CHAPTER I

A SOCIOLOGICAL APPROACH
TO THE THEORY OF
ORGANIZATIONS

For the purposes of this article the term “organization”

will be used to refer to a broad type of collectivity which
has assumed a particularly important place in modern in¬
dustrial societies—the type to which the term “bureaucracy”
is most often applied. Familiar examples are the govern¬
mental bureau or department, the business firm (especially
above a certain size), the university, and the hospital. It is
by now almost a commonplace that there are features com¬
mon to all these types of organization which cut across the
ordinary distinctions between the social science disciplines.
Something is lost if study of the firm is left only to econo¬
mists, of governmental organizations to political scientists,
and of schools and universities to “educationists.”
The study of organization in the present sense is thus
only part of the study of social structure as that term is gen¬
erally used by sociologists (or of “social organization” as
ordinarily used by social anthropologists). A family is only
partly an organization; most other kinship groups are even
less so. The same is certainly true of local communities,
regional subsocieties, and of a society as a whole conceived,
for example, as a nation. On other levels, informal work
groups, cliques of friends, and so on, are not in this technical
sense organizations.

16
A Sociological Approach to the Theory of Organizations 17

The Concept of
Organization
1 - ■

As a formal analytical point of reference, primacy of ori¬

entation to the attainment of a specific goal is used as the
defining characteristic of an organization which distinguishes
it from other types of social systems. This criterion has impli¬
cations for both the external relations and the internal struc¬
ture of the system referred to here as an organization.
The attainment of a goal is defined as a relation between
a system (in this case a social system) and the relevant parts
of the external situation in which it acts or operates. This
relation can be conceived as the maximization, relative to the
relevant conditions such as costs and obstacles, of some cate¬
gory of output of the system to objects or systems in the ex¬
ternal situation. These considerations yield a further impor¬
tant criterion of an organization. An organization is a system
which, as the attainment of its goal, “produces” an identifi¬
able something which can be utilized in some way by another
system; that is, the output of the organization is, for some
other system, an input. In the case of an organization with
economic primacy, this output may be a class of goods or
services which are either consumable or serve as instruments
for a further phase of the production process by other organi¬
zations. In the case of a government agency the output may
be a class of regulatory decisions; in that of an educational
organization it may be a certain type of “trained capacity”
on the part of the students who have been subjected to its
influence. In any of these cases there must be a set of conse¬
quences of the processes which go on within the organization,
which make a difference to the functioning of some other
subsystem of the society; that is, without the production of
certain goods the consuming unit must behave differently,
i.e., suffer a “deprivation.”
The availability, to the unit succeeding the organization
18 The Analysis of Formal Organizations

in the series, of the organization’s output must be subject

to some sort of terms, the settlement of which is analyzable
in the general framework of the ideas of contract or ex¬
change. Thus in the familiar case the economic producer
“sells” his product for a money price which in turn serves
as a medium for procuring the factors of production, most
directly labor services, necessary for further stages of the
productive process. It is thus assumed that in the case of all
organizations there is something analogous to a “market”
for the output which constitutes the attainment of its goal
(what Chester I. Barnard calls “organization purpose”); and
that directly, and perhaps also indirectly, there is some kind
of exchange of this for entities which (as inputs into it) are
important means for the organization to carry out its func¬
tion in the larger system. The exchange of output for input
at the boundary defined by the attainment of the goal of an
organization need not be the only important boundary-
exchange of the organization as a system. It is, however, the
one most directly involved in defining the primary charac¬
teristics of the organization. Others will be discussed later.
The existence of organizations as the concept is here set
forth is a consequence of the division of labor in society.
Where both the “production” of specialized outputs and
their consumption or ultimate utilization occur within the
same structural unit, there is no need for the differentiation
of specialized organizations. Primitive societies, in so far as
their units are “self-sufficient” in both economic and other
senses, generally do not have clear-cut differentiated organi¬
zations in the present sense.
In its internal reference, the primacy of goal-attainment
among the functions of a social system gives priority to
those processes most directly involved with the success or
failure of goal-oriented endeavors. This means essentially
the decision-making process, which controls the utilization
of the resources of the system as a whole in the interest of
the goal, and the processes by which those responsible for
such decisions can count on the mobilization of these re-
A Sociological Approach to the Theory of Organizations 19

sources in the interest of a goal. These mechanisms of mobili¬

zation constitute what we ordinarily think of as the develop¬
ment of power in a political sense.
What from the point of view of the organization in
question is its specified goal is, from the point of view of
the larger system of which it is a differentiated part or sub¬
system, a specialized or differentiated function. This relation¬
ship is the primary link between an organization and the
larger system of which it is a part, and provides a basis for
the classification of types of organization. However, it can¬
not be the only important link.
This article will attempt to analyze both this link and
the other principal ones, using as a point of departure the
treatment of the organization as a social system. First, it will
be treated as a system which is characterized by all the prop¬
erties which are essential to any social system. Secondly, it
will be treated as a functionally differentiated subsystem of
a larger social system. Hence it will be the other subsystems
of the larger one which constitute the situation or environ¬
ment in which the organization operates. An organization,
then, will have to be analyzed as the special type of social
system organized about the primacy of interest in the attain¬
ment of a particular type of system goal. Certain of its
special features will derive from goal-primacy in general and
others from the primacy of the particular type of goal.
Finally, the characteristics of the organization will be defined
by the kind of situation in which it has to operate, which
will consist of the relations obtaining between it and the
other specialized subsystems of the larger system of which
it is a part. The latter can for most purposes be assumed to
be a society.

The Structure of

Organizations

Like any social system, an organization is conceived as

having a describable structure. This can be described and
20 The Analysis of Formal Organizations

analyzed from two points of view, both of which are essen¬

tial to completeness. The first is the “cultural-institutional”
point of view which uses the values of the system and their
institutionalization in different functional contexts as its
point of departure; the second is the “group” or “role” point
of view which takes suborganizations and the roles of indi¬
viduals participating in the functioning of the organization
as its point of departure. Both of these will be discussed, as
will their broad relations to each other, but primary atten¬
tion will be given to the former.
On what has just been called the cultural-institutional
level, a minimal description of an organization will have to
include an outline of the system of values which defines its
functions and of the main institutional patterns which spell
out these values in the more concrete functional context of
goal-attainment itself, adaptation to the situation, and inte¬
gration of the system. There are other aspects, such as tech¬
nical lore, ideology, and ritual symbolization, which cannot,
for reasons of space, be taken up here.
The main point of reference for analyzing the structure
of any social system is its value pattern. This defines the
basic orientation of the system (in the present case, the
organization) to the situation in which it operates; hence it
guides the activities of participant individuals.
In the case of an organization as defined above, this
value system must by definition be a subvalue system of a
higher-order one, since the organization is always defined
as a subsystem of a more comprehensive social system. Two
conclusions follow: First, the value system of the organization
must imply basic acceptance of the more generalized values
of the superordinate system—unless it is a deviant organiza¬
tion not integrated into the superordinate system. Secondly,
on the requisite level of generality, the most essential feature
of the value system of an organization is the evaluative legiti¬
mation of its place or “role” in the superordinate system.
Since it has been assumed that an organization is defined
A Sociological Approach to the Theory of Organizations 21
by the primacy of a type of goal, the focus of its value system
must be the legitimation of this goal in terms of the func¬
tional significance of its attainment for the superordinate
system, and secondly the legitimation of the primacy of this
goal over other possible interests and values of the organi¬
zation and its members. Thus the value system of a business
firm in our society is a version of “economic rationality”
which legitimizes the goal of economic production (specified
to the requisite level of concreteness in terms of particular
goods and services). Devotion of the organization (and hence
the resources it controls) to production is legitimized as is
the maintenance of the primacy of this goal over other func¬
tional interests which may arise within the organization. This
is Barnard’s “organization purpose.” For the business firm,
money return is a primary measure and symbol of success
and is thus part of the goal-structure of the organization. But
it cannot be the primary organization goal because profit¬
making is not by itself a function on behalf of the society
as a system.
In the most general sense the values of the organization
legitimize its existence as a system. But more specifically they
legitimize the main functional patterns of operation which
are necessary to implement the values, in this case the system
goal, under typical conditions of the concrete situation.
Hence, besides legitimation of the goal-type and its primacy
over other interests, there will be legitimation of various
categories of relatively specific subgoals and of the operative
procedures necessary for their attainment. There will further
be normative rules governing the adaptive processes of the
organization, the general principles on which facilities can
be procured and handled, and there will be rules or prin¬
ciples governing the integration of the organization, particu-
.larly in defining the obligations of loyalty of participants to
the organization as compared with the loyalties .they bear
in other roles.
A more familiar approach to the structure of an organiza-
22 The Analysis of Formal Organizations

