Adapting to change

Organizations always have a set of fundamental needs. The organization does something -- it provides a commodity to consumers, it provides services that individuals pay for, it provides charitable services based on foundation funding, it employs specialists to steal credit card information on the Internet. All of these activities consume resources.

For the sake of clarity, let's have two organizations in mind: a mid-size company that produces cigarette lighters and a non-profit organization that provides adult literacy education in a high-poverty environment.

Key to an organization's "metabolism" is its regular access to resources, including especially revenue and people. Generally an organization has an existing model for satisfying these needs. It generates revenues through sale of goods and services or through gifts from foundations, corporations, and individuals who have a commitment to the organization's purposes. It acquires a talent base by hiring talented individuals and by attracting motivated volunteers. Call this a business plan--keeping in mind that profit-based and non-profit organizations alike need a business plan. If the business plan is a good one, the revenues match the expenditure needs of the organization, the talented members of the organization use their time and budgets to produce the organization's "deliverables", and the cycle begins again. The organization is sustainable.

A particularly bad scenario for a non-profit service provider is to begin its work on the basis of a large initial grant which is spent down until the organization expires. The profit-based equivalent is the new business that starts up with a large infusion of venture capital but never develops a revenue stream to support its activities.

What happens when the organization's business environment changes abruptly? Significant changes might include --

• Abrupt change in demand for the organization's product
• Abrupt change in the consumer's ability or willingness to pay for the product at the current price
• Change in the willingness of donors to provide support for this kind of activity
• Change in the costs of inputs necessary for producing the deliverables
• Appearance of a strong competitor who draws off demand and donors

We can easily think of examples of each of these changes. Gasoline prices spiked in summer 2010 and demand for large vehicles plummeted. Rapid increase in unemployment results in a massive decline to demand for mid-range restaurants. Foundations get frustrated about the slow rate of progress in education reform and cut back on funding for education reform NGOs. Digital photography rapidly undermines film companies. The iPod swamps the market for digital music players and other suppliers fail in the marketplace.

The question I'm raising here is a difficult one: what does an organization need to do in order to perceive and adapt to persistent changes like these? If we were asking this question in the field of ecology, the answer would be simple: many local species facing this kind of change simply will not be able to adapt in time and will go locally extinct. Natural selection is not a rapid-adaptation process, in general. Random variation and selection take time and large populations.

But this doesn't need to be the case for organizations. Organizations are led by intelligent and forward-looking people, after all, so in theory it should be possible for organizations to perceive impending change in their business environments and adjust accordingly. However, we also know that many organizations fail to do so. Think of the newspaper industry, the music publishing industry, the film-based photography industry, and some sectors of charitable providers.

So what are some positive heuristics that support effective adaptation? And what are some common sources of failure?

On the positive side:

• Be fact-driven and honest in assessing current conditions in the operating environment. Don't permit wishful thinking to cloud the assessment.
• Be rigorous in analyzing the consequences of these changes. If you are the leader of a non-profit with a great mission in an environment where funders have decisively turned away from this issue, consider the alternatives: downsize the delivery plan, reduce the cost of delivery, change the priorities of the organization, find new revenue partners, or find new sources of funding.
• Be innovative; search carefully for new ways of accomplishing the organization's goals at lower overall cost. A labor union might consider whether its army of organizers might be made more efficient (lower resource cost) by making use of social media.

On the negative side, we can think of a number of psychological and institutional factors that impede successful adaptation. Wishful thinking is at the top of the list. It is very easy for decision makers to persuade themselves that observed trends will quickly reverse -- "the foundations will soon return to a focus on poverty," "digital photography will never achieve the resolution and color fidelity of film," "the state's support for poverty programs will return after the next election."

Second, decision makers may reason that careful but painful adaptation in the near term may be more painful for them individually than the consequences of eventual failure of the organization in the long term. This may be worsened by CEO compensation packages that create perverse incentives for them. The CEO of our fictional cigarette lighter manufacturer may reason that another 10 years of gradually declining sales, leading to bankruptcy, may be preferable to the turbulence and conflict associated with downsizing, shifting to another product, or introducing a lot of new technology.

Third, institutions have an enormous amount of inertia when it comes to change. Consolidating services within an organization, for example, is almost always met with a great deal of resistance from the various divisions that will need to "share" their IT person, their budget specialist, or their web designer.  And rethinking the "deliverable" of the organization, or the way that it is provided, is also often met with a lot of internal resistance.  A poverty-focused organization like the United Way may decide that its old model of distributing charitable funds needs to be more focused on a few central priorities; and this shift of delivery is likely to be met with resistance both internally (from existing staff) and externally (from powerful beneficiaries of the earlier system).

Fourth, there are very real limits on our ability to project current information onto future realities. What was called wishful thinking above might well be accurate in some situations: the current dire circumstances do sometimes get better and the existing business plan turns out to be sustainable after all. So there is always a degree of uncertainty associated with efforts to assess the current and future business environment.

No organization wants to be classified as a "dinosaur" -- the perfect embodiment of an "organization" (species) trapped in a period of change that moves more rapidly than its ability to adapt. But many do in fact find themselves in the contemporary equivalent of the tarpits when they run into unfamiliar and rapid periods of change. I have to hope that universities don't allow themselves to slip into that kind of endgame as they face the difficult and changing environment that currently confronts them.

Adapting to change

Organizations always have a set of fundamental needs. The organization does something -- it provides a commodity to consumers, it provides services that individuals pay for, it provides charitable services based on foundation funding, it employs specialists to steal credit card information on the Internet. All of these activities consume resources.

For the sake of clarity, let's have two organizations in mind: a mid-size company that produces cigarette lighters and a non-profit organization that provides adult literacy education in a high-poverty environment.

Key to an organization's "metabolism" is its regular access to resources, including especially revenue and people. Generally an organization has an existing model for satisfying these needs. It generates revenues through sale of goods and services or through gifts from foundations, corporations, and individuals who have a commitment to the organization's purposes. It acquires a talent base by hiring talented individuals and by attracting motivated volunteers. Call this a business plan--keeping in mind that profit-based and non-profit organizations alike need a business plan. If the business plan is a good one, the revenues match the expenditure needs of the organization, the talented members of the organization use their time and budgets to produce the organization's "deliverables", and the cycle begins again. The organization is sustainable.

A particularly bad scenario for a non-profit service provider is to begin its work on the basis of a large initial grant which is spent down until the organization expires. The profit-based equivalent is the new business that starts up with a large infusion of venture capital but never develops a revenue stream to support its activities.

What happens when the organization's business environment changes abruptly? Significant changes might include --

• Abrupt change in demand for the organization's product
• Abrupt change in the consumer's ability or willingness to pay for the product at the current price
• Change in the willingness of donors to provide support for this kind of activity
• Change in the costs of inputs necessary for producing the deliverables
• Appearance of a strong competitor who draws off demand and donors

We can easily think of examples of each of these changes. Gasoline prices spiked in summer 2010 and demand for large vehicles plummeted. Rapid increase in unemployment results in a massive decline to demand for mid-range restaurants. Foundations get frustrated about the slow rate of progress in education reform and cut back on funding for education reform NGOs. Digital photography rapidly undermines film companies. The iPod swamps the market for digital music players and other suppliers fail in the marketplace.

The question I'm raising here is a difficult one: what does an organization need to do in order to perceive and adapt to persistent changes like these? If we were asking this question in the field of ecology, the answer would be simple: many local species facing this kind of change simply will not be able to adapt in time and will go locally extinct. Natural selection is not a rapid-adaptation process, in general. Random variation and selection take time and large populations.

But this doesn't need to be the case for organizations. Organizations are led by intelligent and forward-looking people, after all, so in theory it should be possible for organizations to perceive impending change in their business environments and adjust accordingly. However, we also know that many organizations fail to do so. Think of the newspaper industry, the music publishing industry, the film-based photography industry, and some sectors of charitable providers.

So what are some positive heuristics that support effective adaptation? And what are some common sources of failure?

