In this post you can read “organization” & “environment” not only as they are (a company within its environment) but also as a subgroup within a group.
When organizations become institutions
An organization is created as a tool to answer rationally a specific demand in its environment. It becomes an institution when the “tool” has the added feature of self-serving social needs.
To institutionalize is a process. This occurs naturally, like in a feedback loop, when the organization analyzes & understands its place in its environment. It is a by-product of its “external” strategy as the institution tries to control its environment. As a result, the institution will amend its internal policies, recruitment & administration accordingly.
Yet, the more specialized & technical the organization’s operations, the closer to being a tool, & the less an organization will be institutionalized. This has a great effect on change: indeed, a tool is dispensable and once it is not needed anymore (due to innovation, market demand or else), the tool is cast aside and another one is used.
Institutionalization brings organizational self-protection. One of its main traits is that the organization avoids conflict and generally prefers to withdraw than to participate. Too intimate a relation between capability & strategy is typical of an institution that focuses on what the organization is and not on what it is made for.
Thus, the change of a technical organization into an institution is noted by a concern for self-maintenance.
To define & defend the institution’s values; an elite must be created. A problem of institutional leadership is to ensure that elites do exist & function while preventing their tendency to become sealed off & to be more concerned with their own destiny than with that of the institution.
The institution’s elite seek stability rather than quick returns.
An institution’s mission must be in line with its survival goals. It must take account of the external expectations (commitments) and the internal ones.
Premature self-definition can hinder the organization as changing occasions may create new duties. Limitations should be waived unless they affect the organization’s effectiveness to reach its goals. Beware of the internal & arising forces that push to further security.
Survival goals impose that prioritizing strategic competence goes in favor of large independent staff departments for planning, procurement, training and R&D.
Vice versa, a too large attention on technology is an emphasis on ways & means and neglects ends. In this extreme case, the goals of the “tool” are set only externally and leadership is not needed.
When policy is communicated, one must beware that the social structure of the institution acts as a filter.
The social structure is composed of:
- Assigned roles
- Internal interest-groups
During the phase of institutional development, centralization is required. Centralization creates a particular set of social conditions. Changes are easily identified by personnel turnover: roles in harmony with the before-change organization may become obsolete.
Afterwards, when the personnel become more homogeneous, the need for centralization decreases. Indeed, decentralization will be achieved without too much loss of control.
Decentralization cannot be the first step. It needs preparatory shaping, during which the leader has the occasion to impact deeply the concepts that guide decision-making at lower levels. It is only when the unification of purpose has occurred that delegation of responsibility may happen.
Thus, leaders will take care of internal cohesion before introducing administrative changes. The leader needs to ensure participation only when there is lack of cohesion. To be sure, institutional integrity is weakened by frail values.
In general, HQ staffs perform elite functions. Cooperation among field representatives is often easier to attain than cooperation among HQ staffs. And it is the HQ staff that puts pressure on its field representatives to avoid cooperation that may prejudice its distinctive identity.
2 critical flaws of leadership
The opportunist is pursuing short-run gains by not considering or controlling the definitive consequences and the utopian expects to avoid tough decisions by hiding in concepts. By contrast, the leader is committed, makes decisions and has the will to pursue.
Opportunist & utopian institutions are sick and, like sick bodies, have symptoms.
Signs of opportunism:
- There are little controlling powers against immediate pressures
- Target identification focuses on doing rather than on becoming
- The primary character of the institution becomes blurred and those who formed the core organization in the past do not fit anymore
- External pressures are driving too much the strategy
- The strategy is self-centered
Signs of utopianism:
- Goals are too broad & unspecific: “making a profit” is the typical example
- More realistic but uncontrolled criteria impose their own laws and foster opportunism
- People turn to technical answers with the blinded faith that they will solve the institutional evils
Creating institutional leadership
Institutional leaders are organizers & guardians of values. They labor to meet the requirements of social circumstances.
In order to do so, they must have teaching skills to grow thinking & acting models and be able to communicate about them on a day-to-day basis. Story-telling has always been a major teaching skill. Myth elaboration* is thus a key to leadership as a myth helps sustaining the institution’s ideals and integrating socially its members. Silicon Valley’s big companies are notorious for their “auras”.
As institutional leadership depends on the circumstances, it emphasizes that a leader has critical experience, as opposed to routine management. Thus, leadership is not always required. When it is, the difficulty lies in the choice of the strategic values to build a social organization that personifies them. The psychological traits required are rather distant from the traits given to a “typical” leader (forceful self-confidence, intuitive assurance, & talent to inspire). Leaders are needed to transform an impersonal group into a committed one. Their job is politics.
*: Stages of myth elaboration used in many folks stories (& movies): ordinary life & adventure’s call, reject the call, meet the mentor, cross the threshold, be tested with friends & foes, get closer to the trial, pass the crucible & get the reward, take the road back, & resurrect with the gift.