Holistic Organizational Analysis – the Pentagon Model

4.1 Formal Structure

Mintzberg (1979: 2) defines the (formal) structure of an organization as “the sum total of the ways in which it divides its labor into distinct tasks and then achieves coordination among them.” He further states that the structure must be adapted to the complexity in the organization’s tasks and the level of stability in the organization’s working environments, and that different organizational configurations are suited for different situations.

The structure is the outcome of an organizational design process composed of four broad groupings of design parameters: (1) design of positions, (2) design of superstructure, (3) design of lateral linkages and (4) design of decision-making system (Mintzberg 1983). From this follows three sets of important questions that must be answered in designing the structure:

1. How shall different tasks be allocated to different positions, how standardized shall the working procedures be in connection with these tasks, and what skills and knowledge shall be required for each kind of position?

2. How shall positions be grouped into units, how large shall the units be, how shall these units be grouped into larger units, such as departments or divisions, and what mechanisms shall be established to handle communication, adjustments and alignment within and between units?

3. How shall decision-making power be distributed, and what kind of formal procedures should be established to govern decision-making processes?

Ahrne and Brunsson (2011: 85) state that decisions are the most fundamental aspect of organization and define organization as “a decided order in which people use elements that are constitutive of formal organizations”. Decisions represent conscious choices by decision-makers on the allocation of tasks and how people in different positions should act. Kühl (2018: 18) says that such decided membership conditions constitute the organization’s formal structure – “the fixed or decided decision premises of an organization”. According to Ahrne and Brunsson (2011: 85), there are five constitutive elements of the formal structure: membership, hierarchy, rules, monitoring of activities, and the right to decide about positive and negative sanctions.

The formal structure is usually depicted as an organization chart, which illustrates how tasks and responsibilities are divided between departments and roles, and how formal power is situated on different organizational levels and between functions. Supplementing the organization chart are typically governing procedures, regulations, role definitions and working requirements. Other formal elements found in most organizations are budgeting and reporting routines, decision-making mechanisms, and incentive structures. The term formal structure then covers what is sometimes spoken about as “organization”.

Luhmann says that there can only be “one consistently planned, legitimate formal order of expectations” in organizations (Kühl 2018: 19). But as well-known, both from practice and theory, organizations also have an informal dimension, which may be described as relations, expectations and activity patterns that are not reflected in the organizational chart or in the governing documentation, but that may have profound influence on the organization’s qualities and operational outcomes. The fact that much of what takes place within a formal structure is unorganized is often described as “informal organization”. Kühl (2018: 19) characterizes such informal aspects of organization as “undecidable decision premises”.

4.2 Technology

Technology refers to the machinery, equipment and ICT systems that organization members are dependent on or use to perform their activities. In a wider sense, technology can also be said to include the organization’s material infrastructures. We can also talk about this factor as materiality.

Technology is important for understanding organizational phenomena in a broader sense, both on systemic and individual levels. Or to put it simpler: We can often not understand how an organization functions without taking technology into consideration, because there are close links between technology and formal structure as well as between technology and informal attributes: culture, interaction and relations. Technology is also an important factor when it comes to individual behavior and performance.

A prominent example of the importance of technology is Woodward’s classical study of the connection between technology and formal structure in successful organizations. Her main finding was that different production systems imposed different demands, which should be met by appropriate structural arrangements: Mechanistic and bureaucratic systems might be useful for companies with mass-based production technologies, whereas companies with unit-based and continuous-based technologies needed more flexible and organic structures (Woodward 1965). Another classic example is the Tavistock studies of mining technologies in the 1950s which laid the foundation for the development of socio-technical theories, with the core idea that organizational performance only can be understood, and improved, if both social and technical aspects are taken into consideration, and that technology must be adapted to the people using it.

An influential direction in the study of technology is the STS theory (Science and Technology Studies) which is an interdisciplinary field focusing on the interplay between science, society and technology. Important contributions are the Social Construction of Technology (SCOT) – studies, which take as a starting point that technologies are shaped by social groups and through negotiations. Important within this group of studies is Actor-Network Theory (ANT), which focuses on “networks” including both human and non-human “actors” (Latour 1987; Pinch and Rijker 1987).

Most writers within the field of organization and management in the last 50 years have, however, tended to ignore the impact of technology/materiality. A quote from Wanda Orlikowski’s essay Sociomaterial Practices: Exploring Technology at Work illustrates the point:

In this essay, I begin with the premise that everyday organizing is inextricably bound up with materiality and contend that this relationship is inadequately reflected in organizational studies that tend to ignore it, take it for granted, or treat it as a special case. The result is an understanding of organizing and its conditions and consequences that is necessarily limited (2007: 1435).