On the positive side:

• Be fact-driven and honest in assessing current conditions in the operating environment. Don't permit wishful thinking to cloud the assessment.
• Be rigorous in analyzing the consequences of these changes. If you are the leader of a non-profit with a great mission in an environment where funders have decisively turned away from this issue, consider the alternatives: downsize the delivery plan, reduce the cost of delivery, change the priorities of the organization, find new revenue partners, or find new sources of funding.
• Be innovative; search carefully for new ways of accomplishing the organization's goals at lower overall cost. A labor union might consider whether its army of organizers might be made more efficient (lower resource cost) by making use of social media.

On the negative side, we can think of a number of psychological and institutional factors that impede successful adaptation. Wishful thinking is at the top of the list. It is very easy for decision makers to persuade themselves that observed trends will quickly reverse -- "the foundations will soon return to a focus on poverty," "digital photography will never achieve the resolution and color fidelity of film," "the state's support for poverty programs will return after the next election."

Second, decision makers may reason that careful but painful adaptation in the near term may be more painful for them individually than the consequences of eventual failure of the organization in the long term. This may be worsened by CEO compensation packages that create perverse incentives for them. The CEO of our fictional cigarette lighter manufacturer may reason that another 10 years of gradually declining sales, leading to bankruptcy, may be preferable to the turbulence and conflict associated with downsizing, shifting to another product, or introducing a lot of new technology.

Third, institutions have an enormous amount of inertia when it comes to change. Consolidating services within an organization, for example, is almost always met with a great deal of resistance from the various divisions that will need to "share" their IT person, their budget specialist, or their web designer.  And rethinking the "deliverable" of the organization, or the way that it is provided, is also often met with a lot of internal resistance.  A poverty-focused organization like the United Way may decide that its old model of distributing charitable funds needs to be more focused on a few central priorities; and this shift of delivery is likely to be met with resistance both internally (from existing staff) and externally (from powerful beneficiaries of the earlier system).

Fourth, there are very real limits on our ability to project current information onto future realities. What was called wishful thinking above might well be accurate in some situations: the current dire circumstances do sometimes get better and the existing business plan turns out to be sustainable after all. So there is always a degree of uncertainty associated with efforts to assess the current and future business environment.

No organization wants to be classified as a "dinosaur" -- the perfect embodiment of an "organization" (species) trapped in a period of change that moves more rapidly than its ability to adapt. But many do in fact find themselves in the contemporary equivalent of the tarpits when they run into unfamiliar and rapid periods of change. I have to hope that universities don't allow themselves to slip into that kind of endgame as they face the difficult and changing environment that currently confronts them.

Adapting to change

Organizations always have a set of fundamental needs. The organization does something -- it provides a commodity to consumers, it provides services that individuals pay for, it provides charitable services based on foundation funding, it employs specialists to steal credit card information on the Internet. All of these activities consume resources.

For the sake of clarity, let's have two organizations in mind: a mid-size company that produces cigarette lighters and a non-profit organization that provides adult literacy education in a high-poverty environment.

Key to an organization's "metabolism" is its regular access to resources, including especially revenue and people. Generally an organization has an existing model for satisfying these needs. It generates revenues through sale of goods and services or through gifts from foundations, corporations, and individuals who have a commitment to the organization's purposes. It acquires a talent base by hiring talented individuals and by attracting motivated volunteers. Call this a business plan--keeping in mind that profit-based and non-profit organizations alike need a business plan. If the business plan is a good one, the revenues match the expenditure needs of the organization, the talented members of the organization use their time and budgets to produce the organization's "deliverables", and the cycle begins again. The organization is sustainable.

A particularly bad scenario for a non-profit service provider is to begin its work on the basis of a large initial grant which is spent down until the organization expires. The profit-based equivalent is the new business that starts up with a large infusion of venture capital but never develops a revenue stream to support its activities.

What happens when the organization's business environment changes abruptly? Significant changes might include --

• Abrupt change in demand for the organization's product
• Abrupt change in the consumer's ability or willingness to pay for the product at the current price
• Change in the willingness of donors to provide support for this kind of activity
• Change in the costs of inputs necessary for producing the deliverables
• Appearance of a strong competitor who draws off demand and donors

We can easily think of examples of each of these changes. Gasoline prices spiked in summer 2010 and demand for large vehicles plummeted. Rapid increase in unemployment results in a massive decline to demand for mid-range restaurants. Foundations get frustrated about the slow rate of progress in education reform and cut back on funding for education reform NGOs. Digital photography rapidly undermines film companies. The iPod swamps the market for digital music players and other suppliers fail in the marketplace.

The question I'm raising here is a difficult one: what does an organization need to do in order to perceive and adapt to persistent changes like these? If we were asking this question in the field of ecology, the answer would be simple: many local species facing this kind of change simply will not be able to adapt in time and will go locally extinct. Natural selection is not a rapid-adaptation process, in general. Random variation and selection take time and large populations.

But this doesn't need to be the case for organizations. Organizations are led by intelligent and forward-looking people, after all, so in theory it should be possible for organizations to perceive impending change in their business environments and adjust accordingly. However, we also know that many organizations fail to do so. Think of the newspaper industry, the music publishing industry, the film-based photography industry, and some sectors of charitable providers.

So what are some positive heuristics that support effective adaptation? And what are some common sources of failure?

On the positive side:

• Be fact-driven and honest in assessing current conditions in the operating environment. Don't permit wishful thinking to cloud the assessment.
• Be rigorous in analyzing the consequences of these changes. If you are the leader of a non-profit with a great mission in an environment where funders have decisively turned away from this issue, consider the alternatives: downsize the delivery plan, reduce the cost of delivery, change the priorities of the organization, find new revenue partners, or find new sources of funding.
• Be innovative; search carefully for new ways of accomplishing the organization's goals at lower overall cost. A labor union might consider whether its army of organizers might be made more efficient (lower resource cost) by making use of social media.

On the negative side, we can think of a number of psychological and institutional factors that impede successful adaptation. Wishful thinking is at the top of the list. It is very easy for decision makers to persuade themselves that observed trends will quickly reverse -- "the foundations will soon return to a focus on poverty," "digital photography will never achieve the resolution and color fidelity of film," "the state's support for poverty programs will return after the next election."

Second, decision makers may reason that careful but painful adaptation in the near term may be more painful for them individually than the consequences of eventual failure of the organization in the long term. This may be worsened by CEO compensation packages that create perverse incentives for them. The CEO of our fictional cigarette lighter manufacturer may reason that another 10 years of gradually declining sales, leading to bankruptcy, may be preferable to the turbulence and conflict associated with downsizing, shifting to another product, or introducing a lot of new technology.

Third, institutions have an enormous amount of inertia when it comes to change. Consolidating services within an organization, for example, is almost always met with a great deal of resistance from the various divisions that will need to "share" their IT person, their budget specialist, or their web designer.  And rethinking the "deliverable" of the organization, or the way that it is provided, is also often met with a lot of internal resistance.  A poverty-focused organization like the United Way may decide that its old model of distributing charitable funds needs to be more focused on a few central priorities; and this shift of delivery is likely to be met with resistance both internally (from existing staff) and externally (from powerful beneficiaries of the earlier system).

Fourth, there are very real limits on our ability to project current information onto future realities. What was called wishful thinking above might well be accurate in some situations: the current dire circumstances do sometimes get better and the existing business plan turns out to be sustainable after all. So there is always a degree of uncertainty associated with efforts to assess the current and future business environment.

No organization wants to be classified as a "dinosaur" -- the perfect embodiment of an "organization" (species) trapped in a period of change that moves more rapidly than its ability to adapt. But many do in fact find themselves in the contemporary equivalent of the tarpits when they run into unfamiliar and rapid periods of change. I have to hope that universities don't allow themselves to slip into that kind of endgame as they face the difficult and changing environment that currently confronts them.

More on meso causation

A recent post considered the question, do organizations have causal powers? There I argued that they do, in a number of ways. Here I'd like to return to these claims and see how they disaggregate onto subvening circumstances, including especially patterns of individual and group activity. The italicized phrases are extracted from the earlier post.

