Chapter 11 Organizations as Political Arenas and Political Agents Introduction: Wal-mart Founder: Sam Walton Started in 1945 as proprietor of 2nd best variety store in small Arkansas town Over 2 million associates > 90% of American households shop at Wal-mart Wal-mart effect: multiple ways this organization influences consumers, vendors, employees, community, environment Example of Wal-mart’s political influence: disappearing cardboard packaging for deodorants; costing $0. 05
Organizations are both arenas for internal conflict, they house an ongoing interplay of players and agendas; directives from the top with pressures from below And political agent or player operating on a field crammed with competitors pursuing parochial interests, serving as powerful tools for achieving the purposes of those calling the shots; organizations operate in complex ecosystems (interdependent networks of autonomous organizations engaged in related activities and occupying popular niches II. Organizations as arenas
Today’s winners, can be tomorrow’s losers; change and stability are paradoxical–organizations constantly change and yet never changes Barbarians at the Gate–Ross Johnson’s example He began his career in the 60’s Charming, humorous, charismatic–moved ahead By the mid 70’s he was second in command (to Henry Weigl) of Stanford Brands Lavish spending placed him at odds with his boss Wooed members of the board and gained more influence that Weigl Eventually gained control over the company His lavish spending etc. , produced mediocre business results 981–Nabisco proposed a merger of two companies–1. 9 billion deal Everyone thought Nabisco would be in charge (over Johnson) Johnson used his “political talent” to win over the Nabisco chairman Johnson eventually took over the company 1985–another call from RJ Reynolds company (tobacco) Soon merger transpired; 4. 9 billion Johnson used his same barbarian political tactics and eventually took over too B. Political Dimensions of Organizational Process As arenas–organizations house contests and set parameters for players, as well as stakes and the rules of the game
Every organizational process has a political dimension Actual question is whose preferences and interests are to be served by the organization The assessment of organizations is dependent upon one’s preferences and one’s perspective Groups have conflicting preferences, but they have a shared interest in avoiding incessant conflict; so they agree on ways to distribute power and resources–structures are the resolution, at any given time, of the contending claims for control, subject to the constraint that structures permit the organization to survive
Ex: Ross Johnson’s decision to move RJR’s headquarters from Winston-Salem (had been there for over 100 yrs) to Atlanta RJR Company was the pride and joy of the community, in terms of business Structural logic points that organizations should be placed in a location that best serves the business Johnson saw the small city as boring This decision made Johnson the most hated man in Winton-Salem, but he got what he wanted C. Sources of Political Initiative Two major sources of political initiative: Bottom-up: relies on mobilization of groups
Top-down: relies on authorities’ capacity to influence subordinates Bottom-up–scripts for revolutions: a period of rising expectations followed by widespread disappointment Rise of trade unions–developed as a result of Industrial revolution–rapid urbanization and the decline of family farms Emergence of American civil rights movement–after a massive occupational and geographical shift for black citizens Antiwar movement of the 70’s–juxtaposition of an unpopular war with a draft lottery that affected every 18 yr old male in the US Environmental activism–knowledge of the destruction of the earth
Initial impetus for change came from grassroots mobilizing and organizing Elites bitterly contested the legitimacy of grassroots action and launched coercive blocking tactics–employers used very thing from lawsuits to violence to resist unions; civil rights unions experienced violent regression by whites; the antiwar movement reach its point at Kent States when the Ohio National Guard fired on student demonstrators; Greens are reputed by business and political leaders who claim their proposed remedies are too costly–each movement suffered profound setback, but managed to mobilize enough power to survive and grow Most bottom-up, grassroots initiatives have been unsuccessful
Antiwar mvt after invasion of Iraq in 2003–9/11 attack had just occurred (Americans were in fear of foreign dangers; fewer American troops; and no draft; never gained momentum on college campuses C. Barriers to Control from the Top Many believe that grassroots political action must begin at the top to get anything accomplished Ex. School District receives monies to change rural education (example of top-down effort) Tight deadlines made only a small group of administrators involved No teachers were involved-teachers resisted New program did not take off D. Organizations as Political Agents Organizations are active political agents in larger arenas, or “ecosystems”
Because organizations depend on their environment for resources, they are inevitably meshed with external constituents whose expectations or demands must be heeded Constituents often speak loudly but with conflicting voices As political actors, organizations need to master many of the basic skills of individual manager as politicians: develop and agenda, map the environment, manage relationships with both allies and enemies, and negotiate agreements, and alliances Many of the organizations key constituents are other enterprises– Ex: Apple Computer and IBM Apple dominated the PC industry before IBM’s entry; IBMs’ ecosystem rapidly surpassed Apple’s Microsoft gained control of the operating system, and Intel gained control of the processor in the IBM ecosystem (the two became mutually indispensible)
