Organisational Paradigms and Their Structural Problems
This article discusses the paradigms or mental models we use to structure organisations and explores examples of how these ideas manifest themselves. In the following index, you can access each of the sections.
4 Organisational Paradigms
We use metaphors to design and communicate the way we organise work.
Family Paradigm
In the pre-industrial era, organisations were seen as families. The master craftsman represented the father figure and transmitted the trade and values through a close relationship based on trust and kinship.
Mechanistic Paradigm
During the Second Industrial Revolution, work was systematised for assembly-line production. Organisations came to be seen as machines where people were merely another cog that could be easily replaced when they failed to fulfil their function.
Organism Paradigm
In the 1960s, following the publication of Bertalanffy's General Systems Theory, organisations began to be conceived as organisms capable of adapting to changes in the environment. Perhaps the most significant example of this was the work of Stafford Beer, who designed a management model inspired by the human nervous system. People adopted different roles under this paradigm, from sensory organs that gathered information from the environment to the brain that made decisions.
Social System Paradigm
Also in the 1960s, the paradigm that viewed the organisation as a social system developed, where people were seen as actors operating in a coordinated manner within a system of relationships and norms to achieve a purpose.
Structural Problems of the 4 Paradigms
Each metaphor results in a different type of organisation with advantages and structural limitations, and with varying impact on people. Over time, I have had the opportunity to work in organisations under each of these paradigms and I have observed shared patterns between them.
For example, family organisations typically face problems of nepotism in personnel selection, where emotional or friendship ties prevail over technical capability to perform the work. They have the challenge of surviving beyond the first generation, as their commercial network is usually based on personal relationships established by their founder. They tend to have inefficient processes as authority is completely centralised and their decisions override any established process or policy.
Under the mechanistic paradigm, processes are clearly defined and documented, as is the expected productivity per hour of work. Processes suffer varying degrees of obsolescence, but people lack the autonomy to update them, as this usually involves not only updating the process itself but also the entire control layer. Moreover, the lack of autonomy means that decisions are made outside the context where the problem occurs, reducing people's sense of control and belonging.
Under the organism paradigm, decision-making is based on data. This reinforces the perception that what cannot be measured does not exist, diminishing the reliability of soft or qualitative information that is not easily measurable. Furthermore, it creates an asymmetry between people who have access to data and can interpret it and those who cannot. Finally, the effective interpretation of data requires a shared frame of reference that facilitates making sense of it in the organisation's context. This proves conflictive because the asymmetry in access to information generates an advantage for using influence and power.
Finally, organisations under the social paradigm typically have democratic governance systems, which implies constant negotiation of high-level decisions, as well as the emergence of internal pressure groups that force the organisation to invest time, effort and resources in managing the social system. Both situations reduce the organisation's effectiveness at an operational level.
Organisations operate in an environment that conditions available resources and where needs constantly evolve. The effectiveness of these paradigms as organisational models depends not only on understanding decision-making and process control but also on understanding change, the dynamics that produce it, and creating the appropriate context for people to respond to them adequately.
Organisations as Open Systems
All organisations, regardless of the paradigm they use, are open systems that take resources, energy and information from the environment, transform them and return them to the environment. Organisations exchange them for other resources that allow them to replicate this pattern sustainably.
For example, a wine producer takes grapes, water, yeast, and sulphur dioxide from the environment (nature and suppliers), transforms them through pressing, fermentation, ageing and bottling processes and returns it to the environment for commercialisation.
The first consequence of this definition is that the organisation can only be viable if both the conditions that allow it to incorporate resources and the needs of its customers are sufficiently stable and sustainable over time. How much wine could be produced if there were no grapes or if these were of poor quality? Similarly, how much could be sold if there weren't enough market willing to pay the price of a bottle of wine?
Being an open system, for the organisation to be viable and sustainable over time, it must be able to guarantee the necessary resources, as well as the transaction of transformed value with the environment.
Imagine a luxury handcrafted automobile manufacturing organisation. The purpose of this organisation is to provide its customers with exclusive handmade vehicles. The organisation decides to explore its possible introduction into, for example, the Burundi market, a country with a per capita income of $270. The feasibility study shows that the country lacks an industry for the extraction and production of metals necessary to produce engines and mechanical parts. Furthermore, the country does not have sufficient technical personnel to perform the work, nor the necessary training programmes to develop these profiles. Finally, the size of the luxury vehicle market in a country with a per capita income of $270 is insufficient to guarantee profitability. In this environment where neither resources nor market needs are guaranteed, the conditions for the organisation to be viable do not exist.
This is undoubtedly an extreme example, but many organisations face the same type of problems, with the difference being that instead of resources or market being manifestly insufficient, these may be above the survival level, or have been eroding at a speed sufficient for the organisation to have been able to adjust its profitability objectives and production to survive rather than collapse completely.
Strategies to Control and Influence the Environment
Faced with this situation, organisations have developed different response mechanisms to try to control both the resources that enter the organisation and market needs.