• First, the rules and procedures of the organization may themselves have behavioral consequences that lead consistently to a certain kind of outcome.

How do rules and procedures causally affect the behavior of the actors who participate in them? (a) Through training and inculcation. The new participant is exposed to training processes designed to lead him/her to internalize the procedures and norms governing his/her function. (b) Through formal enforcement. Supervisors are institutionally charged to enforce the rules through direct observation and feedback. (c) Through the normative example of other participants, including informal sanctions by non-supervisors for "wrong" behavior. (d) Through positive incentives administered by supervisors and mid-level functionaries. Each of these avenues for influencing the behavior of an actor within an organization depends on the actions and motivations of other actors within the organization. So we have the recursive question, what factors influence the behavior of those actors? And the answer seems to be: all actors find themselves within a dynamic system of behavior by other actors, frequently maintaining an equilibrium of reproduction of the rules and roles.

• Second, different organizational forms may be more or less efficient at performing their tasks, leading to consequences for the people and higher-level organizations that are depending on them.

Institutions designed to do similar work may differ in their functioning because of specific differences in the implementation of roles and processes within the organization. This is a system characteristic of the particular features and interactions of the rules and processes of the organization, along with the expected behaviors of the participants. It is also a causal characteristic: implementing system A results in greater efficiency at X than implementing B. The underlying causal reality that needs explanation is how it comes to pass that participants carry out their roles as prescribed--which takes us back to the first thesis.

• Third, the discrepancy between what the rules require of participants and what the participants actually do may have consequences for the outputs of the organization.

This causal claim highlights the difference between formal and informal procedures and practices within an organization. Informal practices can be highly regular and reproducible. In order to incorporate their implications into our analysis of the workings of the organization we need to accurately understand them; so we need to do some organizational ethnography to identify the practices of the organization. But in principle, the logic of explanation we provide on the basis of informal practices is exactly the same as those offered on the basis of the formal rules of the organization.

• Fourth, the specific ways in which incentives, sanctions, and supervision are implemented differentiate across organizations.

This is one of the key insights of the "new institutionalism." The specific design of the institution in terms of opportunities and incentives presented to participants makes a large difference in actors' behavior, and consequently a large difference to the system-level performance of the institution. Tweaking the variable of the level in the organization's hierarchy that needs to sign off on expenditures at a given level has significant effects on behavior and system properties. On the one hand, higher-level sign-off may serve to restrain spending. On the other hand, it may make the organization more unwieldy in responding to opportunities and threats.

• Fifth, the organization has causal powers with respect to the behavior of the individuals involved in the organization.

This factor parallels thesis 1 but is meant to refer to longterm effects on behavior and personality. The idea here is that immersion in a particular organization and its culture creates a distinctive social psychology in the people who experience it. They may acquire habits of thought, ways of responding to new circumstances, higher or lower levels of trust of others, and so forth, in ways that influence their behavior in the broader society. The idea of an "organization man" falls in this category of influence. The organization influences the individual's behavior, not just through the immediate system of rewards and punishments, but through its ability to shape his/her more permanent social psychology.

There are only two fundamental causal paths identified here. The causal properties of the organization are embodied in the patterns of coordinated actions undertaken by the actors who are involved; and these orderly patterns create system effects for the organization as a whole that can be analyzed in abstraction from the individuals whose actions constitute the micro-level of the social entity.

The most obvious causal property of an organization is bound up in the function of the organization. An organization is developed in order to bring about certain social effects: reduce pollution or crime, distribute goods throughout a population, provide services to individuals, seize and hold territory, disseminate information. These effects occur as a result of the coordinated activities of people within the organization. When organizations work correctly they bring about one set of effects; when they break down they bring about another set of effects. Here we can think about organizations in analogy with technology components like amplifiers, thermostats, stabilizers, or surge protectors. This analogy suggests we think about the causal powers of an organization at two levels: what they do (their meso-level effects) and how they do it (their micro-level sub-mechanisms).

More on meso causation

A recent post considered the question, do organizations have causal powers? There I argued that they do, in a number of ways. Here I'd like to return to these claims and see how they disaggregate onto subvening circumstances, including especially patterns of individual and group activity. The italicized phrases are extracted from the earlier post.

• First, the rules and procedures of the organization may themselves have behavioral consequences that lead consistently to a certain kind of outcome.

How do rules and procedures causally affect the behavior of the actors who participate in them? (a) Through training and inculcation. The new participant is exposed to training processes designed to lead him/her to internalize the procedures and norms governing his/her function. (b) Through formal enforcement. Supervisors are institutionally charged to enforce the rules through direct observation and feedback. (c) Through the normative example of other participants, including informal sanctions by non-supervisors for "wrong" behavior. (d) Through positive incentives administered by supervisors and mid-level functionaries. Each of these avenues for influencing the behavior of an actor within an organization depends on the actions and motivations of other actors within the organization. So we have the recursive question, what factors influence the behavior of those actors? And the answer seems to be: all actors find themselves within a dynamic system of behavior by other actors, frequently maintaining an equilibrium of reproduction of the rules and roles.

• Second, different organizational forms may be more or less efficient at performing their tasks, leading to consequences for the people and higher-level organizations that are depending on them.

Institutions designed to do similar work may differ in their functioning because of specific differences in the implementation of roles and processes within the organization. This is a system characteristic of the particular features and interactions of the rules and processes of the organization, along with the expected behaviors of the participants. It is also a causal characteristic: implementing system A results in greater efficiency at X than implementing B. The underlying causal reality that needs explanation is how it comes to pass that participants carry out their roles as prescribed--which takes us back to the first thesis.

• Third, the discrepancy between what the rules require of participants and what the participants actually do may have consequences for the outputs of the organization.

This causal claim highlights the difference between formal and informal procedures and practices within an organization. Informal practices can be highly regular and reproducible. In order to incorporate their implications into our analysis of the workings of the organization we need to accurately understand them; so we need to do some organizational ethnography to identify the practices of the organization. But in principle, the logic of explanation we provide on the basis of informal practices is exactly the same as those offered on the basis of the formal rules of the organization.

• Fourth, the specific ways in which incentives, sanctions, and supervision are implemented differentiate across organizations.

This is one of the key insights of the "new institutionalism." The specific design of the institution in terms of opportunities and incentives presented to participants makes a large difference in actors' behavior, and consequently a large difference to the system-level performance of the institution. Tweaking the variable of the level in the organization's hierarchy that needs to sign off on expenditures at a given level has significant effects on behavior and system properties. On the one hand, higher-level sign-off may serve to restrain spending. On the other hand, it may make the organization more unwieldy in responding to opportunities and threats.

• Fifth, the organization has causal powers with respect to the behavior of the individuals involved in the organization.

This factor parallels thesis 1 but is meant to refer to longterm effects on behavior and personality. The idea here is that immersion in a particular organization and its culture creates a distinctive social psychology in the people who experience it. They may acquire habits of thought, ways of responding to new circumstances, higher or lower levels of trust of others, and so forth, in ways that influence their behavior in the broader society. The idea of an "organization man" falls in this category of influence. The organization influences the individual's behavior, not just through the immediate system of rewards and punishments, but through its ability to shape his/her more permanent social psychology.

There are only two fundamental causal paths identified here. The causal properties of the organization are embodied in the patterns of coordinated actions undertaken by the actors who are involved; and these orderly patterns create system effects for the organization as a whole that can be analyzed in abstraction from the individuals whose actions constitute the micro-level of the social entity.

The most obvious causal property of an organization is bound up in the function of the organization. An organization is developed in order to bring about certain social effects: reduce pollution or crime, distribute goods throughout a population, provide services to individuals, seize and hold territory, disseminate information. These effects occur as a result of the coordinated activities of people within the organization. When organizations work correctly they bring about one set of effects; when they break down they bring about another set of effects. Here we can think about organizations in analogy with technology components like amplifiers, thermostats, stabilizers, or surge protectors. This analogy suggests we think about the causal powers of an organization at two levels: what they do (their meso-level effects) and how they do it (their micro-level sub-mechanisms).