tion is through its constituent personnel and the roles they

play in its functioning. Thus we ordinarily think of an organ¬
ization as having some kind of “management” or “admini¬
stration”—a group of people carrying some kind of special
responsibility for the organization’s affairs, usually formu¬
lated as “policy formation” or “decision-making.” Then
under the control of this top group we would conceive of
various operative groups arranged in “line” formation down
to the lowest in the line of authority. In a somewhat different
relation we would also think of various groups performing
“staff” functions, usually some kinds of experts who stand
in an advisory capacity to the decision-makers at the various
levels, but who do not themselves exercise “line” authority.
It seems advantageous for present purposes to carry
through mainly with the analysis of the institutional struc¬
ture of the organization. Using the value system as the main
point of reference, the discussion of this structure can be
divided into three main headings. The primary adaptive
exigencies of an organization concern the procurement of the
resources necessary for it to attain its goal or carry out its
function; hence one major field of institutionalization con¬
cerns the modes of procurement of these resources. Secondly,
the organization will itself have to have institutionalized
procedures by which these resources are brought to bear in
the concrete processes of goal-attainment; and, finally, there
will have to be institutional patterns defining and regulating
the limits of commitments to this organization as compared
with others in which the same persons and other resource-
controllers are involved, patterns which can be generalized
on a basis tolerable to the society as a whole.

The Mobilization of
Fluid Resources

The resources which an organization must utilize are,

given the social structure of the situation in which it func-
A Sociological Approach to the Theory of Organizations 23

tions, the factors of production as these concepts are used in

economic theory. They are land, labor, capital, and “organi¬
zation” in a somewhat different sense from that used mainly
in this paper. This possibly confusing terminological dupli¬
cation is retained here because organization as a factor is
commonly referred to in economic theory.
The factor of land stands on a somewhat different level
from the other three. If we treat an organization, for pur¬
poses of analysis, as an already established and going concern,
then, like any other social system, we can think of it as being
in control of certain facilities for access to which it is not
dependent on the maintenance of short-run economic sanc¬
tions. It has full ownership of certain physical facilities such
as physical land and relatively nondepreciating or nonobso-
lescing building. It may have certain traditions, particularly
involving technical know-how factors which are not directly
involved in the market nexus. The more fully the market
nexus is developed, however, the less can it be said that an
organization has very important assets which are withdrawn
from the market. Even sites of long operation can be sold
and new locations found and even the most deeply com¬
mitted personnel may resign to take other positions or re¬
tire, and in either case have to be replaced through the labor
market. The core of this aspect of the “land” complex is
thus a set of commitments of resources on value grounds.
The two most fluid factors, however, are labor and capi¬
tal in the economic sense. The overwhelming bulk of per¬
sonal service takes place in occupational roles. This means
that it is contracted for on some sector of the labor market.
It is not based on ascription of status, through kinship or
otherwise, but depends on the specific terms settled between
the management of the organization and the incumbent.
There are, of course, many types of contract of employment.
Some variations concern the agents involved in the settle¬
ment of terms; for example, collective bargaining is very
different from individual bargaining. Others concern the
24 The Analysis of Formal Organizations

duration of commitment, varying all the way from a casual

relation terminable at will, to a tenure appointment.
But most important, only in a limiting case are the spe¬
cific ad hoc terms — balancing specifically defined services
against specific monetary remuneration — anything like ex¬
haustive of the empirically important factors involved in the
contract of employment. The labor market cannot, in the
economic sense, closely approach being a “perfect market.”
It has different degrees and types of imperfection according
to whether the employer is one or another type of organi¬
zation and according to what type of human service is in¬
volved. A few of these differences will be noted in later
illustrations. Here the essential point is that, with the differ¬
entiation of functionally specified organizations from the
matrix of diffuse social groupings, such organizations become
increasingly dependent on explicit contracts of employment
for their human services.
Attention may be called to one particularly important
differentiation among types of relation existing between the
performer of services and recipients of the ultimate “prod¬
uct.” In the typical case of manufacturing industry the typical
worker works within the organization. The end results is a
physical commodity which is then sold to consumers. The
worker has no personal contact with the customer of the
firm; indeed no representative of the firm need have such
contact except to arrange the settlement of the terms of sale.
Where, however, the “product” is a personal service, the
situation is quite different; the worker must have personal
contact with the consumer during the actual performance
of the service.
One way in which service can be organized is the case
where neither performer nor “customer” belongs to an organ¬
ization. Private professional practice is a type case, and doctor
and patient, for example, come to constitute a small-scale
solidary collectivity of their own. This is the main basis of
the sliding scale as a pattern of remuneration. A second
A Sociological Approach to the Theory of Organizations 25
mode of organization is the one which assimilates the provi¬
sion of service to the normal pattern involved in the produc¬
tion of physical commodities; the recipient is a “customer”
who pays on a value-of-service basis, with prices determined
by commercial competition. This pattern is approached in
the case of such services as barbering.
But particularly in the case of professional services there
is another very important pattern, where the recipient of
the service becomes an operative member of the service¬
providing organization. The school, university, and hospital
are type cases illustrating this pattern. The phrase “member
of the university” definitely includes students. The faculty
are in a sense dually employed, on the one hand by their
students, on the other by the university administration. The
transition is particularly clear in the case of the hospital.
In private practice the patient is unequivocally the “employ¬
er.” But in hospital practice the hospital organization em¬
ploys a professional staff on behalf of the patients, as it were.
This taking of the customer into the organization has impor¬
tant implication for the nature of the organization.
In a society like ours the requirements of an organization
for fluid resources are in one sense and on one level over¬
whelmingly met through financing, i.e., through the provi¬
sion of money funds at the disposal of the organization (cf.
Weber, Theory of Social and Economic Organization [1947],
ch. iii.) This applies both to physical facilities, equipment,
materials, buildings, and to the employment of human
services — indeed also to cultural resources in that the rights
to use patented processes may be bought. Hence the avail¬
ability of adequate financing is always a vital problem for
every organization operating in a monetary economy no
matter what its goal-type may be; it is as vital for churches,
symphony orchestras, and universities as it is for business
firms.
The mechanisms through which financial resources are
made available differ enormously, however, with different
26 The Analysis of Formal Organizations

types of organization. All except the “purest” charitable

organizations depend to some extent on the returns they
receive for purveying some kind of a product, be it a com¬
modity, or a service like education or music. But even within
this range there is an enormous variation in the adequacy
of this return for fully meeting financial needs. The business
firm is at one pole in this respect. Its normal expectation is
that in the long run it will be able to finance itself adequately
from the proceeds of sales. But even here this is true only in
the long run; investment of capital in anticipation of future
proceeds is of course one of the most important mechanisms
in our society.
Two other important mechanisms are taxation and volun¬
tary contributions. In a “free enterprise” economy the gen¬
eral principle governing financing by taxation is that organi¬
zations will be supported out of taxation (1) if the goal is
regarded as important enough but organizations devoted to
it cannot be made to “pay” as private enterprises by provid¬
ing the service on a commercial basis, e.g., the care of large
numbers of persons from the lower income groups who (by
current standards) need to be hospitalized for mental ill¬
nesses, or (2) if the ways in which the services would be
provided by private enterprise might jeopardize the public
interest, e.g., the provision of military force for the national
defense might conceivably be contracted out, but placing
control of force to this degree in private hands would con¬
stitute too serious a threat to the political stability of the
society. Others in these categories are left to the “voluntary”
principle, if they are publicly sanctioned, generally in the
form of “nonprofit” organizations.
It is important to note that financing of organizations is
in general “affected with a public interest” and is in some
degree to be regarded as an exercise of political power. This
consideration derives from the character of an organization
as a goal-directed social system. Every subgoal within the
society must to some degree be integrated with the goal-
A Sociological Approach to the Theory of Organizations 27