The two companies that began as servants to IBM eventually took over the “Wintel” economy What were once called IBM clones and advertised as 100% IBM compatible became sily “Windows PC” III. Political Dynamics of Ecosystems Same factors that spawn politics inside organizations also create political dynamics within the ecosystems Organizations have parochial interests and compete for scarce resources Ex: Ross Johnson after becoming CEO of RJR Nabisco, ed to engage in a leveraged buyout (LBO–craze of the time)–basic idea is to find an undervalued company, by up shares with someone else’s money, fix it up or break it up and sell it at a profit–high risk
Johnson’s idea was to use an LBO to take RJR Nabisco private–once he announced this, it was open season for anyone to bid–income–Henry Kravis and his secretive firm, KKR with some 45 billion in buying power; Johnson though Kravis would stay out because the deal was so big, but he underestimated him; after a bitter bidding war,; in the end Kravis and KR won, and RJR Nabisco was theirs for 25 billion the bidding war created an ecosystem, in itself, –many people and companies involved in the contest and RJR Nabisco was largely a bystander–Johnson pursued their private interests more than the company’s interests–in the end both sides bid too much and the winner was stuck with an overpriced albatross RJR Nabisco LBO ecosystem lasted only until the bidding war ended (balance is needed between personal and business pursuits)
Wal-mart is successful because is figured out how to create, manage, and evolve a powerful business ecosystem over the years took advantage of its uncanny ability to gather consumer information to coordinate the distributed assets of its vast network of suppliers; it was able to track demand information in real time, and the key was that it decided to share this very important piece of information with its suppliers; it introduced the Retail Link Other point: Wal-mart has become a monopoly of sorts, the more business you do with Wal-mart, the less you have control over your own business A. Public policy Ecosystem In the public sector, policy areas form around every government activity
Ex: air carriers, airplane manufacturers, travelers, legislators, and regulators who are all active participants in the commercial aviation ecosystem Ex: Federal Aviation Administration: FAA Marion Blakey takes over in 2002 She was determined to fix it Problems: terrorism, antiquated technology, turbulent finances She failed Troubles of the FAA Some internal: accounting—almost every step it took to fix things, caused other problems Fault laid in its ecosystem—no one is really in charge, too many competing factions, FAA is essentially a weak agency needs Congressional approval for how it raises and spends money Ex: Education—complex policy ecosystem
No one believes American schools are as good as they should be, but no one can agree on how to make them better Poplar remedies to “fix” the school system: NCLB, high stakes testing rewarding winners and penalizing losers Another remedy: more choice- – vouchers, grants for private schools, charter schools; but they drain away funds from the public school system; available research suggests that choice programs enhance student achievement and parent satisfaction; opponents question the evidence B. Business-Government Ecosystems (business and government intersect in a plethora of ways) 1. Pharmaceutical companies, physicians, government A. generic drugs are a major threat to pharmaceutical companies b. the industry trade association (an interorganization coalition) lobbied state governments to prohibit the sale of generics in some states; also persuaded the American Medical Association to allow advertising by brand name (consumers buy what the doctor prescribes: think brands, not chemical names). AMA’s advertising tripled C. n come insurers and managed care providers: used their power to push doctors to prescribe less expensive generics; state legislatures began to require pharmacies to offer the generic, and cheaper alternative; pharmaceutical companies fought back with advertisements instructing consumers to ask doctors to prescribe name brand name drugs D. government policy: which determines the rules of commerce, the structure of markets through barriers to entry an changes in cost structures due to regulations, subsidies, and taxation? e. ex: Fed Ex 1. Fred Smith, Fed Ex CEO spends a great deal of tie in Washington—hit a lobbying home run in 1977 when he persuaded Congress to allow full-sized jetliners to carry its cargo—10. 0 billion in business
Fed Ex made generous donations to hundreds of congressional candidates; it’s board adorned with leaders who were former legislators from both parties; in 1996 when FedEx wanted two words inserted into a 1923 law regulating railway express companies—the Senate stayed in session a few extra days just to get this done Other examples—Japan—if you don’t use politicians in Japan, you don’t get anywhere with business, businessmen provide politicians with funds, politicians provide businessmen with information—if you wish to develop a department store, hotel or ski resort, you need licenses and special permits—if you don’t work with the politicians, it could take many years to get anything done C. Society as Ecosystem
Of the 100 largest economies of the world, 51 are corporations, 49 are countries—Wal-Mart is bigger than Israel, Poland or Greece. Mitsubishi is larger than Indonesia, General Motors s larger than Denmark. Bigger companies are getting bigger—in 1954—it took more than 60 companies=20% of American economy; in 2005, 20 companies =20% of the American economy Korten has a particularly gloomy perspective: active propaganda machinery controlled by the world’s largest corporations constantly reassures us that consumerism is on the right path, and that economic globalization is both historically inevitable to the human species—actually these are all myths—propaganda used to justify greed –insatiable quest for money is causing the few who are rich to gobble up the world D.
