Thompson’s Levels Model

Reconciling the Rational, Natural, and Open Systems Perspectives – Thompson’s Levels Model

Introduction:

During the first few weeks of this semester we studied organizations through three different perspectives:

1.          as Rational Systems,

2.         as Natural Systems, and

3.         as Open Systems.

In his work Organizations in Action, James D. Thompson, adopts a set of distinctions developed by Parsons, who differentiated amont the three different levels within organizations:

  • The technical level: that part of the organization carrying on the production functions that transform inputs into outputs.
  • The managerial level: that part of the organization responsible for designing and controlling the production system, for procuring inputs and disposing of outputs, and for securing and allocating personnel to units and functions.
  • The institutional level: that part of the organization that relates the organization to its wider environment, determines its domain, establishes its boundaries, and secures its legitimacy.

Thompson states that all three perspectives apply in differing amounts to different organizations, and suggests researchers should be more flexible in their approach. Thompson proposes that each of the three perspectives is suitable to a different level of organization: the rational system perspective to the technical level, the natural to the managerial, and the open to the institutional level. (Scott and Davis, p 109-110)

He further states that organizations “strive to be rational although they are natural and open systems”. Rational notions of effectiveness and efficiency presume a closed system. Organizations attempt to seal off their technical core from external uncertainties as much as possible. At the institutional level the organization is open to the environment and must adapt to its changes. At the managerial level managers mediate between the open institutional level and closed technical level and need the flexibility of informal structures prevalent in the natural system perspective to ensure organizational survival. (Keith Rollag)

Research Focus:

For the purposes of this paper, I was advised to study the very work in which Thompson presented the Levels Model, i.e. Organizations in Action. The book covers many different aspects of organizations, so three chapters were picked for detailed study as they seemed most relevant to the case at hand (Enron). An overview of the important ideas (or propositions as they are called by the author) in these chapters is presented below:

Chapter 3: Domains of Organized Action

  1. Under norms of rationality, organizations seek to minimize the power of task environment elements over them by maintaining alternatives.
  2. Organizations subject to rationality norms and competing for support seek prestige.
  3. When support capacity is concentrated in one or a few elements of the task environment, organizations under norms of rationality seek power relative to those on whom they are dependent.
    1. When support capacity is concentrated and balanced against concentrated demands, the organizations involved will attempt to handle their dependence though contracting.
    2. When support capacity is concentrated but demand dispersed, the weaker organization will attempt to handle its dependence through co-opting.
    3. When support capacity is concentrated and balanced against concentrated demands, but the power achieved through contracting is inadequate, the organizations involved will attempt to coalesce.
  4. The more sectors in which the organization subject to rationality norms is constrained, the more power the organization will seek over remaining sectors of its task environment.
  5. The organization facing many constraints and unable to achieve power in other sectors of its task environment will seek to enlarge the environment.

Chapter 4: Organizational Design

  1. Organizations under norms of rationality seek to place their boundaries around those activities which if left to the task environment would be crucial contingencies.
    1. Organizations employing long-linked technologies and subject to rationality norms seek to expand their domains through vertical integration.
    2. Organizations employing mediating technologies, and subject to rationality norms seek to expand their domains by increasing the populations served.
    3. Organizations employing intensive technologies, and subject to rationality norms seek to expand their domains by incorporating the object worked on.
  2. Multi-competent organizations subject to rationality norms will seek to grow until the least-reducible component is approximately fully occupied.
  3. Organizations with capacity in excess of what the task environment supports will seek to enlarge their domains.

Chapter 10: Control of Complex Organizations

  1. The more numerous the areas in which the organization must rely on the judgmental decision strategy, the larger the dominant coalition.
    1. The less perfect the core technology, the more likely it will be represented in the dominant coalition.
    2. The more heterogeneous the task environment the task environment, the larger the number of task-environment specialists in the dominant coalition.
  2. As areas within the organization shift from characteristically computational to characteristically judgmental decision strategies, the dominant coalition will expand to include their representatives, and vice versa.
  3. Potential for conflict within the dominant coalition increases with interdependence of the members (and the areas they represent or control).
  4. Potential for conflict within the dominant coalition increases as external forces require internal compromise on outcome preferences.
  5. Potential for conflict within the dominant coalition increases with the variety of professions incorporated.
  6. When power is widely distributed, an inner circle emerges to conduct coalition business.
  7. The organization with dispersed bases of power is immobilized unless there exists an effective inner circle.
  8. When power is widely dispersed, compromise issues can be ratified but cannot be decided by the dominant coalition in toto.
  9. In the organization with dispersed power, the central power figure is the individual who can manage the coalition.
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