structure of the society as a whole, and it is with this societal

goal-structure that political institutions are above all con¬
cerned.1

The Concept of
Organization

The last of the four factors of production is what certain

economists, notably Alfred Marshall, have called “organiza¬
tion” in the technical sense referred to above. This refers
to the function of combining the factors of production in .
such ways as to facilitate the effective attainment of the organ¬
ization’s goal (in our general sense, in its “economic” or
factor-consuming aspects). Its input into the organization
stands on a level different from that of labor services and
financing since it does not concern the direct facilities for
carrying out defined functions in a relatively routine manner,
but instead concerns readjustment in the patterns of organi¬
zation itself. It is, therefore, primarily significant in the
longer run perspective, and it is involved in processes of
structural change in the organization. In its business reference
it is in part what J. A. Schumpeter (cf. The Theory of Eco¬
nomic Development [1934]) referred to as “entrepreneur-
ship.” Organization in this economic sense is, however, an
essential factor in all organizational functioning. It neces¬
sarily plays a central part in the “founding” stages of any
organization. From time to time it is important in later
stages, since the kinds of adjustments to changing situations
which are possible through the routine mechanisms of re- ■
cruitment of labor services, and through the various devices
for securing adequate financial resources, prove to be inade¬
quate; hence a more fundamental structural change in the
organization becomes necessary or desirable. This change

1. This general thesis of the relation between financing and political

power and the public interest has been developed by Parsons and Smelser,
Economy and Society (1956), especially in chapters ii and iii.
28 The Analysis of Formal Organizations

would, in the present frame of reference, require a special

input of the factor of organization in this technical sense.
The more generalized equivalent of the land factor is
treated, except for the longest-run and most profound social
changes, as the most constant reference point of all; its essen¬
tial reference base is the stability of the value system in terms
of which the goal of the organization is defined and the
commitments involved in it are legitimized. It is from this
reference base that the norms defining the broadly expected
types of mechanism in the other respects will be derived,
particularly those most actively involved in short-run opera¬
tions, namely the recruitment of human services through
the labor market and the financing of the organization.

The Mechanisms of
Implementation

The problem of mobilizing fluid resources concerns

one major aspect of the external relations of the organization
to the situation in which it operates. Once possessing control
of the necessary resources, then, it must have a set of mecha¬
nisms by which these resources can be brought to bear on
the actual process of goal-implementation in a changing situ¬
ation. From one point of view, there are two aspects of this
process. First is the set of relations to the external situation
centering around the problem of “disposal” of the “product”
of the organization’s activities. This involves the basis on
which the scale of operations is estimated and on which the
settlement of terms with the recipients of this product is
arrived at. In the economic context it is the problem of
“marketing,” but for present purposes it is necessary to gen¬
eralize this concept to include all products of organization
functioning whether they are “sold” or not; for example, the
products of a military organization may be said to be disposed
of immediately to the executive and legislative branches of
 A Sociological Approach to the Theory of Organizations 29

the government and through them to the public, but of

course in no direct sense are they sold. The second aspect
of the process is concerned with the internal mechanisms of
the mobilization of resources for the implementation of the
goal. For purposes of the present analysis, however, it will
not be necessary to treat these internal and external refer¬
ences separately. Both, as distinguished from the mobilization
of resources, can be treated together as governed by the
“operative code” of the organization.
This code will have to have an essential basis in the
value system which governs the organization. In the case of
mobilization of resources, this basis concerns the problem
of the “claims” of the organization to the resources it needs
and hence the settlement of the terms on which they would
be available to it. In the operative case it concerns the
manner of their utilization within the organization and the
relation to its beneficiaries. We may speak of the relevant
value-implementation as centering about the question of
“authorization” of the measures involved in carrying through
the processes of utilization of resources.
There is an important sense in which the focus of all these
functions is the process ordinarily called “decision-making.”
We have assumed that goal-attainment has clear primacy in
the functioning of the organization. The paramount set of
decisions then will be, within the framework of legitimation
previously referred to, the set of decisions as to how, on the
more generalized level, to take steps to attain the goal. This
is what is generally thought of as the area of policy decisions.
A second set of decisions concerns implementation in the
sense of decisions about the utilization of resources available
to the organization. These are the allocative decisions and
concern two main subject matters: the allocation of responsi¬
bilities among personnel, i.e., suborganizations and indi¬
viduals, and the allocation of fluid resources, i.e., manpower
and monetary and physical facilities in accord with these
responsibilities. Finally, a third set of decisions concerns
30 The Analysis of Formal Organizations

maintaining the integration of the organization, through

facilitating cooperation and dealing with the motivational
problems which arise within the organization in relation to
the maintenance of cooperation. The first two sets of decisions
fall within the area which Barnard calls the problem of
“effectiveness”; the third is the locus of the problem of
“efficiency” in his sense. (Cf. Barnard, The Functions of the
Executive [1938].) Let us consider each of these decision
areas in more detail.

Policy Decisions

By policy decisions are meant decisions which relatively

directly commit the organization as a whole and which stand
in relatively direct connection to its primary functions. They
are decisions touching such matters as determination of the
nature and quality standards of “product,” changes in the
scale of operations, problems of the approach to the recipi¬
ents of the product or service, and organization-wide prob¬
lems of modes of internal operation.
Policy decisions as thus conceived may be taken at dif¬
ferent levels of generality with respect to the functions of
the organization. The very highest level concerns decisions to
set up a given organization or, conversely, to liquidate it.
Near that level is a decision to merge with one or more other
organizations. Then the scale descends through such levels as
major changes in type of product or in scale of operations,
to the day-to-day decisions about current operation. Broadly,
this level of generality scale coincides with a scale of time-
span of the relevance of decisions; the ones touching the
longer-run problems of the organization tend to be the ones
on a higher level of generality, involving a wider range of
considerations and leading to more serious commitments.
An important task for the theory of organization is a syste¬
matic classification of these levels of generality of decisions.
As has been noted, the critical feature of policy decisions
is the fact that they commit the organization as a whole to
 A Sociological Approach to the Theory of Organizations 31

carrying out their implications. This area of decisions is the

focus of the problem of responsibility. One but only one
major aspect of responsibility in turn lies in the fact that all
operations of organization to some extent involve risks, and
the decision-maker on the one hand is to some extent given
“credit” for success, and on the other hand is legitimately
held responsible for unfavorable consequences. One of the
major features of roles of responsibility is the handling of
these consequences; this becomes particularly complicated
psychologically because it is often impossible to assess accu¬
rately the extent to which success or failure in fact stem from
particular decisions or result from factors outside the control
or predictive powers of the decision-maker. On high levels
of responsibility conflicts of moral value may also operate.
Because of the commitment of the organization as a
whole, and through this of the interests of everyone par¬
ticipating in the organization to a greater or lesser degree,
authorization becomes particularly important at the policy-
decision level. This clearly connects with the value system
and hence with the problem of legitimacy. It concerns not
simply the content of particular decisions, but the right to
make them.
Different organizations, according to scale and qualitative
types, of course, have different concrete ways of organizing
the policy-making process. Often the highest level of policy
is placed mainly in the hands of some kind of a board;
whereas “management” has responsibility for the next high¬
est levels, with the still lower levels delegated to operative
echelons.