Greatest Hits from Jeffrey Pfeffer and Gerald Salancik in the book, The External Control of O Organizational Studies—External Control of Organizations argue: Organizations are other-directed, involved in a constant struggle for autonomy and discretion, confronted with constraint ad external control; they also argue that much of the job of management is to understand and respond too demands of key external constituents whose support is vital to the organization’s survival Two challenges make the job of organizations more difficult: 1. Organization’s understanding of the environment s often distorted because their ability depends on the information they are geared to collect and know how to interpret 2. Organizations often confront multiple constituents whose demands are often inconsistent
Organizations like to make their environment more predictable and favorable They merge to gain greater influence Enlist government help Dilemma—every entanglement, even if it garners greater influence over a part of the environment, also produces erosion of the company’s autonomy—there’s no free lunch Pfeffer and Salancik—managers have three roles: two political, one symbolic Responsive role: seek to adjust the organization’s activities to comply with pressures from the environment Dicretionary role: seek t alter he organization’s relationship with its environment Symbolic role: arising from the widely accepted myth that managers actually make a difference—if a tea is losing, you can’t fire the layers, so you fire the coach
Pfeffer and Salanick views on the marketing concept: over time, all businesses either service or die because people (the market) either want the more don’t want them—the market creates demand—many managers think they can control the market, but the market actually controls them Ecological view establishes that both managers and the market are in charge, they both share power Even the most powerful have no guarantee of immortality (unless you are Edward Cullen or course) Of the top 20 companies in 1900, only GE stood around to celebrate the arrival of the new millennium Fishman frames both sides in the case of Wal-Mart: Customers vote for Wal-Mart with their wallets, suppliers vote for Wal-Mart ith their products—anyone (consumer or supplier) who does not agree with the manner in which Wal-Mart conducts business is free to buy and sell products elsewhere Free choice has become an illusion: in many of the products it sells, Wal-Mart now control at or 30 % of the market—sells 31% of pet food in the US; 37% of fresh meat; 45% of the office and school supplies—Wal-Mart if strangling the free market in America—it is the boa constrictor of the market—no more free-market capitalism, Wal-Mart is running the market Merger between Procter & Gamble and Gillette—has sales in excess of 64 Billion a year—bigger than all but 20 public companies of any kinds in the US—Wal-Mart’s isn’t just P&G’s number one customer, it’s P&G’s business—Wal-Mart is bigger than P&G’s next nine customers combined—business people are scared of Wal-Mart—if huge business entities such as P&G must bend to Wal-Mart’s will—imagine the kind of dominance Wal-Mart has over the operators of small factories in developing nations Will Wal-Mart remain king? Difficult to tell it has been in slow-growth mode in recent years Large multinational companies have enormous power, but they must cope with the demands of other powerful players: governments, labor unions, and consumers As arenas, organizations house competition and offer a setting for the ongoing interplay of divergent interests and agendas.
An arena’s rules and parameters shape the game to be played—from this perspective every organization is inherently political As agents, organizations are tools often very powerful for the purposes of achieving the purposes of whoever controls them; they are also dependent on the environment for needed support and resources. Controversial issue: relative power of organizations and society—more powerful companies have emerged as giants (i. e. Wal-Mart) Critics worry that in their domination, they are distorting politics, society and teh environment. Other argue that powerful companies retain their clout by adapting to their ever-changing environment and responding to the needs and demands of customers and constituents
