Let's think about a fundamental question. How should we think about what an organization is and what it does? It turns out that organizations are really complex, and there are lots of ways to think about what organizations are, and what they do. We're going to use three different ways to think about organizations. First, we're going to think of organizations as machines, second, we can think about organizations as communities of people, and third, we can think about organizations as adaptive organisms. To better understand these three ways of looking at organizations, let's take a look at an example that most of us are pretty familiar with. We're going to talk about universities. In fact, I'm currently standing on the campus of the University of Illinois, near the iconic Alma Mater statute. Professor Jeff Love and I are going to take you around campus. We're going to take you to different places that will help to illustrate these three different perspectives on organizations. We've moved and I'm standing here, in front of the facility that houses the Blue Waters supercomputers at the University of Illinois. Inside, you'd find powerful computers, machines that process huge amounts of data at incredible speeds. They turn inputs into outputs. So now, if I asked you to describe to me a typical university as an organization, there's a number of different ways you might answer. But one, is that you might say, ''Look, the university can be thought of as a big machine designed to turn students, inputs, into graduates, outputs, in large quantities.'' Through that machine lens, you might focus on how the university is structured for the different tasks; colleges, departments. You might also think about the leaders at the top; the deans and presidents. They make decisions, the university, the machine enacts them. Or maybe you'd think back on your time as a student. Remember, there were strict requirements about classes you had to take, formal procedures that needed to be followed, then you could graduate. You might have had to deal with some bureaucracy along the way. Might have made it seem tough to get things done. Sometimes you might have felt like you were just a cog in a larger machine. So that's one way to describe universities. To think of them as if they're machines. When we think of organizations as machines, we're going to call that taking a rational system perspective, rational, logical, efficient, orderly. From this perspective, the rational system, the organization exists for a well-defined purpose, it focuses on the traditional organization chart, where there's well-defined roles and responsibilities, we think of power and decision-making at the top of the organization. This perspective also, of course, focuses on the formal rules and procedures that help the organization operate in a regular, and reliable, and hopefully efficient way. While universities are like machines, you could also describe the same university in very different terms. This time, you might focus on the people that you interacted with, and the relationships that you developed during your time as a student. I'm standing right now in the main quad area at the University of Illinois. This area is a major hub of interaction. In the background, you'll see buildings from different colleges and a student union building, where students come to eat, study, shop, and much more. Rather than thinking of the university as a machine, we can view the university as a community of people, with all the complexity and the messiness that occurs when people get involved with different perspectives, goals, and incentives. As you think about your own experience in universities, you've probably developed meaningful relationships with professors and classmates. But you may have also experienced some of the challenges of dealing with people of various kinds. Maybe it was a challenging classmate who didn't pull his weight on group assignments, or a professor who seem like an unnecessarily harsh grader. You may have also noticed that the university doesn't just exist to turn students into graduates. But there's lots of goals, some goals pertaining to research, teaching, community engagement, fundraising, and many more important but distinct things that were being pursued simultaneously. Sometimes those goals may have seemed to conflict. You may have even seen disagreements among faculty and students about which of those goals should be given greater priority. Decisions don't just get made at the top. The faculty, students, and others exert considerable influence on the decisions that get made. When we think about the organization as a community of people, this is what we'll call a natural system perspective. Through the lens of this perspective, we noticed that organizations are fundamentally made up of people, and people play important roles in organizations that don't always show up in a formal organizational chart. People in organizations often have multiple, even competing goals, and sometimes have big disagreements about which of those goals should be pursued. People throughout the organization can have power and influence, and so decisions don't just happen at the top and cascade down. Informal structures, norms, and cultures evolve over time. They influence how work gets done. In summary, the natural system perspective introduces a human element to organizations and all the messiness that human behavior brings. So far, we've described the university as a machine, and also as a community of people. But both of those perspectives looks at what's happens inside the organization. That is, they're internally focused. But we know that organizations and universities, they don't operate in a vacuum, they're open to the outside world, and they don't look the same today as they did a 100 years ago. Actually, I'm standing next to the Morrow Plots. All the way back in 1876, these fields were used to conduct groundbreaking experiments that showed how crop rotation improves farm yields. The university has changed since then. Change since 1876: we've got fancy new buildings, a much larger student body, new ways of delivering education, they were unimaginable over a 100 years ago. So think about that. What if you think about the university in terms of how it interacts with, and changes in response to the outside world? What we call the external environment. Now, you might look at how the university gets resources in. If you went to a state funded institution, you probably care at the state stopped funding the university at historic levels. You also might look at how the university attracts the best and brightest students or brings in top professors. You'd notice competitors and you'd think about how your university is fairing relative to other peer universities. You might also notice if there were changes in the demographics of students or changes in their tastes or preferences. You'd paid attention to new technologies like online learning and see how well the university was able to change in response to the changing external environment. So you might say that the university is like a living organism, that it needs to adapt to its changing environment if it's going to survive and thrive. That's a different perspective. Now, thinking of an organization as an adaptive organism, is what we'll call an open systems perspective. Here, we focus on how the university achieves the goal of survival and how it might pursue different goals as environments change. Power here occurs at the boundaries of the organization, where they bring in valuable resources from the outside. Structures tend to be less stable, because they need to be flexible to adapt to the outside world. So a number of implications. This class is all about organizations. Organizations can harness the unique abilities of lots of different people and help to direct their action towards some common purpose. But as amazing as organizations are, you don't have to spend much time in organizations to know that it's actually really hard to get an organization to run smoothly. Managers have to deal with real tradeoffs all the time, and that means you have to make tough decisions, sometimes without perfect information. So what do we do in the face of this daunting challenge? Well, this class is designed to give you tools that will help you to better recognize and understand many of the common problems and challenges of organizational life. You'll begin to develop a managerial toolkit that will help you to make tough decisions in a more informed way as you design and manage more effective organizations. Now, to use a tool effectively, it helps to know why it works, what to do with it generally, and then how to use it in specific situations. We're going to do the same thing in this class using a framework to think about organizations. This framework includes theory, principle, and application. Theory is an explanation of why the world works the way that it does. A theory is like a lens that can highlight certain organizational problems and point us towards productive solutions. Principles are general rules or guidelines that can be derived from theories. If theory tells us why an organization works the way that it does, a principle tells us what we should generally do as a manager. Finally, application refers to how we should implement these principles based on our own unique circumstances. In class, we'll work with this framework to help build your managerial toolkit. To do that, we'll go back and forth between all three of these different levels. Sometimes, we'll talk about theory at a high level to help us understand the why behind certain organizational problems. Other times, we'll talk about general principles or guidelines that help you know what you should generally do as a manager. Perhaps most importantly, you should take the theory and the principles that you're learning in this class and look for ways to apply that knowledge to your own organizational life. Managers who develop a toolkit and then consistently apply correct principles that are based in sound theory, tend to be much more effective in designing and managing successful organizations.