Allocative Decisions
Higher policy decisions will concern the general type and
quantity of resources brought into the organization and the
more general policies toward personnel recruitment and
financing. But the operative utilization of these facilities
cannot be completely controlled from the center. There must
52 The Analysis of Formal Organizations

be some allocative organization by which resources are

distributed within the organization, and responsibility for
their utilization in the various necessary operative tasks is
assigned. This means that specialization in the functions of
administration or management precludes the incumbents of
these functions from also carrying out the main technical
procedures involved in the organization-goal, and hence mak¬
ing the main operating decisions at the “work” level. Thus,
a commanding general cannot actually man a particular
aircraft or command a particular battery of artillery; a uni¬
versity president cannot actively teach all the subjects of
instruction for which the university is responsible.
From one point of view, these mechanisms of internal
allocation may be treated as “delegations of authority,”
though this formula will have to be qualified in connection
with various cross-cutting considerations of types of com¬
petence and so forth. Thus a general, who by training and
experience has been an artilleryman, when he is in command
does not simply “delegate” authority to the air element
under his command; he must in some way recognize the
special technical competence of the air people in a field
where he cannot have such competence. Similarly a univer¬
sity president who by academic training has been a professor
of English does not merely delegate authority to the physicists
on his faculty. Both must recognize an independent technical
basis for “lower” echelons performing their functions in the
ways in which their own technical judgment makes advisable.
The technical man can reasonably be held responsible for
the results of his operations; he cannot, however, be “dic¬
tated to” with respect to the technical procedures by which
he achieves these results.
Seen in this light, there are two main aspects of the alloca¬
tive decision process. One concerns mainly personnel (organ¬
ized in suborganizations, for example, “departments”), the
other financial and, at the requisite level, physical facilities.
In the case of personnel the fundamental consideration is the
A Sociological Approach to the Theory of Organizations 33

allocation of responsibility. Using decisions as the reference

point, the primary focus of the responsibility problem is
allocation of the responsibility to decide, i.e., the “decision
who should decide,” as Barnard puts it. Technical operations
as such may then be treated as controlled by the allocation
of responsibility for decisions.
The second main aspect of the allocation process is the
budget. Though generally formalized only in rather large
and highly differentiated organizations, analytically the
budget is a central conception. It means the allocation of
fluid financial resources which in turn can be committed to
particular “uses,” namely, acquisition of physical facilities
and employment of personnel. Allocation of responsibility
is definition of the functions of humanly organized sub¬
systems of personnel. Budget allocation is giving these
suborganizations access to the necessary means of carrying
out their assignment. There is a certain important criss¬
crossing of the two lines in that at the higher level the deci¬
sion tends to be one of budget, leaving the employment of
the relevant personnel to the subsystem to which funds are
allocated. The people responsible at the level in question in
turn divide the resource stream, devoting part of it to per¬
sonnel the employment of whom is, subject to general poli¬
cies, under their control, another part to subbudget alloca¬
tion of funds to the uses of personnel they employ. This
step-down series continues until the personnel in question
are given only various types and levels of control or use of
physical facilities, and not control of funds.

Coordination Decisions
Two types of operative decisions have so far been dis¬
cussed, namely policy decisions and allocative decisions.
There is a third category which may be called “decisions of
coordination,” involving what Barnard has called , the prob¬
lems of “efficiency.” These decisions are the operative deci¬
sions concerned with the integration of the organization as
34 The Analysis of Formal Organizations

a system. Our two types of fundamental resources have a

sharply asymmetrical relation to these decisions as they do to
the allocative decisions. Funds (considered apart from their
lenders or other suppliers) and physical resources do not
have to be motivated to cooperate in organizational tasks, but
human agents do. Decisions of policy and decisions of the
allocation of responsibility still leave open the question of
motivation to adequate performance.
This becomes an integrative problem because the special
types of performance required to achieve the many complex
contributions to an organization goal cannot be presumed to
be motivated by the mere “nature” of the participants inde¬
pendently of the sanctions operating in the organizational
situation. What is coordination from the point of view of
the operation of the organization is “cooperation” from the
point of view of the personnel. The limiting case of non¬
cooperation is declining to continue employment in the
organization, a case of by no means negligible importance
where a free labor market exists. But short of this, relative
to the goals of the organization, it is reasonable to postulate
an inherent centrifugal tendency of subunits of the organi¬
zation, a tendency reflecting pulls deriving from the per¬
sonalities of the participants, from the special adaptive
exigencies of their particular job situations, and possibly
from other sources, such as the pressure of other roles in
which they are involved.
In this situation the management of the organization must,
to some degree, take or be ready to take measures to counter¬
act the centrifugal pull, to keep employment turnover at least
down to tolerable levels, and internally to bring the per¬
formances of subunits and individuals more closely into line
with the requirements of the organization than would other¬
wise be the case. These measures can take any one or a com¬
bination of three fundamental forms: (1) coercion—in that
penalties for noncooperation are set, (2) inducement—in
that rewards for valued performance are instituted, and (3)
A Sociological Approach to the Theory of Organizations 35

“therapy”—in that by a complex and judicious combination

of measures the motivational obstacles to satisfactory coopera¬
tion are dealt with on a level which “goes behind” the overt
ostensible reasons given for the difficulty by the persons
involved.2

Institutional Factors

in the Structure

of Organizations

So far two problems have been dealt with, that of the

adaptation of an organization to the situation in which it
must operate, and that of its operative goal-attainment
mechanisms. These prove to be capable of formulation in
terms of the mechanisms of mobilization of fluid resources
and of the central decision-making processes, respectively.
There is, however, another central problem area which is
not covered by these considerations, namely that of the
mechanisms by which the organization is integrated with
as distinguished from “adapted to” other organizations and
other types of collectivity in the total social system. This Ui
not a matter of the organization in question treating it*'
social situation or environment instrumentally, as a source
for the procurement of resources or as the functionally
defined field in which it produces its goal-attainment output
and makes it available on agreed (or somehow settled) terms
to other units of the social structure.
The problem concerns rather the compatibility of the

2. The famous phenomenon of restriction of production in the informal

group as reported by F. J. Roethlisberger and W. J. Dickson (Management
and the Worker fl939], pt. IV) is a case of relative failure of integration and
hence, from one point of view, of failure of management in the function of
coordination. It could be handled, from the present point of view, neither by
policy decisions (e.g., not to hire “uncooperative workers”) nor by allocative
decisions (e.g., to hold the shop boss strictly responsible for meeting high
production quotas), but only by decisions of coordination, presumably includ¬
ing “therapeutic” measures.
36 The Analysis of Formal Organizations

institutional patterns under which the organization operates

with those of other organizations and social units, as related
to the integrative exigencies of the society as a whole (or of
subsystems wider than the organization in question). It is
hence in one aspect a question of the generalizability of the
patterns of procedure adopted in the particular organization
and hence of their permissibility from a wider social point
of view. For example, if a given firm hires and fires on
certain bases, will other firms in the same industry be
allowed to follow this precedent? Or if the security officers in
the Department of Defense follow a given procedure in deal¬
ing with alleged security risks, can the same procedure be
tolerated in the State Department? If the two sets of pro¬
cedures are in conflict, can the two organizations continue
to differ or must they be subjected to a common set of
principles?
It has already been noted that the integrative problem
within an organization most directly concerns the human
agents. This point can be generalized to interorganizational
integration. The central problem concerns the institutional¬
ized norms which can effectively bind the actions of indi¬
viduals in their commitments to organizations. An important
feature of all complex societies is that the normal individual
is involved in a multiplicity of roles. From one point of view
these roles constitute memberships in or commitments to
collectivities, of which in turn organizations are one prin¬
cipal type. The focus of the integrative problem on a trans-
organizational level, then, is the problem of the determina¬
tion of the loyalties of participant persons: on the one hand,
the level of loyalty he bears to a particular organization (in
which, for example, he is employed) and the bases of this
loyalty; on the other hand, the way in which this loyalty
fits into the larger system of loyalties in which his obligations
to a plurality of roles are balanced (for example, to his job,
family, and country). Clearly this allocation of loyalties, not
A Sociological Approach to the Theory of Organizations 37