More on meso causation

A recent post considered the question, do organizations have causal powers? There I argued that they do, in a number of ways. Here I'd like to return to these claims and see how they disaggregate onto subvening circumstances, including especially patterns of individual and group activity. The italicized phrases are extracted from the earlier post.

• First, the rules and procedures of the organization may themselves have behavioral consequences that lead consistently to a certain kind of outcome.

How do rules and procedures causally affect the behavior of the actors who participate in them? (a) Through training and inculcation. The new participant is exposed to training processes designed to lead him/her to internalize the procedures and norms governing his/her function. (b) Through formal enforcement. Supervisors are institutionally charged to enforce the rules through direct observation and feedback. (c) Through the normative example of other participants, including informal sanctions by non-supervisors for "wrong" behavior. (d) Through positive incentives administered by supervisors and mid-level functionaries. Each of these avenues for influencing the behavior of an actor within an organization depends on the actions and motivations of other actors within the organization. So we have the recursive question, what factors influence the behavior of those actors? And the answer seems to be: all actors find themselves within a dynamic system of behavior by other actors, frequently maintaining an equilibrium of reproduction of the rules and roles.

• Second, different organizational forms may be more or less efficient at performing their tasks, leading to consequences for the people and higher-level organizations that are depending on them.

Institutions designed to do similar work may differ in their functioning because of specific differences in the implementation of roles and processes within the organization. This is a system characteristic of the particular features and interactions of the rules and processes of the organization, along with the expected behaviors of the participants. It is also a causal characteristic: implementing system A results in greater efficiency at X than implementing B. The underlying causal reality that needs explanation is how it comes to pass that participants carry out their roles as prescribed--which takes us back to the first thesis.

• Third, the discrepancy between what the rules require of participants and what the participants actually do may have consequences for the outputs of the organization.

This causal claim highlights the difference between formal and informal procedures and practices within an organization. Informal practices can be highly regular and reproducible. In order to incorporate their implications into our analysis of the workings of the organization we need to accurately understand them; so we need to do some organizational ethnography to identify the practices of the organization. But in principle, the logic of explanation we provide on the basis of informal practices is exactly the same as those offered on the basis of the formal rules of the organization.

• Fourth, the specific ways in which incentives, sanctions, and supervision are implemented differentiate across organizations.

This is one of the key insights of the "new institutionalism." The specific design of the institution in terms of opportunities and incentives presented to participants makes a large difference in actors' behavior, and consequently a large difference to the system-level performance of the institution. Tweaking the variable of the level in the organization's hierarchy that needs to sign off on expenditures at a given level has significant effects on behavior and system properties. On the one hand, higher-level sign-off may serve to restrain spending. On the other hand, it may make the organization more unwieldy in responding to opportunities and threats.

• Fifth, the organization has causal powers with respect to the behavior of the individuals involved in the organization.

This factor parallels thesis 1 but is meant to refer to longterm effects on behavior and personality. The idea here is that immersion in a particular organization and its culture creates a distinctive social psychology in the people who experience it. They may acquire habits of thought, ways of responding to new circumstances, higher or lower levels of trust of others, and so forth, in ways that influence their behavior in the broader society. The idea of an "organization man" falls in this category of influence. The organization influences the individual's behavior, not just through the immediate system of rewards and punishments, but through its ability to shape his/her more permanent social psychology.

There are only two fundamental causal paths identified here. The causal properties of the organization are embodied in the patterns of coordinated actions undertaken by the actors who are involved; and these orderly patterns create system effects for the organization as a whole that can be analyzed in abstraction from the individuals whose actions constitute the micro-level of the social entity.

The most obvious causal property of an organization is bound up in the function of the organization. An organization is developed in order to bring about certain social effects: reduce pollution or crime, distribute goods throughout a population, provide services to individuals, seize and hold territory, disseminate information. These effects occur as a result of the coordinated activities of people within the organization. When organizations work correctly they bring about one set of effects; when they break down they bring about another set of effects. Here we can think about organizations in analogy with technology components like amplifiers, thermostats, stabilizers, or surge protectors. This analogy suggests we think about the causal powers of an organization at two levels: what they do (their meso-level effects) and how they do it (their micro-level sub-mechanisms).

Do organizations have causal powers?

An organization is a meso-level social structure. It is a structured group of individuals, often hierarchically organized, pursuing a relatively clearly defined set of tasks. In the abstract, it is a set of rules and procedures that regulate and motive the behavior of the individuals who function within the organization. There are also a set of informal practices within an organization that are not codified that have significant effects on the functioning of the organization (for example, the coffee room as a medium of informal communication). Some of those individuals have responsibilities of oversight, which is a primary way in which the abstract rules of the organization are transformed into concrete patterns of activity by other individuals. Another behavioral characteristic of an organization is the set of incentives and rewards that it creates for participants in the organization. Often the incentives that exist were planned and designed to have specific effects on behavior of participants; by offering rewards for behaviors X, Y, Z, the organization is expected to produce a lot of X, Y, and Z. Sometimes, though, the incentives are unintended, created perhaps by the intersection of two rules of operation that lead to a perverse incentive leading to W. For example: a farm supervisor may ask peach pickers to discard the bruised peaches rather than placing them in the basket to be weighed. But if the laborers' salaries are determined solely by the weight of the baskets they present for weighing, they will have an incentive to include the bruised peaches (at the bottom!).

Examples of organizations include things like these:

• the Atlanta police department
• a collective farm in Sichuan in 1965
• the maintenance and operations staff of a nuclear power plant
• a large investment bank on Wall Street
• Certus Corporation (discoverer of the PCR process)
• the land value assessment process in late Imperial China

The organization consists of a number of things:

• a set of procedures for how to handle specific kinds of tasks
• a set of people with skills and specific roles
• a set of incentives and rewards to induce participants to carry out their roles effectively and diligently
• a set of accountability processes permitting supervision and assessment of performance by individuals within the organization
• an "executive" function with the power to refine / revise / improve the rules so as to bring about overall better performance

Let's take the nuclear power plant staff as an example. The tasks of the organization are to control the complex technology and its instruments over an extended time; to conduct inspections of the physical infrastructure of the plant to discover failures before they occur; to conduct routine maintenance of machines and other physical systems; to respond quickly to failures, both large and small; and to sometimes conduct major upgrades on the hardware of the system. We may imagine that there are detailed, written procedures for each of these activities, as well as procedures for action during times of malfunction or breakdown. The people of the plant represent a range of specialized skills and specialized tasks. Wainwrights maintain and repair machinery; computer technicians maintain computer systems; nuclear technicians oversee the measured functioning of the system (pressures, temperatures, power production); safety workers inspect various system; and supervisors assign tasks and monitor performance.

Failures of the system arise for several different kinds of reasons: technical failure (a device fails for unexpected technical reasons, such as a faulty weld); operator failure (an operator disregards or misinterprets a pressure warning, and a pipe explodes before corrective action is taken); training failure (staff are technically or operationally unprepared for performing their tasks routinely or in exceptional circumstances); system failure (two or more sub-systems function as designed, but in an unusual circumstance may interact in such a way as to bring about an explosion, a computer crash, or a release of energy or heat); supervisory failure (procedures were good but supervisors permitted deviation from the procedures); venality failure (individuals in a position to control purchasing decisions authorize bad contracts for faulty materials for their personal profit).

The idea of a principal-agent problem is highly relevant within organizations, at every level. The executive expects the supervisor to faithfully perform his/her tasks of supervision. But since the executive does not directly monitor the performance of the supervisor, it is possible for the supervisor to shirk his/her duties and permit faulty performance by those he supervises. Likewise, the supervisor expects that the operator will continue to monitor and control the machine throughout the day; but it is possible for the operator to keep a solitaire window open on the screen. Each level of accountability, then, requires both formal expectations and a basis for trust in the good faith of the participants in the organization.

