5. The Formulation and Control of the General Purposes of a Company and Its Sub-system Objectives. The Creation of the Organizational Structure and the Information System

For example, Barnard (1938), p. 88, seems to use the word “motive” for the term “purpose” to realize for the satisfaction of personal needs. On the contrary, in pp. 17–19, the distinction between motivation and ends is clear; the author states: “We shall call desires, impulses, wants by the name ‘motives’. They are chiefly resultants of forces in the physical, biological, and social environments, present and past. In other words, ‘motives’ are constructions for the psychological factors of individuals in the sense previously discussed in this chapter.”

Human behavior is mostly directed towards the realization of ends in order to satisfy its own needs in tension. Behavior is, therefore, largely conscious and rational. However, in order to better evaluate human behavior it is also necessary to consider the “field,” the “situation” in which individuals act. Maslow says, “Only rarely can the field be used to conclusively explain behavior. In addition, the field itself must be interpreted according to the human organism. The ‘field theory’ cannot replace ‘motivation theory’” Maslow (1943), article in Sexton (1970), p. 144.

Barnard (1938), pp. 94–95.

Ibidem, p. 86.

Ibidem, p. 95. Barnard points out, as we have seen, that the determination of the general purpose of the organization and the articulation in a system of company objectives is the central moment of the development of the cooperative system.

The specification of the overall purpose (mission) is decisive regarding the operation of the organization. For example, to say that a company should pursue the maximization of value for shareholders, or to affirm otherwise, that the purpose of the same company consists in producing and selling goods and services desired by customers (with the constraint of economic equilibrium) not is not the same thing: the way to govern the organization, the financial results, the quality of life of the organization’s members, etc. vary according to the end adopted. We will return to this topic in Chaps. 7, 8, 11, and 12.

On this point it is very interesting to read the article by Bartlett and Ghoshal (1994), that focuses on the objective of the company, claiming that its mission is the moral response that the organization gives to its stakeholders (defining consequently its responsibilities) and not the plans that are adopted for the economic exploitation of the commercial opportunities offered by the environment.

Barnard (1938), p. 87.

Adopting the terminology of Barnard, in the first case people display an organizational personality, while in the second an individual personality.

This distinction is very important and will affect future studies of economics and management: it will be the key point of the modern “agency theory.”

“Individual motive is necessarily an internal, personal, subjective thing; common purpose is necessarily an external, impersonal, objective thing even though the individual interpretation of it is subjective.” Barnard (1938), p. 89.

Barnard states, p. 89,: “It is rare, however, if ever, and then I think only in connection with family, patriotic and religious organizations under special conditions, that organization purpose becomes or can become the only or even the major individual motive.”

Reference was made to Maslow’s hierarchy of human needs. On this point, see: Maslow (1943), pp. 144–153.

Barnard (1938), cit., p. 89.

Ibidem, p. 83, p. 94 and pp. 153–160. The problem of making compatible individual motivations and goals with those of the organization was not new when Barnard wrote; it was anticipated and analyzed by Marx, Taylor, and the Human Relations School. Even today, the issue is debated by sociologists, economists, and scholars of organization and management with conflicting results.

Barnard (1938), p. 231.

“The purpose must be broken into fragments, specific objectives, not only ordered in time so that detailed purpose and detailed action follow in the series of progressive cooperation, but also ordered contemporaneously into the specifications – geographical, social and financial – that each unit organization implies” (Ibidem, p. 231).

Barnard (1938), p. 231.

Barnard is not speaking about the planning process, but of decisions taken by the various participants in a process that involves the articulation of the general objectives by increasingly specific objectives until operational activity is reached.

Barnard (1938), p. 232.

Barnard (1938), p. 232.

Barnard (1938), p. 233.

“Without that up-and-down-the-line coordination of purposeful decisions, general decisions and general purposes are mere intellectual processes in an organization vacuum, insulated from realities by layers of misunderstanding. The function of formulating grand purposes and providing for their redefinition is one which needs sensitive systems of communication, experience in interpretation, imagination, and delegation of responsibility.” Ibidem p. 233.

Ibidem, p. 231.

The ideal bureaucratic model—but the discussion also applies to substantially similar patterns of classical organizational theory and also for the subsequent “administrative organization theory of labor” (Fayol and Urwick)—it was certainly not able to interpret the structure and operation of large enterprises (especially commercial) of the American managerial economy and in general, the companies operating in sectors characterized by considerable dynamism. In that model, the top management, in relation to the purposes to be achieved, created an organizational structure that included duties, responsibilities, and specific powers. The organizational centers located below the top management had no discretionary powers; specifically, the objectives of each unit, the means and the ways to achieve the objectives were analytically specified by the top of the organization. Procedures and operating rules regulated the activities of the organizational system, eliminating any discretion. Managers, owners of the units placed under the top of the organization, were simple “order-passers” and were concerned essentially to control their subordinates in order to make them comply completely and correctly with the requirements and procedures established at the top. The “knowledge” of the organization was concentrated at the top that “recapitulated” and held the specialized skills needed to take all business decisions rationally. In essence, the company moved and evolved because of impulses generated by top management, who imposed their decisions primarily through authority.

This subject is dealt with in Chap. 12.

Cyert and March (1963); Italian translation: Teoria del comportamento dell’impresa (1970). This edition is referred to in subsequent citations.

Galbraith (1967).

On p. 84, the authors state that the idea of organization objective and the concept of organization as a coalition are inherently contradictory.

The model illustrates the decision to “belong,” the balance between company incentives and commitments of participants, the conditions for the survival of the company. The organization appears as an instrument that manages the “payments” to participants (capitalists, workers, etc.) in relation to the need to attract and retain them.

Ibidem, p. 48.

Passim.

Ibidem, p. 50.

Ibidem, p. 51.

Ibidem, p. 53.

Ibidem, p. 53.

Ibidem, p. 69.

Ibidem, pp. 56–58.

Galbraith (1967), chap. VI; the author points out that the need for this group personality depends on the fact that in industry today a large number of decisions and all the important ones are based on information available to many people. As a rule, they are based on scientific and technical specialized knowledge, on information, and on the accumulated experience and the artistic sense and intuition of many people. All of this is directed through additional information, ordered, analyzed, and interpreted by experts through the use of highly technical equipment. The final decision will be taken only when it is based systematically on the contribution of all those whose information is relevant.

Ibidem, chap. VI.

Ibidem, chap. VI.

Simon (1958), Introduction.

Ibidem, chap. I.

Zanda (2012), p. 98 and ss.

Caselli (1966), p. 5; Marris (1965); Salvati (1967), p. 138.

Küng (2011), pp. 7–15 and 203–263.

Goshal and Moran (2009), chap. I. This chapter coincides with the publication of Goshal and Moran (2006).