The Reasons Why Organizations Act Irrationally

Paper Summary:

Rationality in the pursuit of goals is ensured on the one hand by rewarding departments that stick closer to the organizational goal with a larger budget, and by punishing departments that do not, with a smaller budget. Secondly, rationality is achieved by controlling the people working in the organization either by measuring their output (output control) by supervising them (process control) or by selecting, employing or training people in such a way that they believe in the mission and the overall objectives of the organization (clan control). Thirdly, reward systems are put in place, which remunerate people for helping to achieve the organizational goals. Examples of these are executive bonuses and stock options. It is widely believed, that through these measures it is possible to align the human resources of the organization with the organization's goals and thus ensure a rational pursuit of the goals that have been set. Thus an organization that has the appropriate systems in place is assumed to be characterized by the rational pursuit of organizational goals.

From the Paper:

"The view that organisations are characterised by the rational pursuit of some specific goal, is very prominent in organisation theory and in management literature. Pioneered by Frederick Taylor in his Scientific Management theory, it assumes that there is one best way to achieve a specific goal. A large amount of management literature supports this approach by suggesting procedures by which this "one best way" can be found. "

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