Now we are in a position to address the central question here: do organizations have causal powers? It seems to me that the answer is yes, in fairly specific ways. First, the rules and procedures of the organization may themselves have behavioral consequences that lead consistently to a certain kind of outcome.

Second, different organizational forms may be more or less efficient at performing their tasks, leading to consequences for the people and higher-level organizations that are depending on them. For example, two tax-collection systems may be designed for the same goal -- to collect 10% of the grain produced everywhere in the kingdom. If one system is 75% successful in this task and the other is 50% successful, the state depending on the second system will be starved for resources.

Third, the discrepancy between what the rules require of participants and what the participants actually do may have consequences for the outputs of the organization. Police department regulations may require that each piece of physical evidence is separately bagged and catalogued with appropriate information about its collection. If police operatives are careless in the cataloguing of evidence it may be more difficult to convict the accused; this may lead to a rising disregard for the likelihood of conviction and a rise in the crime rate. Corruption (venal failure to perform one's tasks faithfully) may lead to large consequences: the company is less profitable, the city is discredited to its citizens, the Church is delegitimated by the self-interested behavior of its clergy.

Fourth, the specific ways in which incentives, sanctions, and supervision are implemented differentiate across organizations. We may find that organizations with supervision system X are on average more productive or more effective than those with system Y.

Fifth, the organization has causal powers with respect to the behavior of the individuals involved in the organization. By presenting its rules, sanctions, and rewards to its participants, it changes their behavior in specific ways. Google and Apple have organized their internal procedures and rewards in such a way as to encourage creativeness, teamwork, and confidentiality. These organizations look quite different in their functioning and their products from a steel company or a shoe company.

This means two things. First, we can say with some confidence that the way an organization is structured makes a difference to its performance; this is a causal power all by itself. And second, we may be able to discover that there are broad characteristics that differentiate organizational types, and it may turn out that these distinct types also have different performance characteristics. We might discover, for example, that one system of oversight and employee motivation is significantly more likely to permit theft and corrupt behavior by its agents than another. In that case, we might say that these two systems differ in their propensities for generating corrupt behavior. (This is an argument that Robert Klitgaard makes in Controlling Corruption.)

So far we haven't mentioned the familiar subject of "microfoundations" at all; we have considered an organization as a complex social entity. It is easy to specify the microfoundations of the causal powers we have identified. The organization's performance is determined by the behaviors of the individuals who fall within it, and the aggregate individual behaviors are explained by the rules and procedures embodied in the organization. So the causal powers having to do with efficiency, effectiveness, and corruptibility can be disaggregated into the incentives and behaviors of typical individuals. But here is the key point: we don't need to carry out this disaggregation when we want to invoke statements about the causal characteristics of organizations in explanations of more complex social processes. This is a case illustrating the point of relative explanatory autonomy developed in a prior post, and it also illustrates the point that David Elder-Vass makes in The Causal Power of Social Structures: Emergence, Structure and Agency.

These observations lay a basis for concluding that meso-level social entities have causal powers that can legitimately be invoked in social explanations. Significantly, there are clear and convincing examples of sociological explanations that take the causal powers of organizations as fundamental to their explanations of important social outcomes -- for example, technology failure (Charles Perrow, Normal Accidents: Living with High-Risk Technologies; link), corruption (Robert Klitgaard, Controlling Corruption), and the use of common property resources (Elinor Ostrom, Governing the Commons: The Evolution of Institutions for Collective Action).

Do organizations have causal powers?

An organization is a meso-level social structure. It is a structured group of individuals, often hierarchically organized, pursuing a relatively clearly defined set of tasks. In the abstract, it is a set of rules and procedures that regulate and motive the behavior of the individuals who function within the organization. There are also a set of informal practices within an organization that are not codified that have significant effects on the functioning of the organization (for example, the coffee room as a medium of informal communication). Some of those individuals have responsibilities of oversight, which is a primary way in which the abstract rules of the organization are transformed into concrete patterns of activity by other individuals. Another behavioral characteristic of an organization is the set of incentives and rewards that it creates for participants in the organization. Often the incentives that exist were planned and designed to have specific effects on behavior of participants; by offering rewards for behaviors X, Y, Z, the organization is expected to produce a lot of X, Y, and Z. Sometimes, though, the incentives are unintended, created perhaps by the intersection of two rules of operation that lead to a perverse incentive leading to W. For example: a farm supervisor may ask peach pickers to discard the bruised peaches rather than placing them in the basket to be weighed. But if the laborers' salaries are determined solely by the weight of the baskets they present for weighing, they will have an incentive to include the bruised peaches (at the bottom!).

Examples of organizations include things like these:

• the Atlanta police department
• a collective farm in Sichuan in 1965
• the maintenance and operations staff of a nuclear power plant
• a large investment bank on Wall Street
• Certus Corporation (discoverer of the PCR process)
• the land value assessment process in late Imperial China

The organization consists of a number of things:

• a set of procedures for how to handle specific kinds of tasks
• a set of people with skills and specific roles
• a set of incentives and rewards to induce participants to carry out their roles effectively and diligently
• a set of accountability processes permitting supervision and assessment of performance by individuals within the organization
• an "executive" function with the power to refine / revise / improve the rules so as to bring about overall better performance

Let's take the nuclear power plant staff as an example. The tasks of the organization are to control the complex technology and its instruments over an extended time; to conduct inspections of the physical infrastructure of the plant to discover failures before they occur; to conduct routine maintenance of machines and other physical systems; to respond quickly to failures, both large and small; and to sometimes conduct major upgrades on the hardware of the system. We may imagine that there are detailed, written procedures for each of these activities, as well as procedures for action during times of malfunction or breakdown. The people of the plant represent a range of specialized skills and specialized tasks. Wainwrights maintain and repair machinery; computer technicians maintain computer systems; nuclear technicians oversee the measured functioning of the system (pressures, temperatures, power production); safety workers inspect various system; and supervisors assign tasks and monitor performance.

Failures of the system arise for several different kinds of reasons: technical failure (a device fails for unexpected technical reasons, such as a faulty weld); operator failure (an operator disregards or misinterprets a pressure warning, and a pipe explodes before corrective action is taken); training failure (staff are technically or operationally unprepared for performing their tasks routinely or in exceptional circumstances); system failure (two or more sub-systems function as designed, but in an unusual circumstance may interact in such a way as to bring about an explosion, a computer crash, or a release of energy or heat); supervisory failure (procedures were good but supervisors permitted deviation from the procedures); venality failure (individuals in a position to control purchasing decisions authorize bad contracts for faulty materials for their personal profit).

The idea of a principal-agent problem is highly relevant within organizations, at every level. The executive expects the supervisor to faithfully perform his/her tasks of supervision. But since the executive does not directly monitor the performance of the supervisor, it is possible for the supervisor to shirk his/her duties and permit faulty performance by those he supervises. Likewise, the supervisor expects that the operator will continue to monitor and control the machine throughout the day; but it is possible for the operator to keep a solitaire window open on the screen. Each level of accountability, then, requires both formal expectations and a basis for trust in the good faith of the participants in the organization.

Now we are in a position to address the central question here: do organizations have causal powers? It seems to me that the answer is yes, in fairly specific ways. First, the rules and procedures of the organization may themselves have behavioral consequences that lead consistently to a certain kind of outcome.

Second, different organizational forms may be more or less efficient at performing their tasks, leading to consequences for the people and higher-level organizations that are depending on them. For example, two tax-collection systems may be designed for the same goal -- to collect 10% of the grain produced everywhere in the kingdom. If one system is 75% successful in this task and the other is 50% successful, the state depending on the second system will be starved for resources.

Third, the discrepancy between what the rules require of participants and what the participants actually do may have consequences for the outputs of the organization. Police department regulations may require that each piece of physical evidence is separately bagged and catalogued with appropriate information about its collection. If police operatives are careless in the cataloguing of evidence it may be more difficult to convict the accused; this may lead to a rising disregard for the likelihood of conviction and a rise in the crime rate. Corruption (venal failure to perform one's tasks faithfully) may lead to large consequences: the company is less profitable, the city is discredited to its citizens, the Church is delegitimated by the self-interested behavior of its clergy.