A search through well-known organization textbooks confirms Orlikowski’s argument; topics like production technology, ICT as tools for process control and communication, and the general impact of the material infrastructure are usually omitted. This situation also reflects the dominating research agenda: Zamutto et al. (2007: 750) found that between 1996 and 2005 only 1,2 % (14 of 1.187) of the research articles in three of the field’s top journals^[3] focused on the relationship between technology and organizational form and function. According to Orlikowsky and Scott (2008: 436), technology is important for organizational outcomes, for the way organizations are structured, for norms and ways of working, for capabilities to act and interact, and for learning and innovation. With the introduction of advanced ICT, the importance of technology takes on an extra dimension. Modern technology is not only a matter of “tools” operated by individuals or groups, but is to an increasing extent also a means for changing the way we work and the organizations we work in. Groth (1999) says that the effects of these technologies are “extending the space of constructible organizations”.

In recent research, we find the term sociomateriality, which is used to describe the complex interaction between technology, material infrastructures, organizational attributes and human action. For Orlikowski, “there is no social that is not also material, and no material that is not also social (Orlikowski 2007: 1437). A logical consequence of this insight is a movement away from asking how technology influences humans, to examining how technology and materiality are intrinsic to all kinds of organizational activities and relations. Materiality also has a cultural component. A trivial example is how size, design and furniture in offices mirror power and status differences and, as such, reflect dominant cultural values.

In empirical research, it is often useful to specify technology as machinery, equipment, digital infrastructure and material infrastructure.

4.3 Culture

Deal and Kennedy (1982: 49), who were among the first to put culture on the agenda of organizational research, say that organizational culture simply can be understood as “the way we do things around here.” Reason (1997: 192) elaborates this understanding by saying that culture is: “Shared values (what is important) and beliefs (how things work) that interact with an organization’s structures and control systems to produce behavioral norms (the way we do things around here).” A more thorough definition is presented by Schein (1991: 247), who says that culture is “(1) a pattern of shared basic assumptions, (2) invented, discovered, or developed by a given group, (3) as it learns to cope with its problems of external adaption and internal integration, (4) that has worked well enough to be considered valid, and, therefore, (5) is to be taught to new members of the group as the (6) correct way to perceive, think, and feel in relation to those problems.” Kühl (2018: 8) takes a somewhat similar perspective, when he says that “an organizational culture is comprised of expectations of the behavior of the organization’s members.” He further states that such expectations emerge slowly and through repetitions and imitations, and that they are not made by through official management. Organizational culture can therefore be described as “those decision premises in organizations about which no decisions have been made” (2018: 14). Important to note, however, is that expectations do not function as precise recipes for correct action, instead they supply the “room for de facto behavior”, which, according to Luhmann, means that “you have to act within the channels mapped out and made acceptable by expectations” (2018: 15).

Both Deal and Kennedy, as well as Reason and Schein, are representatives of an integration perspective on culture. Looked upon this way, culture is perceived as something clear, unambiguous, and mostly shared by all members of the organization. An example is Reason’s description of an “ideal safety culture”, which is said to be characterized by reporting, just, flexible and learning (1997: 195). From such a perspective follows logically that culture can be “engineered” by a combination of structural arrangements and good leadership. Martin argues against this and points out that one cannot take for granted that an organizational culture can be described as an integrated unity. More often, at least in large organizations, cultures are either differentiated or fragmented. A differentiated culture is typically characterized by several subcultures, which may differentiate along occupational or organizational lines or have their origin in personal networks or demographic identities, e.g., gender, age, or ethnicity. Consensus and common interpretations exist primarily within subcultures, whichby may exist in harmony, independently, or in conflict with each other. A fragmentation perspective underscores that cultural manifestations may be unclear and ambiguous, there may be multiple views on many issues, and those views may be in a constant flux (Martin 2002).

When doing research in field situations, we meet local culture in different ways, as assumptions, beliefs, norms and interpretations. We can observe it in behaviour and material manifestations, and we can listen to it by paying attention to what people say, and not say, and how they express their meanings. After many decades as a researcher, management advisor and consultant, in both small and large organizations, at all levels ranging from top executives to the ground floor, I have concluded that for analytical purposes, and as guidelines for empirical research, one can say that culture is made up of three sets of components: linguistic, normative and cognitive. The linguistic components define the frames of verbal expressions and discourses; what one has words for, can talk about and discuss. The normative components define what is allowed or accepted, and what positive and negative reactions certain kinds of behavior shall be met with. In the organization, this is manifested in conventions, norms and sanctions. Cognitive components act as a framework that guides attention, interpretation, sensemaking, evaluations and decisions, and may become visible as basic assumptions, beliefs, values, and knowledge. In an organization, we can observe the outcomes of these three basic components directly, but also indirectly in cultural traits as artefacts, behavior patterns, habits and practices, expectations, attitudes, decision criteria, frames for interpretation, symbols and rituals (Figure 2).