within the organization but within the society between

collectivities, is intimately connected with values. It cannot
be only the values of the organization which govern, it must
also be a higher-level value system, since the individual
cannot determine his loyalties to the organization only on
the basis of the values of that particular organization unless
in some special sense it claims, and enforces the claim, to
absolute loyalty. This is a limiting case, most nearly exempli¬
fied in our time by the totalitarian state.
There are three primary complexes of these integrative
patterns which have the same order of hierarchical relation
to each other that has been sketched for the case of decision-
types. Particularly in a society where ascriptive elements of
status are relatively minimized, the focal integrative institu¬
tion is, from one point of view, that of contract. As applied
to organizations, this is primarily relevant to the contract
of employment. It is the contract of employment—including
not only explicitly agreed terms, but “implicit” understand¬
ings and also including what Emile Durkheim called the
“noncontractual” elements, i.e., the norms governing the
making and implementation of contracts which the parties
are not at liberty to alter at will—which defines the indi¬
vidual’s obligations to the organization. When for any reason
the performance of these obligations is brought into question,
the problem of loyalty is raised. Limitations on claims of
loyalty made by the organization will arise from one or both
of two sources, either the personality of the role-incumbent,
in that doing what is asked may conflict with his personal
values or may otherwise be motivationally distasteful to him,
or from other role-obligations, for example, certain requests
for overtime work may conflict with obligations to his family.
The institution of contract regulates these possible conflicts
through patterns which can apply to the organization in
question but which at the same time can be motivationally
acceptable to most people as “reasonable” and take into
38 The Analysis of Formal Organizations

account the interests of the other role-complexes in which

the same people are involved. Quite clearly the decisions
about what particular personnel to hire may be a prerogative
exclusively of the organization; the definitions of the institu¬
tion of contract can in the nature of the case never be the
prerogative of one organization, but, with variations, they
must regulate the functioning of every organization in the
society.
The contract of employment brings out the central sig¬
nificance of contractual relations most vividly. But essentially
the same considerations are involved in contracts where
property rights rather than human services are the objects of
agreement. Where what is transferred is complete ownership,
as in the sale of consumer goods or land or capital goods,
problems of loyalty are residual. But contracts of investment
and the various types of leases involve such considerations
directly, since the holder of property claims against an
organization is in a position to influence the operations of
the organization, sometimes profoundly, through asserting
his “rights.” Clearly on the inter organization level these
contractual patterns cannot be left to the discretion of the
particular organization but must be institutionalized on a
wider basis.
Both with respect to human services and with respect to
property, elements of compulsion may enter to limit “freedom
of contract.” The case where the role-incumbent is given no
choice may be treated as the limiting one. For each category
there are two primary types of such limiting cases. With
respect to human service one type is that of ascriptive status
—for example, on the medieval manor—where the obligation
to work a particular plot of land was based on hereditary
serfdom to the lord of the manor. On the other hand, certain
organizations in the society may exercise powers of compul¬
sion over certain categories of the population in certain con¬
tingencies; conscription for military service is a conspicuous
A Sociological Approach to the Theory of Organizations 39

example. In the case of property, there may be ascriptive

rights and obligations as exemplified by hereditary owner¬
ship of land which was inalienable, or there may be powers
which legitimize the compulsory relinquishment of property,
for example, the taxing power.
The ascriptive case is not of great interest in the present
context because it is seldom a feature of organizations in our
technical sense. Compulsory contract is, however, of great
interest. Essentially it consists of the exercise of authority by
an organization of higher-order jurisdiction. It is thus a
special combination of the institution of contract, as the
definition of the rules under which resources can be made
available to organizations, and of the institution of authority,
which is the second of the three basic integrative institutions.
The institutionalization of authority may be treated on
the interorganization level as cognate with decision-making
as a function of the organization itself. Authority is the way
in which the binding character of decisions is defined. It is
an institutionalized feature of a reciprocal role relationship;
there is hence always a double question. First, in what
respects and how far is alter bound by ego’s decisions and,
second, how far and in what respects is ego bound by alter’s
decisions? We tend to speak of authority only when the
relation is relatively one-sided, but the essential elements are
present independently of this one-sidedness.
The institutionalization of authority defines, on a basis
broader than that of the rules and practices of the organiza¬
tion itself, the ways and their limits in which any given actor,
individual or collective, can in a given status in the organiza¬
tion bind others by his decisions and, conversely, the ways
and limits in which his action can be bound by the decision
of others. Where status in the organization is on a “free”
contractual basis, the right to quit is a limiting protection
against exposure to authority, and conversely the exerciser of
authority is limited in its use by the danger of losing the
40 The Analysis of Formal Organizations
personnel whose action he seeks to control. Where, as in the
military case, the right to quit is severely restricted or alto¬
gether eliminated, authority can, of course, go much further.
Although both contract and authority, as institutional¬
ized patterns of the wider society they prescribe, are rules
transcending any particular organization, they define obliga¬
tions which, once entered into, are particularistic. By accept¬
ing employment in an organization, an individual accepts
a loyalty to that particular organization which, of course, has
important limits but which at the same time must be re¬
spected within these limits. Authority is also limited, but
once in the organization one undertakes responsibilities (i.e.,
exercises authority) and undertakes to accept the authority of
others within the limits of the legitimate range in this
organization. These two institutions define the obligations
specific to the role in the particular organization which
come into force only so far as the incumbent accepts a
relation to the organization.
In the conduct of an organization, however, there is a
third class of rules or norms which govern conduct independ¬
ently of any particular organization membership. They are
universalistically defined for the society as a whole or for
transorganizational sectors of the society’s structure. A par¬
ticularly basic one in our society is the complex having to do
with personal freedoms; to take its extreme application,
slavery is prohibited not only in that no one may coerce
an individual into giving up his personal freedom, but even
he himself may not, by however voluntary a contractual
arrangement, “sell himself” into slavery. The general rules
against the use of force in human relations except under
carefully regulated circumstances, against the use of outright
fraud in almost any case (not, of course, including the
withholding of information to which alter is not “entitled”)
and a variety of other cases fall here. The essential point
is that the conduct of the affairs of an organization must in
general conform with the norms of “good conduct” as recog-
A Sociological Approach to the Theory of Organizations 41

nized and institutionalized in the society. The most general

principle is that no one may legitimately contract to violate
these norms, nor may authority be used to coerce people into
their violation.
Thus from another point of view the three complexes of
institutionalized rules stand in a reverse relation of hier¬
archical priority. The most universalistic complex just dis¬
cussed sets the limits in the treatment of human beings and
nonhuman resources within which the conduct of organiza¬
tions must remain. The institutionalization of authority then
defines more specifically how, within these limits, resources
may be used within the structure of the organization, while
the institution of contract defines the terms on which the
resources can be made available at all.

The Problem of Power

As seen in the analysis in the first section of this paper,
the development of organizations is the principal mechanism
by which, in a highly differentiated society, it is possible to
“get things done,” to achieve goals beyond the reach of the
individual and under conditions which provide a relative
maximization of effectiveness, in Chester Barnard’s sense.
Subject to the over-all control of an institutionalized value
system in the society and its subsystems, the central phenom¬
enon of organization is the mobilization of power for the
attainment of the goals of the organization. The value system
legitimizes the organization’s goal, but it is only through
power that its achievement can be made effective.
Seen in these terms, power is the generalized capacity to
mobilize resources in the interest of attainment of a system
goal. The generation and utilization of power constitutes one
of the fundamental functional imperatives of any social
system. Like any other major system function, except in the
simplest systems, power becomes the focus of a set of spe¬
cialized mechanisms. So far as these mechanisms themselves
42 The Analysis of Formal Organizations
become organized to constitute a distinct subsystem of the
society, we can speak of the “polity” as the system oriented
to the generation and allocation of power.3 The polity in
this sense is parallel to the economy as that concept is
ordinarily used in economic theory.
The generation and exercise of power is most conspicu¬
ous in relation to a goal which is dramatically and un¬
equivocally a common goal for a whole society, such as
victory in war. But in more everyday terms, the goal of the
society can be said to be to “get the things done” which are
approved in terms of its values as “worth doing” (the term
“worth” may, of course, signify varying degrees of urgency).
Hence we may speak of power as a generalized societal re¬
source which is allocated to the attainment of a wide range
of subgoals and to organizations as the agents of the attain¬
ment of such subgoals. Power is comparable to wealth, which,
as a generalized societal resource, is allocated to many differ¬
ent societal subsystems for “consumption” or for “capital”
use.
The power exercised in and by an organization is gener¬
ated both outside and within the organization. Every organ¬
ization, whatever the nature of its functional primacy—for
example, manufacturing, or medical care—is part of the
polity and a generator of power, but is also a recipient of the
power generated at higher echelons in the polity.
The generation of power on any given level depends, as
we see it, on four fundamental conditions. The first condi¬
tion is the institutionalization of a value system which
legitimizes both the goal of the organization and the prin¬
cipal patterns by which it functions in the attainment of that
goal. The second condition is the regulation of the organiza-