Fourth, the specific ways in which incentives, sanctions, and supervision are implemented differentiate across organizations. We may find that organizations with supervision system X are on average more productive or more effective than those with system Y.

Fifth, the organization has causal powers with respect to the behavior of the individuals involved in the organization. By presenting its rules, sanctions, and rewards to its participants, it changes their behavior in specific ways. Google and Apple have organized their internal procedures and rewards in such a way as to encourage creativeness, teamwork, and confidentiality. These organizations look quite different in their functioning and their products from a steel company or a shoe company.

This means two things. First, we can say with some confidence that the way an organization is structured makes a difference to its performance; this is a causal power all by itself. And second, we may be able to discover that there are broad characteristics that differentiate organizational types, and it may turn out that these distinct types also have different performance characteristics. We might discover, for example, that one system of oversight and employee motivation is significantly more likely to permit theft and corrupt behavior by its agents than another. In that case, we might say that these two systems differ in their propensities for generating corrupt behavior. (This is an argument that Robert Klitgaard makes in Controlling Corruption.)

So far we haven't mentioned the familiar subject of "microfoundations" at all; we have considered an organization as a complex social entity. It is easy to specify the microfoundations of the causal powers we have identified. The organization's performance is determined by the behaviors of the individuals who fall within it, and the aggregate individual behaviors are explained by the rules and procedures embodied in the organization. So the causal powers having to do with efficiency, effectiveness, and corruptibility can be disaggregated into the incentives and behaviors of typical individuals. But here is the key point: we don't need to carry out this disaggregation when we want to invoke statements about the causal characteristics of organizations in explanations of more complex social processes. This is a case illustrating the point of relative explanatory autonomy developed in a prior post, and it also illustrates the point that David Elder-Vass makes in The Causal Power of Social Structures: Emergence, Structure and Agency.

These observations lay a basis for concluding that meso-level social entities have causal powers that can legitimately be invoked in social explanations. Significantly, there are clear and convincing examples of sociological explanations that take the causal powers of organizations as fundamental to their explanations of important social outcomes -- for example, technology failure (Charles Perrow, Normal Accidents: Living with High-Risk Technologies; link), corruption (Robert Klitgaard, Controlling Corruption), and the use of common property resources (Elinor Ostrom, Governing the Commons: The Evolution of Institutions for Collective Action).

Do organizations have causal powers?

An organization is a meso-level social structure. It is a structured group of individuals, often hierarchically organized, pursuing a relatively clearly defined set of tasks. In the abstract, it is a set of rules and procedures that regulate and motive the behavior of the individuals who function within the organization. There are also a set of informal practices within an organization that are not codified that have significant effects on the functioning of the organization (for example, the coffee room as a medium of informal communication). Some of those individuals have responsibilities of oversight, which is a primary way in which the abstract rules of the organization are transformed into concrete patterns of activity by other individuals. Another behavioral characteristic of an organization is the set of incentives and rewards that it creates for participants in the organization. Often the incentives that exist were planned and designed to have specific effects on behavior of participants; by offering rewards for behaviors X, Y, Z, the organization is expected to produce a lot of X, Y, and Z. Sometimes, though, the incentives are unintended, created perhaps by the intersection of two rules of operation that lead to a perverse incentive leading to W. For example: a farm supervisor may ask peach pickers to discard the bruised peaches rather than placing them in the basket to be weighed. But if the laborers' salaries are determined solely by the weight of the baskets they present for weighing, they will have an incentive to include the bruised peaches (at the bottom!).

Examples of organizations include things like these:

• the Atlanta police department
• a collective farm in Sichuan in 1965
• the maintenance and operations staff of a nuclear power plant
• a large investment bank on Wall Street
• Certus Corporation (discoverer of the PCR process)
• the land value assessment process in late Imperial China

The organization consists of a number of things:

• a set of procedures for how to handle specific kinds of tasks
• a set of people with skills and specific roles
• a set of incentives and rewards to induce participants to carry out their roles effectively and diligently
• a set of accountability processes permitting supervision and assessment of performance by individuals within the organization
• an "executive" function with the power to refine / revise / improve the rules so as to bring about overall better performance

Let's take the nuclear power plant staff as an example. The tasks of the organization are to control the complex technology and its instruments over an extended time; to conduct inspections of the physical infrastructure of the plant to discover failures before they occur; to conduct routine maintenance of machines and other physical systems; to respond quickly to failures, both large and small; and to sometimes conduct major upgrades on the hardware of the system. We may imagine that there are detailed, written procedures for each of these activities, as well as procedures for action during times of malfunction or breakdown. The people of the plant represent a range of specialized skills and specialized tasks. Wainwrights maintain and repair machinery; computer technicians maintain computer systems; nuclear technicians oversee the measured functioning of the system (pressures, temperatures, power production); safety workers inspect various system; and supervisors assign tasks and monitor performance.

Failures of the system arise for several different kinds of reasons: technical failure (a device fails for unexpected technical reasons, such as a faulty weld); operator failure (an operator disregards or misinterprets a pressure warning, and a pipe explodes before corrective action is taken); training failure (staff are technically or operationally unprepared for performing their tasks routinely or in exceptional circumstances); system failure (two or more sub-systems function as designed, but in an unusual circumstance may interact in such a way as to bring about an explosion, a computer crash, or a release of energy or heat); supervisory failure (procedures were good but supervisors permitted deviation from the procedures); venality failure (individuals in a position to control purchasing decisions authorize bad contracts for faulty materials for their personal profit).

The idea of a principal-agent problem is highly relevant within organizations, at every level. The executive expects the supervisor to faithfully perform his/her tasks of supervision. But since the executive does not directly monitor the performance of the supervisor, it is possible for the supervisor to shirk his/her duties and permit faulty performance by those he supervises. Likewise, the supervisor expects that the operator will continue to monitor and control the machine throughout the day; but it is possible for the operator to keep a solitaire window open on the screen. Each level of accountability, then, requires both formal expectations and a basis for trust in the good faith of the participants in the organization.

Now we are in a position to address the central question here: do organizations have causal powers? It seems to me that the answer is yes, in fairly specific ways. First, the rules and procedures of the organization may themselves have behavioral consequences that lead consistently to a certain kind of outcome.

Second, different organizational forms may be more or less efficient at performing their tasks, leading to consequences for the people and higher-level organizations that are depending on them. For example, two tax-collection systems may be designed for the same goal -- to collect 10% of the grain produced everywhere in the kingdom. If one system is 75% successful in this task and the other is 50% successful, the state depending on the second system will be starved for resources.

Third, the discrepancy between what the rules require of participants and what the participants actually do may have consequences for the outputs of the organization. Police department regulations may require that each piece of physical evidence is separately bagged and catalogued with appropriate information about its collection. If police operatives are careless in the cataloguing of evidence it may be more difficult to convict the accused; this may lead to a rising disregard for the likelihood of conviction and a rise in the crime rate. Corruption (venal failure to perform one's tasks faithfully) may lead to large consequences: the company is less profitable, the city is discredited to its citizens, the Church is delegitimated by the self-interested behavior of its clergy.

Fourth, the specific ways in which incentives, sanctions, and supervision are implemented differentiate across organizations. We may find that organizations with supervision system X are on average more productive or more effective than those with system Y.

Fifth, the organization has causal powers with respect to the behavior of the individuals involved in the organization. By presenting its rules, sanctions, and rewards to its participants, it changes their behavior in specific ways. Google and Apple have organized their internal procedures and rewards in such a way as to encourage creativeness, teamwork, and confidentiality. These organizations look quite different in their functioning and their products from a steel company or a shoe company.

This means two things. First, we can say with some confidence that the way an organization is structured makes a difference to its performance; this is a causal power all by itself. And second, we may be able to discover that there are broad characteristics that differentiate organizational types, and it may turn out that these distinct types also have different performance characteristics. We might discover, for example, that one system of oversight and employee motivation is significantly more likely to permit theft and corrupt behavior by its agents than another. In that case, we might say that these two systems differ in their propensities for generating corrupt behavior. (This is an argument that Robert Klitgaard makes in Controlling Corruption.)