Figure 2:

Components of culture (Schiefloe 2021: 120).

To what extent a certain organization is characterized by a specific internal culture is an empirical question. In some organizations, culture plays an important role, whereas in other organizations it is of lesser importance. The impact of culture will often relate to the organization’s history and accumulated experiences, recruitment patterns and the degree of turnover. Schein (1991) also points to the lasting impact of the founder’s assumptions and beliefs.

4.4 Relations

The well-known Hawthorne studies, carried out between 1924 and 1932, were the first to shed light on the importance of personal relations and informal social structures for organizational performance. By observing workers who produced telephone equipment in the “bank wiring room”, the researchers found that informal groups both developed rules of behavior as well as means to enforce them. Some of these rules set standards for “a fair day’s work”, whereas other rules served to control the interaction between the workers and their bosses. The Norwegian sociologist Sverre Lysgaard later described similar mechanisms and coined the observed informal structure as a “workers’ collective” (Lysgaard 1961). The workers’ collective served as a protective mechanism – a buffer – between the workers and the demands from the technical-economic system.

These and other early studies of informal social structures were targeted at workers “on the floor”, and from a management perspective, the existence of such mechanisms could be seen as a problem which reduced managers’ influence and control. With the development of theories and methods for systematic network studies, which took place some decades later, it gradually became clear that the existence and importance of informal social structures in organizations were not restricted to those at the bottom of the formal hierarchy. Nohria and Eccles (1992: 4) state this clearly: “All organizations are in important respects social networks and need to be addressed and analyzed as such.” Extensive research during the last 30 years has demonstrated the relevance of this statement; informal social relations and social networks pervade organizational life, are the basis for alliances and power, influence capabilities such as knowledge sharing, learning and innovation, and influence individual behavior on all levels, as well as the way the overall system functions. An illustration is the title of a book by Cross and Parker (2004): The Hidden Power of Social Networks. Understanding How Work Really Gets Done in Organizations.

Four basic principles are at the core of a social network approach to organizations (Kilduff and Krackhardt 2008: 14). The first is a focus on the importance of relations between actors, to understand interaction within the organization. The second is the emphasis on embeddedness, understanding human behavior as embedded in networks of interpersonal relationships. The third is realizing that social relations within a network are the basis of social capital, whereas the fourth has to do with analyzing the importance of the informal structural patterning within the organization.

Networks in organizations can be studied both by qualitative and quantitative methods. Qualitative approaches are useful for studying how networks are functioning and what role they play, for individual members as well as for the way the organization works. Quantitative approaches are used to get an overview of the informal social system and how this is built up and functions. Wellman (1988: 26) uses the term whole network studies for a structural approach mapping the comprehensive structure of relationships within a social system. The strength of such an approach is that it at the same time gives an overview of the social system (the organization) as well as of the relational location of each of the participants (the members, the employees). By different kinds of techniques one can then find patterns of connectivity and cleavage, structurally equivalent positions within the system, and how system members are directly and indirectly connected. One can also identify centrally located individuals, cliques and clusters. Many organizations now regularly employ organizational network analysis (ONA) to get a picture of the intraorganizational networks, communication and cooperation patterns, and the outcomes of social capital.

Early works on informal structures focused almost solely on their controlling and restraining effects. More recent studies with a wider scope have illustrated how participation in networks may also contribute positively to capabilities and performance by giving access to resources such as knowledge, information, and general social support. On the individual level, several studies have shown how informal relations may be beneficial not only for work, but also for career development. Participation in local networks is also crucial for identification and sense of belonging, and thereby also for turnover (Cross and Parker 2004; Cross and Thomas 2009; Cross and Velasquez 2010; Hekscher and Adler 2006).

It is important to recognize that social capital goes beyond individuals and has a collective dimension. Or, to say it with Putnam: It has both a private face and a public face (Putnam 2000:20). Leana and Van Buren (1999: 538) define social capital in organizations as “a resource reflecting the character of social relations within the firm…(which) is realized through members’ level of collective goal orientation and shared trust, which create value by facilitating successful collective action.” Two basic components of organizational social capital are associability and trust. Associability is defined as the participants’ willingness to subordinate individual to collective goals, whereas trust is said to be both an antecedent to, and a result of, successful collective action. They further point to four primary ways in which organizational social capital can lead to beneficial outcomes, both for the organization and for its individual members: It (1) justifies individual commitment to the collective good, (2) facilitates flexibility, (3) serves as a mechanism for managing collective action, and (4) facilitates the development of intellectual capital (1999: 547).