3. The polity in this sense is not identical with government, which we

interpret to be a complex of organizations. Government has other than
political functions, and other organizations participate in the polity. We
conceive of the relation of polity and government as approximately parallel
to that between economy and business. Cf. Talcott Parsons and Neil Smelser,
Economy and Society (op. cit.) ch. ii.
A Sociological Approach to the Theory of Organizations 43

tion’s procurement and decision-making processes through

adherence to universalistic rules and to such institutions as
authority and contract. It is on these bases that the organiza¬
tion establishes generalized claims to the loyal cooperation
of its personnel and of persons outside the organization on
whose cooperation it depends. The third condition is the
command of the more detailed and day-to-day support of the
persons whose cooperation is needed. The fourth is the
command of necessary facilities, of which the primary cate¬
gory in our society is financial.
In our society the first condition has frequently become
formalized through the privilege and practice of incorpora¬
tion. This establishes a direct positive link with government
and the legal system. Organization for the purpose at hand is
formally “authorized,” and certain powers and privileges
are thereby conferred. The second condition is partly met
by the legal regulation of all organizational activity, and
partly by an informal reputation for integrity and “good
practice” which in itself often becomes an organizational
asset. The third and fourth conditions are met by the opera¬
tive mechanisms of procurement of resources and the opera¬
tive code previously described. Certain variations in the
mechanisms by which this occurs in different types of organ¬
izations will be discussed presently.
The mobilization and utilization of power is the central
focus of the operation of organizations, but by virtue of the
fact that an organization is a social system, it is also depend¬
ent on all the other exigencies of such a system. The value
component has already been discussed. The other two com¬
ponents are economic resources (centering on the problem of
financing) and the command of loyalties (which underlies
efficiency in Barnard’s sense). Power helps to command these
essentials, but their availability is not a function only of
power but also of the ways in which the cognate activities
of the organization mesh with the relevant features of the
situation in which it functions. Thus the organization always
44 The Analysis of Formal Organizations

to some extent “produces” economically valuable goods or

services; the marketability of these products constitutes one
central set of conditions of its operation. Similarly, the organ¬
ization is always, through “informal” organization and other¬
wise, a focus of the relatively noncontingent loyalties of its
personnel. The extent to which this is true and the basis
on which it rests form another essential condition of the
organization’s functioning. Power as a factor operates to
exploit advantages on these levels and to make up deficits;
power never operates alone.
The scheme we have presented is characterized by a
certain formal symmetry. The value system of the organiza¬
tion is treated as defining and legitimizing its goal. Each of
the other three aspects, the adaptive mechanisms and those
mechanisms of operative goal-attainment and the integra¬
tion of the organization, is regulated by subvalues governing
each of these three aspects of organizational functioning.
Each primary type of resource input is regulated by a type of
contractual pattern, e.g., employment and investment. Each
part of the operative code is governed in turn by an aspect
of authority, and finally each context of institutionalization
is a way of defining, for those participating, the extent of
“loyalty” owing to the organization as compared with other
commitments.

Classification of

Types of Organization

Organizations are of course always part of a larger social

structure of the society in which they occur. There is neces¬
sarily a certain variability among organizations which is a
function of this wider societal matrix; an American organiza¬
tion is never quite like a British one even though they are
nearly cognate in function. Discounting this type of vari-
A Sociological Approach to the Theory of Organizations 45

ability, however, organizations may in the first instance be

classified in terms of the type of goal or function about which
they are organized. The same basic classification can be used
for goal types which has been used earlier in dealing with
the functions of a social system. Thus we may speak of
adaptive goals, implementive goals, integrative goals, and
pattern-maintenance goals. The reference is always to func¬
tion in the society as a system.
Seen in these terms the principal broad types of organiza¬
tion are:
1. Organizations oriented to economic production: The
type case in this category is the business firm. Production
should be understood in the full economic sense as “adding
value”; it is by no means confined to physical production,
e.g., manufacturing. It has been emphasized several times
that every organization contributes in some way to every
primary function (if it is well integrated in the society);
hence we can speak only of economic primacy, never of an
organization as being exclusively economic. This applies also
to the other categories.
2. Organizations oriented to political goals, that is, to the
attainment of valued goals and to the generation and alloca¬
tion of power in the society: This category includes most
organs of government, but in a society like ours, various
other organizations are involved. The allocation of purchas¬
ing power through credit creation is an exercise of power in
this sense; hence a good part of the banking system should
be treated as residing in primarily political organizations.
More generally, it seems legitimate to speak of incorporation
as an allocation of power in a political sense; hence the
corporate aspect of formal organizations generally is a
political aspect.
3. Integrative organizations: These are organizations which
on the societal level, contribute primarily to efficiency, not
effectiveness. They concern the adjustment of conflicts and
the direction of motivation to the fulfillment of institution-
46 The Analysis of Formal Organizations

alized expectations. A substantial part of the functions of the

courts and of the legal profession should be classed here.
Political parties, whose function is the mobilization of sup¬
port for those responsible for government operations, belong
in this category, and, to a certain extent, “interest groups”
belong here, too. Finally, those organizations that are pri¬
marily mechanisms of social control in the narrower sense,
for example hospitals, are mainly integrative.
4. Pattern-maintenance organizations: The principal cases
centering here are those with primarily “cultural,” “educa¬
tional,” and “expressive” functions. Perhaps the most clear-
cut organizational examples are churches and schools. (Pat¬
tern maintenance is not here conceived to preclude creativity;
hence research is included.) The arts so far as they give rise
to organization also belong here. Kinship groups are ordi¬
narily not primarily organizations in our technical sense,
but in a society so highly differentiated as our own the
nuclear family approaches more closely the characteristics
of an organization than in other societies. As such it clearly
belongs in the pattern-maintenance category.
This primary basis of classification can be used as the
point of departure for a more detailed one, by further sub¬
dividing each of the primary types into lower other sub¬
systems. Thus in the economic case the main bases of
sub-classification would include specialization in adaptive
functions for the economy (financing), in goal attainment
(production and marketing in a narrower sense), etc. Similar
considerations will apply in the cases of the other primary
types. In each of these cases a primary determinant of the
type of organization is the kind of boundary-interchange
operating between the societal system in which the organiza¬
tion is primarily anchored and the contiguous subsystem.
Thus from the point of view of the economy, production
and marketing are the sources of the ultimate production
of goods and services to the consumer and of the input of
labor services into the economy. Both consumer and worker
A Sociological Approach to the Theory of Organizations 47

are anchored in the first instance in the household as part

of the pattern-maintenance system. Organizations oriented
primarily to consumption interests are necessarily different
from those oriented primarily to the financing of capital
expansion.

