedures. That is, organizations are driven to incorporate the practices and procedures defined by prevailing rationalized concepts of organizational work and institutionalized in society. Organizations that do so increase their legitimacy and their survival prospects, independent of the immediate efficacy of the acquired practices and procedures.

the formal structures of many organizations in postindustrial society dramatically reflect the myths of their institutional environments instead of the demands of their work activities.

Institutionalized rules are classifications built into society as reciprocated typifications or interpretations. Such rules may be simply taken for granted or may be supported by public opinion or the force of law. Institutions inevitably involve normative obligations but often enter into social life primarily as facts which must be taken into account by actors. Institutionalization involves the processes by which social processes, obligations, or actualities come to take on a rulelike status in social thought and action.

institutional rules may have effects on organizational structures and their implementation in actual technical work which are very different from the effects generated by the networks of social behavior and relationships which compose and surround a given organization.

In conventional theories, rational formal structure is assumed to be the most effective way to coordinate and control the complex relational networks involved in modern technical or work activities. This assumption derives from Weber's discussions of the historical emergence of bureaucracies as consequences of economic markets and centralized states. Economic markets place a premium on rationality and coordination. As markets expand, the relational networks in a given domain become more complex and differentiated, and organizations in that domain must manage more internal and boundary-spanning interdependencies. Such factors as size and technology increase the complexity of internal relations, and the division of labor among organizations increases boundary-spanning problems. Because the need for coordination increases under these conditions, and because formally coordinated work has competitive advantages, organizations with rationalized formal structures tend to develop.

In modern societies, the myths generating formal organizational structure have two key properties. First, they are rationalized and impersonal prescriptions that identify various social purposes as technical ones and specify in a rulelike way the appropriate means to pursue these technical purposes rationally. Second, they are highly institutionalized and thus in some measure beyond the discretion of any individual participant or organization. They must, therefore, be taken for granted as legitimate, apart from evaluations of their impact on work outcomes.

The growth of rationalized institutional structures in society makes formal organizations more common and more elaborate. Such institutions are myths which make formal organizations both easier to create and more necessary. After all, the building blocks for organizations come to be littered around the societal landscape; it takes only a little entrepreneurial energy to assemble them into a structure. And because these building blocks are considered proper, adequate, rational, and necessary, organizations must incorporate them to avoid illegitimacy. Thus, the myths built into rationalized institutional elements create the necessity, the opportunity, and the impulse to organize rationally, over and above pressures in this direction created by the need to manage proximate relational networks

Proposition 1. As rationalized institutional rules arise in given domains of work activity, formal organizations form and expand by incorporating these rules as structural elements.

Proposition 2. The more modernized the society, the more extended the rationalized institutional structure in given domains and the greater the number of domains containing rationalized institutions.

Quite beyond the environmental interrelations suggested in open- systems theories, institutional theories in their extreme forms define organizations as dramatic enactments of the rationalized myths pervading modern societies, rather than as units involved in exchange-no matter how complex-with their environments.

The elaboration of complex relational networks.-As the relational networks in societies become dense and interconnected, increasing numbers of rationalized myths arise.

The degree of collective organization of the environment.-The myths generated by particular organizational practices and diffused through relational networks have legitimacy based on the supposition that they are rationally effective.

Leadership efforts of local organization. ... Many organizations actively seek charters from collective authorities and manage to institutionalize their goals and structures in the rules of such authorities.

Efforts to mold institutional environments proceed along two dimensions. First, powerful organizations force their immediate relational networks to adapt to their structures and relations. For instance, automobile producers help create demands for particular kinds of roads, transportation systems, and fuels that make automobiles virtual necessities; competitive forms of transportation have to adapt to the existing relational context. But second, powerful organizations attempt to build their goals and procedures directly into society as institutional rules. Automobile producers, for instance, attempt to create the standards in public opinion defining desirable cars, to influence legal standards defining satisfactory cars, to affect judicial rules defining cars adequate enough to avoid manufacturer liability, and to force agents of the collectivity to purchase only their cars. Rivals must then compete both in social networks or markets and in contexts of institutional rules which are defined by extant organizations. In this fashion, given organizational forms perpetuate themselves by becoming institutionalized rules.

Isomorphism with environmental institutions has some crucial consequences for organizations: (a) they incorporate elements which are legitimated externally, rather than in terms of efficiency; (b) they employ external or ceremonial assessment criteria to define the value of structural elements; and (c) dependence on externally fixed institutions reduces turbulence and maintains stability. As a result, it is argued here, institutional isomorphism promotes the success and survival of organizations. ... And the use of external assessment criteria- that is, moving toward the status in society of a subunit rather than an independent system-can enable an organization to remain successful by social definition, buffering it from failure.