Nahapiet and Ghoshal (1998) make a distinction between three main dimensions of social capital in an organization. The structural dimension describes the configuration of linkages between people, or what we may call “the network map”. The relational dimension covers the kind of personal relationships people have developed through a history of interactions, such as respect, friendship and trust. An important facet within the relational dimension is the existence of mutual obligations between parties. The cognitive dimension refers to shared representations, interpretations and systems of meaning.

Most studies on networks and social capital in organizations have focused on positive outcomes, but in some cases, one can also find negative effects. Burt (2005: 7) points to possible disciplining and restraining impacts in describing what he calls “network closure”, which “increases the odds of a person being caught and punished for displaying belief or behavior inconsistent with preferences in the closed network”. Two possible consequences of closed networks within an organization may be the constraining of individual freedom of action and the exclusion of knowledge originating elsewhere. Actors may also be restricted in their opportunities by negative ties, competition and conflicts.

Many studies have demonstrated the importance of trust for sustaining individual and organizational effectiveness (McAllister 1995). Trust acts as a “psychological lubricant” for smooth social processes (Igarashi et al. 2008: 88). It makes it easier to cooperate, contributes to reduced transaction costs, reduces the potential for conflicts, facilitates formulation of ad hoc groups, and promotes effective responses to crisis (Rousseau et al. 1998: 394). The opposite can be experienced in situations characterized by a lack of trust or outright distrust. In such cases, people will stick to themselves, guard their steps and be careful with what they say. Cooperation will be difficult, and transaction costs will be high.

Social relations and networks – the informal social structure – are a phenomenon that is closely connected to organizational culture. Values, norms and established ways of behavior influence the way people behave towards each other and what kind of relations are expected and accepted. On the other hand, organizational culture is developed and maintained within social networks and is managed and influences attitudes and behavior through social relations. Both culture and social relations are sources of resources as well as of constraints. Taken together, we can say that these two elements constitute a sociocultural field within the organization. Individual actions, as well as interactions involving several individuals, take place within this field.

Relations and networks are also important additions to formal power positions. Because “getting things done in an organization involves working through a complex network of individuals and groups” (Bolman and Deal 2008: 204). In a discussion of preconditions for effective change processes, John P. Kotter emphasizes the importance of creating a “guiding coalition”. This is especially important in today’s rapidly changing business environments, where “only teams with the right composition and sufficient trust among members can be highly effective” (Kotter 2012:57). Social relations and networks also form the basis for coalitions and alliances and can play important roles in competitions and conflicts.

4.5 Interaction

Mintzberg (1983: 2) points out that every organized activity gives rise to two fundamental and opposing requirements: the division of labor into various tasks and the coordination of these tasks to accomplish the activity. Another way of stating this is to say that the basic organizational process is interaction: people divide responsibilities and work between them and combine efforts to achieve specific goals.

Interaction has to do with actors consciously relating to each other and is the basic component in work processes. Interaction is a precondition for developing and maintaining social relations and networks, and is also a foundation for organizational culture, experience transfer and learning. In analyzing organizations and organizational phenomena, four specific forms of interaction should be subject to special attention: cooperation, communication, coordination and managing.

To cooperate can be defined as “to work with another person or group to do something”, or “to act in a way that makes something possible or likely: to produce the right conditions for something to happen”.^[4] The terms cooperation and collaboration are often used interchangeably, but it is more accurate to say that collaboration is a specific form of cooperation, where the participants also have some kind of shared or common goal. Bedwell et al. (2012: 134) argue that it is the existence of such a shared goal that is the key element separating collaboration from other forms of shared work. In line with this, they define collaboration as “an evolving process whereby two or more social entities actively and reciprocally engage in joint activities aimed at achieving at least one shared goal” (2012: 130). Adler et al (2013) say that successful organizations can develop collaborative communities, which are formed when people work together to create shared value. People participating in such communities are motivated by a collective mission, not just personal gains or intrinsic pleasures. Collaborative communities also rest on a common cultural foundation, sharing “a distinctive set of values, which we call an ethic of contribution” (Adler and Heckscher 2006: 49).