Some Illustrative Cases

It should prove illuminating to apply the formal analysis

presented above to the differentiation between types of
organization. For this purpose it seems useful to select the
business firm, the military organization, and the university.
They belong in three different primary categories and are
sufficiently extreme so that the differences can be brought
out clearly. Let us contrast them with respect to each of the
four main analytical categories which have been sketched in
general terms above: values, adaptive patterns, operative
code, and institutional pattern.
First, let us look at values. The business firm is governed
by the values of economic rationality; the maximization of
production with minimal cost in the economic sense. It is
production which is the institutionalized goal of the firm. In
a market economy, however, financial return is both a condi¬
tion of continuing operation and a central symbol of success.
The societal function reference is primary; the market-profit
reference is secondary, but very important. In the adaptive
context the values of the firm call for independent self¬
financing and payment of labor on what is felt to be a
marginal productivity basis. In the goal-attainment context
products are “marketed” on a full payment-of-cost basis in¬
volving prices governed by marginal utility, not by “need.”
In the integrative context, beyond the general commitment
to productivity as an ethical obligation, loyalties and obliga¬
tions to the organization are defined in terms of “self-
interest.”
48 The Analysis of Formal Organizations

The military organization, on the other hand, is organ¬

ized about the value of technical effectiveness; its primary
goal is maximization of power in its particular field. This
must be done under a very special set of conditions, since
operative exercise of military power is an emergency func¬
tion and in most societies is not a routine function of social
life. Hence the organization must be kept in a maximum
state of readiness but for long periods without opportunity
to test its effectiveness in combat; and the time when it will
be called upon to do so is generally not predictable. Further¬
more, the organized use of force in most modern societies
is valued only as a necessary evil, legitimized only through
the defensive interest of the national society. The functional
equivalent of the market in the economic case is extremely
precarious because of this ethical ambivalence and because of
the high contingency factor. The primary subgoals are the
mobilization of support, the authorization of facilities, and
the legitimation of the function. Hence there is a high
premium on stringency of control over personnel and
facilities.
The university belongs quite clearly in the category of
pattern-maintenance primacy. Its goal is twofold: it is part
of the process of socialization or of education, and it has
responsibility for creative modification of the cultural tradi¬
tion through the processes usually referred to as “research.”
Its functions for the social system are “expressive” rather
than “operative,” and its importance is clear in the long run
rather than the short run. The university must depend on
recognition of its services as “good in themselves” rather
than on their short-run utility in the society. It tends to be
seen as devoted to “higher” interests which involve self-
sacrifice, and it appeals for support on this ground. At the
same time it is exposed to attack by those who feel that it
is “useless” or worse.
Next let us look at the adaptive factors; for brevity’s sake
the discussion will be confined to the acquisition of personnel
A Sociological Approach to the Theory of Organizations 49

and financial resources. The most striking thing about the

business firm in both these respects is that is is expected to
“pay its way” on a marginal utility-marginal productivity
basis. In the long run it is expected to meet its costs through
the monetary proceeds of its operations, with something to
spare as a symbol of its success in effective operation. In the
short run it may enter the capital market as a borrower, but
generally on “investment” terms, meaning that the lender
should, discounting the risk, have good prospects, not merely
of recouping his investment but of receiving a satisfactory
return on it. There are many modifications of this pattern,
through the phenomena of direct or indirect subsidies, but
for the free-enterprise type of economy the general pattern
is clear.
The general principle for the recruitment of personnel
to the firm is similar. The employee, both on labor and on
managerial levels, is expected to be paid “what his services
are worth” in marginal productivity terms as determined on
a competitive market. Conversely, adequate or fair remunera¬
tion as defined in marginal utility terms is accepted as a
standard for defining the individual’s obligations to the firm;
he will not be blamed for quitting if he can do better (both
for himself and in productivity terms) in another job; the
presumption is that the firm offering him higher pay is
more accurately measuring his productivity. This, as the
main context of the definition of “self-interest,” is not to be
construed as not valuing the goal of production; on the con¬
trary, the level of remuneration is taken as a direct symboliza¬
tion of contribution to productivity.
Remuneration by marginal productivity is of course an
ideal type, and there are many modifications of it. The posi¬
tion of the trade union and the interposition of collective
bargaining between the individual worker and the employ¬
ing organization signify one major focus of limitation on this
principle. Another derives from the increasing dependence
of business organizations on professional personnel whose
50 The Analysis of Formal Organizationr

occupational status is necessarily anchored in societal func¬

tions other than production as such. But by contrast with
the other types of organization considered here, this pattern
is more closely approached in the business world than
elsewhere.
In the case of the military organization, both fields of
resource-procurement present a radical contrast. To take
financing first, in all modern societies military forces are
ideally controlled exclusively by public authority; hence
military organizations (with negligible exceptions) do not
“earn” any income whatever. Their financing is dependent
on a grant by public authority out of funds raised by taxa¬
tion. The basis for such financing is, therefore, an evaluative
judgment, made by certain organs of that authority, of the
defense needs of the society. Because of the urgency of the
need and the potential seriousness of its neglect, such organ¬
izations can command very large resources, but the mechan¬
ism of their procurement is nearly as far removed from the
economic principle as it is possible to get.
The procurement of personnel by the military also takes
place by mechanisms strikingly different from those involved
in the business world. Indeed, for military personnel (as
distinguished from civilian employees of the military estab¬
lishment), it is scarcely correct to speak of “employment” at
all. There are two basic patterns, namely “volunteering” and
conscription. Military service is the only near-occupational
role in which compulsory service is sanctioned in our type of
society on a basis other than punishment or incapacity. Even
military conscription is felt to be justified only as an emer¬
gency measure. The volunteer, though not forced into the
role, must sign up for a stated term and cannot resign during
it; he must also accept contingencies of discipline and per¬
sonal risk far exceeding those ordinarily accepted in “jobs.”
The concepts of duty and “service” are heavily emphasized.
Remuneration is clearly not regulated by marginal produc¬
tivity but by some kind of concept of need and of status-
A Sociological Approach to the Theory of Organizations 51

dignity. It is thus only in a highly attenuated sense that we

may speak of the “market for military employment.”
The case of the university is intermediate in both re¬
spects. To varying degrees, universities are expected to
recoup part of their costs from fees for their services, notably
tuition. But this is scarcely a price in the strict economic
sense, both because university functions universally are
highly subsidized by voluntary contributions and/or taxa¬
tion, and because tuition is assessed on a modified sliding-
scale basis; ability to pay is taken explicitly into account, and
many are given scholarship aid. The value of the function
therefore is not measured by its capacity to “pay its way”
through the market mechanisms. Tuition is justified rather
on the ground that since university financing presents diffi¬
cult problems, it is legitimate to ask those who benefit most
directly (though it is usually parents, not students, who pay)
to bear as much of the cost as they can.
With respect to personnel recruitment, the university also
stands in a position intermediate in most respects between
the business firm and the military organization. The key
sector of its personnel is clearly the faculty, though various
other categories are needed. The faculty member is a highly
trained professional person who is also a specialist, often in
a highly technical and erudite field. He holds a “job” in
that his contract of employment is wholly voluntary, and
he enjoys the right to resign at any time. But his role is not
defined as “self-interested” in the business sense, and his
remuneration is not calculated on a marginal productivity
basis, but on a “just price” basis. A particular kind of modi¬
fication of the market pattern stands in marked contrast with
business (though to a degree shared with the military),
namely the institution of tenure. In both cases this relates to
the fact that the incumbent has renounced the possible
advantages of a business career and has devoted himself to an
economically unviable source of employment, one' in which
the remuneration levels generally are, relative to ability,
52 The Analysis of Formal Organizations

markedly lower than they are in business. Tenure and the

sliding scale are institutions emphatically frowned upon in
the business world; their clear acceptance in the academic
is a measure of the difference between the two types of
organization.
Now let us look at the situation with respect to the opera¬
tive code in each of these three types of organization. In this
respect the business firm stands intermediate between the
other two. Because of the goal-directedness of organizations
generally, we put particular emphasis in this respect on the
processes of policy decision. The business firm as we know it is
a relatively centralized organization; the main locus of policy
decisions is what is usually called “top management,” and
its procedures are removed from “democratic” norms.
In the tradition which has crystalized in the United
States in recent decades, the primary responsibility for de¬
cisions is concentrated in a central management, and then
both the responsibilities of other personnel and budgetary
resources are allocated from the center out by top manage¬
ment. This centralization is legitimized by the expectation
that management will be competent, and that there will be
an identity of interest between management and other em¬
ployees in giving management the power it needs to do the
job effectively, subject to fair treatment of employees. This
expectation is controlled externally, first by competition with
other firms so that presumably an ineffective management
would not be able to continue in business, and secondly by
the free labor market to the extent that its employees are free
to quit and seek other employment.
It is notable that the growth of trade unionism in the
United States has been accompanied by relatively little de¬
mand for managerial prerogatives. It is also notable that
there has been a marked diminution in the legitimation of
control by ownership of capital assets, and a corresponding
increase in control by the effectiveness of a management,
most of whose personnel are formally “employees.”
A Sociological Approach to the Theory of Organizations 53