From an institutional perspective, then, a most important aspect of isomorphism with environmental institutions is the evolution of organizational language. The labels of the organization chart as well as the vocabulary used to delineate organizational goals, procedures, and policies are analogous to the vocabularies of motive used to account for the activities of individuals

the conventions of modern accounting attempt to assign value to particular components of organizations on the basis of their contribution-through the organization's production function-to the goods and services the organization produces. But for many units-service departments, administrative sectors, and others-it is utterly unclear what is being produced that has clear or definable value in terms of its contribution to the organizational product. In these situations, accountants employ shadow prices: they assume that given organizational units are necessary and calculate their value from their prices in the world outside the organization. Thus modern accounting creates ceremonial production functions and maps them onto economic production functions: organizations assign externally defined worth to advertising departments, safety departments, managers, econometricians, and occasionally even sociologists, whether or not these units contribute measurably to the production of outputs. Monetary prices, in postindustrial society, reflect hosts of ceremonial influences, as do economic measures of efficiency, profitability, or net worth

Stabilization.-The rise of an elaborate institutional environment stabilizes both external and internal organizational relationships.

Market conditions, the characteristics of inputs and outputs, and technological procedures are brought under the jurisdiction of institutional meanings and controls. Stabilization also results as a given organization becomes part of the wider collective system. Support is guaranteed by agreements instead of depending entirely on performance.

Adaptations occur less rapidly as increased numbers of agreements are enacted. ... The taken-for-granted (and legally regulated) quality of institutional rules makes dramatic instabilities in products, techniques, or policies unlikely.

Proposition 3. Organizations that incorporate societally legitimated rationalized elements in their formal structures maximize their legitimacy and increase their resources and survival capabilities.

Some organizations use routine, clearly defined technologies to produce outputs. When output can be easily evaluated a market often develops, and consumers gain considerable rights of inspection and control. In this context, efficiency often determines success. Organizations must face exigencies of close coordination with their relational networks, and they cope with these exigencies by organizing around immediate technical problems.

But the rise of collectively organized society and the increasing interconnectedness of social relations have eroded many market contexts. Increasingly, such organizations as schools, R & D units, and governmental bureaucracies use variable, ambiguous technologies to produce outputs that are difficult to appraise, and other organizations with clearly defined technologies find themselves unable to adapt to environmental turbulence. The uncertainties of unpredictable technical contingencies or of adapting to environmental change cannot be resolved on the basis of efficiency. Internal participants and external constituents alike call for institutionalized rules that promote trust and confidence in outputs and buffer organizations from failure

Thus, one can conceive of a continuum along which organizations can be ordered. At one end are production organizations under strong output controls whose success depends on the management of relational networks. At the other end are institutionalized organizations whose success depends on the confidence and stability achieved by isomorphism with institutional rules. For two reasons it is important not to assume that an organization's location on this continuum is based on the inherent technical properties of its output and therefore permanent. First, the technical properties of outputs are socially defined and do not exist in some concrete sense that allows them to be empirically discovered. Second, environments and organizations often redefine the nature of products, services, and technologies. Redefinition sometimes clarifies techniques or evaluative standards. But often organizations and environments redefine the nature of techniques and output so that ambiguity is introduced and rights of inspection and control are lowered.

Formal structures that celebrate institutionalized myths differ from structures that act efficiently. Ceremonial activity is significant in relation to categorical rules, not in its concrete effects

highly professionalized consultants who bring external blessings on an organization are often difficult to justify in terms of improved productivity, yet may be very important in maintaining internal and external legitimacy.

There are four partial solutions to these inconsistencies. First, an organization can resist ceremonial requirements. But an organization that neglects ceremonial requirements and portrays itself as efficient may be unsuccessful in documenting its efficiency. Also, rejecting ceremonial requirements neglects an important source of resources and stability. Second, an organization can maintain rigid conformity to institutionalized prescriptions by cutting off external relations. Although such isolation upholds ceremonial requirements, internal participants and external constituents may soon become disillusioned with their inability to manage boundary-spanning exchanges. Institutionalized organizations must not only conform to myths but must also maintain the appearance that the myths actually work. Third, an organization can cynically acknowledge that its structure is inconsistent with work requirements. But this strategy denies the validity of institutionalized myths and sabotages the legitimacy of the organization. Fourth, an organization can promise reform. People may picture the present as unworkable but the future as filled with promising reforms of both structure and activity. But by defining the organization's valid structure as lying in the future, this strategy makes the organization's current structure illegitimate.