Interaction is dependent on communication, which, according to Encyclopedia Britannica, can be defined as the exchange of meanings between individuals through a common system of symbols. A traditional understanding of communication – the Shannon-Weaver model – explains this as a process containing a set of three basic elements: A sender who encodes thoughts or feelings into a message, which is conveyed to a receiver by means of a channel, whereafter the receiver decodes the message. The channel used to communicate influences the variety of verbal and non-verbal symbols that may be used. An example is that face-to-face conversations are different from the exchange of e-mails. An earlier understanding of communication described this as a one-way process. Today, scholars agree that communication activities are better represented by a transactional communication model, which reflects the fact that the participants send and receive messages simultaneously, and that the behavior of the parties is continually influenced by the feedback they receive (Adler et al. 2001).

All communication takes place within a social and cultural context that influences ”how individuals enact, interpret, and respond to listening behaviours and their perceptions of responsiveness” (Itzchakov and Reis 2023: 2). Effective communication within an organization therefore takes place within specific cultural surroundings and is dependent on the degree of linguistic unity, i.e. the extent to which people use “the same language” and within shared frames for discourse.

National linguistic differences are easy to observe, but within an organizational setting, there may also be professional jargon and different “dialects” which make communication across departments and groups problematic. A general observation from many organizations is that the importance of common vocabulary and agreed-upon discourses is often underestimated.

Malone and Crowston (1994: 90) define coordination as: “the act of managing interdependencies between activities”. The dependencies that may have to be managed to obtain coordination of activities within an organization can be of different kinds. Four main types are:

1. Resource dependencies (when multiple activities share some kind of limited resources).

2. Sequential dependencies (producer–consumer relationships/output–input, dependencies).

3. Simultaneity constraints (when activities need to occur at the same time, or the opposite: cannot occur at the same time).

4. Task dependencies (several activities are “subtasks”, which contribute to a common goal/product).

As Mintzberg (1979) points out, coordination in organizations may be achieved by different kinds of mechanisms. Much literature has focused on structural mechanisms, such as standardization and bureaucratic routines. Schiefloe and Syvertsen (1998: 17) use the term constitutive coordination, which is described as a series of steps: “decomposition of goals, operationalization of goals into specified activities, assigning activities and responsibilities to actors, establishing procedures for handling activities and merging part results into wholes”.

Jarzabkowski et al. (2012: 907) point, however, to the fact that” coordinating mechanisms are dynamic social practices that are under dynamic construction”. From this follows that the analytic focus should be shifted from coordinating mechanisms as reified standards, rules and procedures to studying such social practices. Schiefloe and Syvertsen (1998) describe such dynamic practices as concurrent coordination, where focus is shifted from predefined procedures and fixed roles to problem solving, relations and involvement. This is in line with Okhuysen and Bechky (2009: 463), who define coordination as “the process of interaction that integrates a collective set of interdependent tasks” and can be described as “ongoing work activities that emerge in response to coordination challenges” (2009: 468).

If we consider collaboration as the most general term, we can say that successful collaboration depends on both cooperation, communication and coordination. This can be illustrated in a “collaboration triangle” (Figure 3):

Figure 3:

Collaboration triangle.

The terms managing, management and leadership are often used interchangeably. Following Clegg et al. (2011: 8), we can look upon managing as the widest term, covering the content and expectations of the role of managers: “Managing is an active, relational practice which involves doing things. The things that managers do are supposed to contribute to the achievement of the organization’s formal goals.” Mintzberg (2011: 12) follows the same line of reasoning, defining a manager as “someone responsible for a whole organization or some identifiable part of it.”

Management has to do with the formal rationalities of the manager’s role. Clegg et al. (2011: 9) define it as follows: “Management is the process of communicating, coordinating and accomplishing action in the pursuit of organizational objectives while managing relationships with stakeholders, technologies, and other artifacts, both within as well as between organizations”. Kotter says that the most important aspects of management include planning, budgeting, organizing, staffing, controlling and problem solving (Kotter 2012:28).

In the GLOBE project, which studied culture and leadership in 62 different countries, the researchers decided on the following definition of leadership: “the ability of an individual to influence, motivate, and enable others to contribute towards the effectiveness and success of the organizations of which they are members” (House et al. 2004:15). Kotter emphasizes that leadership defines what the future should look like, aligns people with that vision, and inspires them to make it happen (2012: 28).

For analytical purposes, it is possible to treat management and leadership as different aspects of managing. Mintzberg, however, argues that even if these two aspects can be separated conceptually, there is no point in doing this when it comes to practice: “…instead of distinguishing managers from leaders, we should be seeing managers as leaders, and leadership as management practiced well” (Mintzberg 2011: 8–9).