The military organization is, of course, the most author¬

itarian type of organization found on a considerable scale
in our society. There is no market standard of effectiveness
and no institutionalized right to quit. Legitimation focuses
very sharply on authorization from the legally competent
source. Once the commanding officer’s position is legiti-
rnated, he exercises powers of decision and of coercion which
would hardly be tolerated anywhere else. This pattern
clearly derives from the overwhelming importance of effec¬
tive coordinated action in dangerous emergency conditions.
It is an important fact, however, that in a modern society
the clear predominance of “line” authority as a central prin¬
ciple of operation in either the business or the military ver¬
sion is coming to be seriously modified by the involvement
of technical professional services. The strategic significance
of such services for the organization comes to be so high
that the persons responsible for them must be given high
status. But it is the nature of executive responsibility that
it must cover the whole range of subject matters relevant
to the functioning of the organization as a whole, or to the
level of responsibility of the suborganization in question.
This diffuseness of responsibility precludes that the exec¬
utive could be the equal, even on the basis of judgment to
say nothing of performance, of the high-level technical ex¬
pert on his own ground, in all the different fields of technical
expertness which may be important to the executive’s field
of responsibility. Hence he cannot supervise the technical
expert in detail nor can he have a detailed personal judg¬
ment of what the expert does, except from other experts in
the same field. He must, therefore, delegate an important
share of responsibility to technical experts, or “teams” of
them. The multiplication of technical fields, and their dif¬
ferentiation from each other, therefore, leads to an essential
element of decentralization in the organizations which must
employ them.
This problem seems to be at least one principal key to
54 The Analysis of Formal Organizations

the structure of the university, as contrasted with the other

two cases. The central personnel of a university organiza¬
tion are its faculty, who are all highly qualified technical
experts, spread over a very wide range of different subject
matters. It is they who are the main operative performers of
the two principal functions of the university—teaching and
research.
A university cannot be organized mainly on a “line”
principle, with the president issuing orders through his deans
to the members of the faculty. The faculty tends, rather, to
be a collegial “company of equals” who bear a good deal of
corporate responsibility. The “administration” is more a
“facilitating” agency responsible for financial resources,
physical facilities, and largely for public relations. Perhaps
the most important point at which a delicate balance must
be worked out is in the field of appointments. The adminis¬
tration cannot simply “hire” a professor without regard to
the professional wishes and judgments of his prospective
colleagues or to the candidate’s standing in the relevant
professional field. At the same time, leaving the appointment
function solely in the hands of faculty departments also has its
dangers. The result is usually a balance of responsibility, with
the initiative mainly in faculty hands, and a veto power, effect¬
ively if not formally, on both sides. This situation provides
another basis on which to explain the institution of tenure.
The professor is a technical expert who must take a heavy
responsibility in an organization where his administrative
superiors are almost always lacking in technical ability to
evaluate the quality of his work. Denial to administrations
of the right to “fire” him, except for cause involving grave
professional or personal misconduct, protects him against
arbitrary intervention in his work by persons who inevitably
possess great power but who do not possess the competence
to exercise it wisely on the basis of their own personal knowl¬
edge and experience alone.
The integrative or institutional aspect of the three types
A Sociological Approach to the Theory of Organizations 55

of organizations being compared involves repetition of some

of the considerations already stated, since this concerns the
institutionalization, on a basis transcending the organization,
of patterns of contract and of authority in the society as a
whole. It is worth while to sum up the differences.
The business firm relies, and is expected to rely, on "free
contract" on the basis of the financially symbolized self-
interest of the parties, both for the disposal of its product
and, from the proceeds, for the necessary financial and per¬
sonnel resources for its operation. The contracts are in gen¬
eral balanced on both sides: the right to hire and fire is
balanced by the right to accept or reject offers of employ¬
ment and to quit at will. There are, of course, many modi¬
fications of the perfectly “free" market, e.g., collective bar¬
gaining, grievance procedures, and regulation of investment,
but by contrast with the other types of organization these
features stand out clearly. The military stands in this respect
in the sharpest contrast, with no "market" for its services
in the ordinary sense at all and scarcely a market for its
financial or human resources. The university in this respect
is in the intermediate position, with a greatly modified mar¬
ket for services, but this is distinguished by a sliding scale,
and by the expectation that proceeds will only partially cover
costs, the deficit to be made up by taxation and/or contri¬
butions. Payment in both military and academic organiza¬
tions is on the basis of a "just price" system and not of
marginal productivity, and the university is characterized
by the institution of tenure. (In a modified sense this is also
true of military officers.)
In the case of authority the most stringent type is clearly
the military, which carries the "line” principle and the use
of coercive sanctions further than any other organization in
the society. The business firm is in the intermediate position.
It has a notable legitimation of authority, but this is limited
by the fact that acceptance of authority is voluntary and de¬
fined in terms of self-interest and market competition.
56 The Analysis of Formal Organizations

Finally, the university is in some respects a peculiarly “anti¬

authoritarian” type of organization; its “top management”
is ordinarily subjected to a conspicuous set of limitations on
its authority to intervene in the spheres of competence of
faculty members, who in one sense are “subordinates.” The
case of tenure has been stressed, but another very important
sphere in which these limitations operate is that of “academic
freedom” in the sense of freedom to teach, discuss, and write
without interference over a wide area of tolerance.

Conclusion

The principal aim of this paper has been to relate the

analysis of “formal organizations” more closely than is cus¬
tomary to some categorizations available in general sociolog¬
ical theory. There is a tendency in our society to consider
different types of organizations as belonging in the fields
allocated to different academic disciplines; thus students of
business organization are likely to be economists, those of
governmental and military organization, political scientists,
and so forth. This tendency to divide the field obscures both
the importance of the common elements, and the systematic
bases of the variations from one type to another.
The procedure of this paper has been first to attempt to
define an organization by locating it systematically in the
structure of the society in relation to other categories of
social structure. It seemed appropriate to define an organiza¬
tion as a social system which is organized for the attainment
of a particular type of goal; the attainment of that goal is at
the same time the performance of a type of function on behalf
of a more inclusive system, the society.
It proved possible to bring to bear a general classification
of the functional imperatives of social systems and with this
to identify the principal mechanisms necessary to bring about
the attainment of the goal or the organization purpose. The
 A Sociological Approach to the Theory of Organizations 57

classification used has proved its applicability both for the

level of the total society and for that of the small group.
The present application to an intermediate level further in¬
creases confidence in its generality.
The classification distinguishes four main categories: the
value system which defines and legitimizes the goals of the
organization, the adaptive mechanisms which concern mobi¬
lization of resources, the operative code concerned with the
mechanisms of the direct process of goal implementation, and
finally the integrative mechanisms. These four categories are
specifications of categories which, as noted, have been used
in a variety of other contexts for the analysis of structural
differentiation and phases of process over time in social
systems.
These categories were first used to analyze the main com¬
ponents in the structure of an organization—its value system
defining the societal commitments on which its functioning
depends; its mechanisms of procurement of resources; its
operative mechanisms centering about decision making in
the field of policy, allocation, and integration; and its in¬
stitutional patterns which link the structure of the organiza¬
tion with the structure of the society as a whole. It has
proved possible to spell out these considerations in ways
which link directly with the well-known ways of dealing with
the problems of organization in the relevant literature.
The same basic classification of the functional problems
of social systems was used to establish points of reference
for a classification of types of organization, and the broadest
outline of a proposed classification was sketched. The capac¬
ity of the conceptual scheme to account for variations in the
important features of organizations was then tested in a pre¬
liminary, illustrative way by a rapid survey of some of the
principal features of business, military, and academic organi¬
zations.
In the nature of the case this essay has been- subject
to severe limitations. Such limitations are partly involved in
58 The Analysis of Formal Organizations

the space available. More important, however, is the fact that

the essay constitutes a preliminary attempt to approach this
range of problems systematically in terms of this order of
general theoretical analysis. The results seem to justify the
hope that carrying such analysis further will help to codify
our knowledge of organizations more systematically than
has been the case before, and to link it more closely with
knowledge of other types of social systems and of the social
environment within which formal organizations must oper¬
ate in a society like our own.