One strategy has been the consolidation of lobbies to exert pressure on institutions that control access to resources. For example, for decades, oil companies have exerted strong influence over the Nigerian government to maintain control over oil resources in the Niger Delta. Through lobbying and political pressure, these corporations have achieved favourable tax conditions and lax environmental regulations that have allowed them to continue extracting oil, whilst local communities suffer from contamination of their lands and waters.
This same lobbying strategy has been employed to raise entry barriers for certain competitors to the market. For example, textile manufacturers' associations have successfully pressured the EU to maintain high tariffs on clothing and fabric imports from countries such as Bangladesh or Vietnam, arguing for the protection of local employment. However, these measures have artificially increased product prices for European consumers whilst hindering the economic development of producing countries that could compete on price and quality.
At the time of writing this article, Donald Trump had just begun his second term as President of the United States. One of the most relevant images from his inauguration was the presence of Amazon founder Jeff Bezos, Meta director Mark Zuckerberg, Apple chief Tim Cook and Google head Sundar Pichai occupying prime seats at St. John's Church in Washington, D.C., accompanied by Elon Musk in his role of the new head of the Department of Government Efficiency. Two days later, the American president, accompanied by the CEOs of OpenAI, Oracle and SoftBank, announced a five-hundred-billion-dollar investment package to develop artificial intelligence infrastructure in the United States. The support of major technology companies for Donald Trump is not a disinterested move, but rather a strategy to guarantee the stability of their resources and the flexibility of legislation for the development and expansion of their business models.
However, one of the most successful strategies is conditioning society to voluntarily accept values and attitudes that encourage consumption. Frédéric Martel's book "Mainstream Culture" presents the case of McDonald's global expansion as a cultural asset beyond hamburgers. The company has managed to turn "fast food" into a symbol of modernity and the American lifestyle. This strategy has transformed traditional eating habits in numerous cultures. In countries like Japan or France, known for their traditional gastronomy, McDonald's has managed not only to establish itself but to become part of local culture, adapting its products whilst maintaining the essence of the American consumption model. What is significant is that this transformation is not perceived as an imposition but as a voluntary choice by consumers, who associate the brand with positive values such as modernity, youth and success. This transformation of consumer values and attitudes is achieved through the systematic investment of millions of dollars in advertising.
These four examples focus only on one type of organisation that can influence suppliers and customers on a large scale, sometimes conditioning the rules of the game themselves. However, most organisations do not have this capacity for influence and are, generally, more exposed to market dynamics where they can usually only react to them.
Technology as a Force for Change
One of the main dynamics that influence not only the availability of resources but the relevance of the value they generate is technological advances. Advances such as the Internet or blockchain have transformed traditional business models, making both people's skills and resources, as well as products or services, obsolete.
For example, at the beginning of the 20th century, the main function of personal banking was capital deposit and individual lending, operations that required a strong physical presence and manual work.
From the 1950s, the improvement of mechanical accounting systems and the emergence of the first computers facilitated product diversification and expansion through branches. Accounting and financial knowledge, as well as commercial capability, became the most demanded skills.
In the 1980s, magnetic stripe technology, more robust communication systems and microprocessors enabled the emergence of ATMs and the first credit cards. The labour market evolved towards profiles with capabilities for computer system management and the ability to advise on financial products.
From the year 2000, the arrival of the internet and security protocols and the development of advanced computer systems resulted in the beginning of online banking, which demanded the development of technological skills of banking staff and multichannel sales to serve the hybrid needs, in-person and online services, of customers.
Finally, since 2010, the emergence of blockchain, cloud data storage, big data, and artificial intelligence have transformed customers' relationships with banks. Today, a large portion of customers use their mobile applications to make payments and banking operations. This has forced banks to drastically reduce their physical presence on the streets and has allowed the emergence of virtual banks. Furthermore, it has transformed the nature of banking personnel requirements, where the most demanded skills today have to do with cybersecurity, system management, artificial intelligence implementation or data management and exploitation.
This is an example of the vertiginous change that technology can cause in the environment where organisations operate, and which conditions their ability to survive. However, many organisations are, consciously or unconsciously, more focused on the present and short term than on understanding how the environment evolves and what changes we need to face to continue being viable and relevant in the future.
Conclusion
The organisation is an open system. However, the paradigm of efficiency and control is based on a vision of the organisation as a closed system where interactions with the exterior are limited and, as the previous examples show, can be to some extent controlled with strategies to influence access to and control of resources, as well as customer's desires and needs.
There is, in my view, an urgent need to review and update the paradigms on which we build our organisations, not only to make them viable and sustainable over time but for them to fulfil their purpose in society, which is to improve citizens' quality of life through developing appropriate solutions in the form of products, services or knowledge. Furthermore, today we are already clear about the current capacity of our ecosystem to keep us alive so that if we want to be viable as a species, our organisations must incorporate this factor within any new paradigm they want to use to organise and structure work.