Proposition 4. Because attempts to control and coordinate activities in institutionalized organizations lead to conflicts and loss of legitimacy, elements of structure are decoupled from activities and from each other

Human relations are made very important. The organization cannot formally coordinate activities because its formal rules, if applied, would generate inconsistencies. Therefore individuals are left to work out technical interdependencies informally. The ability to coordinate things in violation of the rules-that is, to get along with other people-is highly valued.

The logic of confidence and good faith.-Despite the lack of coordination and control, decoupled organizations are not anarchies. Day-to-day activities proceed in an orderly fashion. What legitimates institutionalized organizations, enabling them to appear useful in spite of the lack of technical validation, is the confidence and good faith of their internal participants and their external constituents.

What legitimates institutionalized organizations, enabling them to appear useful in spite of the lack of technical validation, is the confidence and good faith of their internal participants and their external constituents.

Confidence in structural elements is maintained through three practices-avoidance, discretion, and overlooking. Avoidance and discretion are encouraged by decoupling autonomous subunits; overlooking anomalies is also quite common. Both internal participants and external constituents cooperate in these practices. Assuring that individual participants maintain face sustains confidence in the organization, and ultimately reinforces confidence in the myths that rationalize the organization's existence.

Organizations employ a host of mechanisms to dramatize the ritual commitments which their participants make to basic structural elements.

Proposition 5. The more an organization's structure is derived from institutionalized myths, the more it maintains elaborate displays of confidence, satisfaction, and good faith, internally and externally.

Participants not only commit themselves to supporting an organization's ceremonial facade but also commit themselves to making things work out backstage. The committed participants engage in informal coordination that, although often formally inappropriate, keeps technical activities running smoothly and avoids public embarrassments. In this sense the confidence and good faith generated by ceremonial action is in no way fraudulent. It may even be the most reasonable way to get participants to make their best efforts in situations that are made problematic by institutionalized myths that are at odds with immediate technical demands.

Evaluation and inspection are public assertions of societal control which violate the assumption that everyone is acting with competence and in good faith. Violating this assumption lowers morale and confidence. Thus, evaluation and inspection undermine the ceremonial aspects of organizations.

Proposition 6. Institutionalized organizations seek to minimize inspection and evaluation by both internal managers and external constituents.

Accrediting agencies, boards of trustees, government agencies, and individuals accept ceremonially at face value the credentials, ambiguous goals, and categorical evaluations that are characteristic of ceremonial organizations. In elaborate institutional environments these external constituents are themselves likely to be corporately organized agents of society. Maintaining categorical relationships with their organizational subunits is more stable and more certain than is relying on inspection and control.

Organizational structures are created and made more elaborate with the rise of institutionalized myths, and, in highly institutionalized contexts, organizational action must support these myths. But an organization must also attend to practical activity. The two requirements are at odds. A stable solution is to maintain the organization in a loosely coupled state.

No position is taken here on the overall social effectiveness of isomorphic and loosely coupled organizations. To some extent such structures buffer activity from efficiency criteria and produce ineffectiveness. On the other hand, by binding participants to act in good faith, and to adhere to the larger rationalities of the wider structure, they may maximize long-run effectiveness. It should not be assumed that the creation of microscopic rationalities in the daily activity of workers effects social ends more efficiently than commitment to larger institutional claims and purposes.

Organizations which incorporate institutionalized myths are more legitimate, successful, and likely to survive. Here, research should compare similar organizations in different contexts. For instance, the presence of personnel departments or research and development units should predict success in environments in which they are widely institutionalized. Organizations which have structural elements not institutionalized in their environments should be more likely to fail, as such unauthorized complexity must be justified by claims of efficiency and effectiveness.

Organizational control efforts, especially in highly institutionalized contexts, are devoted to ritual conformity, both internally and externally. Such organizations, that is, decouple structure from activity and structures from each other. The idea here is that the more highly institutionalized the environment, the more time and energy organizational elites devote to managing their organization's public image and status and the less they devote to coordination and to managing particular boundary-spanning relationships. Further, the argument is that in such contexts managers devote more time to articulating internal structures and relationships at an abstract or ritual level, in contrast to managing particular relationships among activities and interdependencies.