So far we haven't mentioned the familiar subject of "microfoundations" at all; we have considered an organization as a complex social entity. It is easy to specify the microfoundations of the causal powers we have identified. The organization's performance is determined by the behaviors of the individuals who fall within it, and the aggregate individual behaviors are explained by the rules and procedures embodied in the organization. So the causal powers having to do with efficiency, effectiveness, and corruptibility can be disaggregated into the incentives and behaviors of typical individuals. But here is the key point: we don't need to carry out this disaggregation when we want to invoke statements about the causal characteristics of organizations in explanations of more complex social processes. This is a case illustrating the point of relative explanatory autonomy developed in a prior post, and it also illustrates the point that David Elder-Vass makes in The Causal Power of Social Structures: Emergence, Structure and Agency.

These observations lay a basis for concluding that meso-level social entities have causal powers that can legitimately be invoked in social explanations. Significantly, there are clear and convincing examples of sociological explanations that take the causal powers of organizations as fundamental to their explanations of important social outcomes -- for example, technology failure (Charles Perrow, Normal Accidents: Living with High-Risk Technologies; link), corruption (Robert Klitgaard, Controlling Corruption), and the use of common property resources (Elinor Ostrom, Governing the Commons: The Evolution of Institutions for Collective Action).

Thinking about disaster

Charles Perrow is a very talented sociologist who has put his finger on some of the central weaknesses of the American social-economic-political system.  He has written about corporations (Organizing America: Wealth, Power, and the Origins of Corporate Capitalism), technology failure (Normal Accidents: Living with High-Risk Technologies), and organizations (Complex Organizations: A Critical Essay).  (Here is an earlier post on his historical account of the corporation in America; link.) These sound like very different topics -- but they're not, really.  Organizations, power, the conflict between private interests and the public good, and the social and technical causes of great public harms have been the organizing themes of his research for a very long time.

His current book is truly scary.  In The Next Catastrophe: Reducing Our Vulnerabilities to Natural, Industrial, and Terrorist Disasters he carefully surveys the conjunction of factors that make 21st-century America almost uniquely vulnerable to major disasters -- actual and possible.  Hurricane Katrina is one place to start -- a concentration of habitation, dangerous infrastructure, vulnerable toxic storage, and wholly inadequate policies of water and land use led to a horrific loss of life and a permanent crippling of a great American city.  The disaster was foreseeable and foreseen, and yet few effective steps were taken to protect the city and river system from catastrophic flooding.  And even more alarming -- government and the private sector have taken almost none of the prudent steps after the disaster that would mitigate future flooding.

Perrow's analysis includes natural disasters (floods, hurricanes, earthquakes), nuclear power plants, chemical plants, the electric power transmission infrastructure, and the Internet -- as well as the threat of deliberate attacks by terrorists against high-risk targets.   In each case he documents the extreme risks that our society faces from a combination of factors: concentration of industry and population, lax regulation, ineffective organizations of management and oversight, and an inability on the part of Congress to enact legislation that seriously interferes with the business interests of major corporations even for the purpose of protecting the public.

His point is a simple one: we can't change the weather, the physics of nuclear power, or the destructive energy contained in an LNG farm; but we can take precautions today that significantly reduce the possible effects of accidents caused by these factors in the future. His general conclusion is a very worrisome one: our society is essentially unprotected from major natural disasters and industrial accidents, and we have only very slightly increased our safety when it comes to preventing deliberate terrorist attacks.

This book has been about the inevitable inadequacy of our efforts to protect us from major disasters. It locates the inevitable inadequacy in the limitations of formal organizations. We cannot expect them to do an adequate job in protecting us from mounting natural, industrial, and terrorist disasters.  It locates the avoidable inadequacy of our efforts in our failure to reduce the size of the targets, and thus minimize the extent of harm these disasters can do. (chapter 9)

A specific failure in our current political system is the failure to construct an adequate and safety-enhancing system of regulation:

Stepping outside of the organization itself, we come to a third source of organizational failure, that of regulation. Every chapter on disasters in this book has ended with a call for better regulation and re-regulation, since we need both new regulations in the face of new technologies and threats and the restoration of past regulations that had disappeared or been weakened since the 1960s and 1970s. (chapter 9)

The central vulnerabilities that Perrow points to are systemic and virtually ubiquitous across the United States -- concentration and centralization.  He is very concerned about the concentration of people in high-risk areas (flood and earthquake zones, for example); he is concerned about the centralized power wielded by mega-organizations and corporations in our society; and he is concerned about the concentration of highly dangerous infrastructure in places where it puts large populations at risk.  He refers repeatedly to the risk posed by the transport by rail of huge quantities of chlorine gas through densely populated areas -- 90 tons at a time; the risk presented by LNG and propane storage farms in areas vulnerable to flooding and consequent release or explosion; the lethal consequences that would ensue from a winter-time massive failure of the electric power grid.

Perrow is an organizational expert; and he recognizes the deep implications that follow from the inherent obstacles that confront large organizations, both public or private.  Co-optation by powerful private interests, failure of coordination among agencies, lack of effective communication in the preparation of policies and emergency responses -- these organizational tendencies can reduce organizations like FEMA or the NRC to almost complete inability to perform their public functions.

Organizations, as I have often noted, are tools that can be used by those within and without them for purposes that have little to do with their announced goals. (Kindle loc, 1686)

Throughout the book Perrow offers careful, detailed reviews of the effectiveness and consistency of the government agencies and the regulatory legislation that have been deployed to contain these risks.  Why was FEMA such an organizational failure?  What's wrong with the Department of Homeland Security?  Why are chronic issues of system safety in nuclear power plants and chemical plants not adequately addressed by the corresponding regulatory agencies?  Perrow goes through these examples in great detail and demonstrates the very ordinary social mechanisms through which organizations lose effectiveness.  The book serves as a case-study review of organizational failures.

Perrow's central point is stark: the American political system lacks the strength to take the long-term steps it needs to in order to mitigate the worst effects of natural (or intentional) disasters that are inevitable in our future.  We need consistent investment for long-term benefits; we need effective regulation of powerful actors; and we need long-term policies that mitigate future disasters.  But so far we have failed in each of these areas.  Private interests are too strong, an ideology of free choice and virtually unrestrained use of property leads to dangerous residential and business development, and Federal and state agencies lack the political will to enact the effective regulations that would be necessary to raise the safety threshold in dangerous industries and developments. And, of course, the determined attack on "government regulations" that has been underway from the right since the Reagan years just further worsens the ability of agencies to regulate these powerful businesses -- the nuclear power industry, the chemical industry, the oil and gas industry, ...

One might think that the risks that Perrow describes are fairly universal across modern societies.  But Perrow notes that these problems seem more difficult and fundamental in the United States than in Europe.  The Netherlands has centuries of experience in investing in and regulating developments having to do with the control of water; European countries have managed to cooperate on the management of rivers and flood plains; and most have much stronger regulatory regimes for the high risk technologies and infrastructure sectors.

The book is scary, and we need to pay attention to the social and natural risks that Perrow documents so vividly.  And we need collectively to take steps to realistically address these risks.  We need to improve the organizations we create, both public and private, aimed at mitigating large risks.  And we need to substantially improve upon the reach and effectiveness of the regulatory systems that govern these activities.  But Perrow insists that improving organizations and leadership, and creating better regulations, can only take us so far.  So we also need to reduce the scope of damage that will occur when disaster strikes.  We need to design our social system for "soft landings" when disasters occur.  Fundamentally, his advice is to decentralize dangerous infrastructure and to be much more cautious about development in high-risk zones.

