Markets, Bureaucracies, and Clans
William G. Ouchi
What is an organization, and why do organizations exist? Many of us would answer this question by referring to Barnard ( 1968) technological imperative, which argues that a formal organization will arise when technological conditions demand physical power, speed, endurance, mechanical adaptation, or continuity beyond the capacity of a single individual ( 1968: 27-8). Yet when the stone is too large or the production facility too complex for a single person, what is called for is cooperation, and cooperation need not take the form of a formal organization. Indeed, grain farmers who need a large grain elevator do not form corporations which take over the farms and make the farmers into employees; instead, they form a cooperative to own and operate the elevator.
Others would refer to March and Simon ( 1958) argument that an organization will exist so long as it can offer its members inducements which exceed the contributions it asks of them. While this position explains the conditions under which an organization may continue to exist, it does not explain how an organization can create a whole which is so much greater than the sum of its parts that it can give them more than they contribute.
Most of us, however, would refer to Blau and Scott ( 1962) definition of a formal organization as a purposive aggregation of individuals who exert concerted effort toward a common and explicitly recognized goal. Yet we can hardly accept this definition whole, suspecting as Simon ( 1945: 257-78)
I am indebted to many colleagues for their constructive criticisms of this paper, particularly to Chris Argyris, Peter Blau, Larry Cummings, Charles Horngren, Joanne Martin, John Meyer, Jerry Porras, Edgar Schein, W. Richard Scott, Arnold Tannenbaum, Richard Walton, and Oliver Williamson.