Given the limited success we can expect from organizational, executive, and regulatory reform, we should attend to reducing the damage that organizations can do by reducing their size.  Smaller organizations have a smaller potential for harm, just as smaller concentrations of populations in areas vulnerable to natural, industrial, and terrorist disasters present smaller targets. (chapter 9)

If owners assume more responsibility for decisions about design and location -- for example, by being required to purchase realistically priced flood or earthquake insurance -- then there would be less new construction in hurricane alleyways or high-risk earthquake areas.  Rather than integrated mega-organizations and corporations providing goods and services, Perrow argues for the effectiveness of networks of small firms.  And he argues that regulations and law can be designed that give the right incentives to developers and home buyers about where to locate their businesses and homes, reflecting the true costs associated with risky locations. Realistically priced mandatory flood insurance would significantly alter the population density in hurricane alleys.  And our policies and regulations should make a systematic effort to disperse dangerous concentrations of industrial and nuclear materials wherever possible.

Thinking about disaster

Charles Perrow is a very talented sociologist who has put his finger on some of the central weaknesses of the American social-economic-political system.  He has written about corporations (Organizing America: Wealth, Power, and the Origins of Corporate Capitalism), technology failure (Normal Accidents: Living with High-Risk Technologies), and organizations (Complex Organizations: A Critical Essay).  (Here is an earlier post on his historical account of the corporation in America; link.) These sound like very different topics -- but they're not, really.  Organizations, power, the conflict between private interests and the public good, and the social and technical causes of great public harms have been the organizing themes of his research for a very long time.

His current book is truly scary.  In The Next Catastrophe: Reducing Our Vulnerabilities to Natural, Industrial, and Terrorist Disasters he carefully surveys the conjunction of factors that make 21st-century America almost uniquely vulnerable to major disasters -- actual and possible.  Hurricane Katrina is one place to start -- a concentration of habitation, dangerous infrastructure, vulnerable toxic storage, and wholly inadequate policies of water and land use led to a horrific loss of life and a permanent crippling of a great American city.  The disaster was foreseeable and foreseen, and yet few effective steps were taken to protect the city and river system from catastrophic flooding.  And even more alarming -- government and the private sector have taken almost none of the prudent steps after the disaster that would mitigate future flooding.

Perrow's analysis includes natural disasters (floods, hurricanes, earthquakes), nuclear power plants, chemical plants, the electric power transmission infrastructure, and the Internet -- as well as the threat of deliberate attacks by terrorists against high-risk targets.   In each case he documents the extreme risks that our society faces from a combination of factors: concentration of industry and population, lax regulation, ineffective organizations of management and oversight, and an inability on the part of Congress to enact legislation that seriously interferes with the business interests of major corporations even for the purpose of protecting the public.

His point is a simple one: we can't change the weather, the physics of nuclear power, or the destructive energy contained in an LNG farm; but we can take precautions today that significantly reduce the possible effects of accidents caused by these factors in the future. His general conclusion is a very worrisome one: our society is essentially unprotected from major natural disasters and industrial accidents, and we have only very slightly increased our safety when it comes to preventing deliberate terrorist attacks.

This book has been about the inevitable inadequacy of our efforts to protect us from major disasters. It locates the inevitable inadequacy in the limitations of formal organizations. We cannot expect them to do an adequate job in protecting us from mounting natural, industrial, and terrorist disasters.  It locates the avoidable inadequacy of our efforts in our failure to reduce the size of the targets, and thus minimize the extent of harm these disasters can do. (chapter 9)

A specific failure in our current political system is the failure to construct an adequate and safety-enhancing system of regulation:

Stepping outside of the organization itself, we come to a third source of organizational failure, that of regulation. Every chapter on disasters in this book has ended with a call for better regulation and re-regulation, since we need both new regulations in the face of new technologies and threats and the restoration of past regulations that had disappeared or been weakened since the 1960s and 1970s. (chapter 9)

The central vulnerabilities that Perrow points to are systemic and virtually ubiquitous across the United States -- concentration and centralization.  He is very concerned about the concentration of people in high-risk areas (flood and earthquake zones, for example); he is concerned about the centralized power wielded by mega-organizations and corporations in our society; and he is concerned about the concentration of highly dangerous infrastructure in places where it puts large populations at risk.  He refers repeatedly to the risk posed by the transport by rail of huge quantities of chlorine gas through densely populated areas -- 90 tons at a time; the risk presented by LNG and propane storage farms in areas vulnerable to flooding and consequent release or explosion; the lethal consequences that would ensue from a winter-time massive failure of the electric power grid.

Perrow is an organizational expert; and he recognizes the deep implications that follow from the inherent obstacles that confront large organizations, both public or private.  Co-optation by powerful private interests, failure of coordination among agencies, lack of effective communication in the preparation of policies and emergency responses -- these organizational tendencies can reduce organizations like FEMA or the NRC to almost complete inability to perform their public functions.

Organizations, as I have often noted, are tools that can be used by those within and without them for purposes that have little to do with their announced goals. (Kindle loc, 1686)

Throughout the book Perrow offers careful, detailed reviews of the effectiveness and consistency of the government agencies and the regulatory legislation that have been deployed to contain these risks.  Why was FEMA such an organizational failure?  What's wrong with the Department of Homeland Security?  Why are chronic issues of system safety in nuclear power plants and chemical plants not adequately addressed by the corresponding regulatory agencies?  Perrow goes through these examples in great detail and demonstrates the very ordinary social mechanisms through which organizations lose effectiveness.  The book serves as a case-study review of organizational failures.

Perrow's central point is stark: the American political system lacks the strength to take the long-term steps it needs to in order to mitigate the worst effects of natural (or intentional) disasters that are inevitable in our future.  We need consistent investment for long-term benefits; we need effective regulation of powerful actors; and we need long-term policies that mitigate future disasters.  But so far we have failed in each of these areas.  Private interests are too strong, an ideology of free choice and virtually unrestrained use of property leads to dangerous residential and business development, and Federal and state agencies lack the political will to enact the effective regulations that would be necessary to raise the safety threshold in dangerous industries and developments. And, of course, the determined attack on "government regulations" that has been underway from the right since the Reagan years just further worsens the ability of agencies to regulate these powerful businesses -- the nuclear power industry, the chemical industry, the oil and gas industry, ...

One might think that the risks that Perrow describes are fairly universal across modern societies.  But Perrow notes that these problems seem more difficult and fundamental in the United States than in Europe.  The Netherlands has centuries of experience in investing in and regulating developments having to do with the control of water; European countries have managed to cooperate on the management of rivers and flood plains; and most have much stronger regulatory regimes for the high risk technologies and infrastructure sectors.

The book is scary, and we need to pay attention to the social and natural risks that Perrow documents so vividly.  And we need collectively to take steps to realistically address these risks.  We need to improve the organizations we create, both public and private, aimed at mitigating large risks.  And we need to substantially improve upon the reach and effectiveness of the regulatory systems that govern these activities.  But Perrow insists that improving organizations and leadership, and creating better regulations, can only take us so far.  So we also need to reduce the scope of damage that will occur when disaster strikes.  We need to design our social system for "soft landings" when disasters occur.  Fundamentally, his advice is to decentralize dangerous infrastructure and to be much more cautious about development in high-risk zones.

Given the limited success we can expect from organizational, executive, and regulatory reform, we should attend to reducing the damage that organizations can do by reducing their size.  Smaller organizations have a smaller potential for harm, just as smaller concentrations of populations in areas vulnerable to natural, industrial, and terrorist disasters present smaller targets. (chapter 9)

If owners assume more responsibility for decisions about design and location -- for example, by being required to purchase realistically priced flood or earthquake insurance -- then there would be less new construction in hurricane alleyways or high-risk earthquake areas.  Rather than integrated mega-organizations and corporations providing goods and services, Perrow argues for the effectiveness of networks of small firms.  And he argues that regulations and law can be designed that give the right incentives to developers and home buyers about where to locate their businesses and homes, reflecting the true costs associated with risky locations. Realistically priced mandatory flood insurance would significantly alter the population density in hurricane alleys.  And our policies and regulations should make a systematic effort to disperse dangerous concentrations of industrial and nuclear materials wherever possible.