Resistance from top to bottom : the dynamics of risk management in complex organizations

Abstract

Organizations today devote substantial resources towards the development of governance systems to increase transparency and accountability in areas such as quality, safety, financial accounting, and environmental performance. In this dissertation, I combine ethnographic and simulation methods to understand the implementation and performance of such systems. In the first essay, I compare the implementation of a safety management system in two industrial plants following accidents. Despite a common process, workers at one plant resist portions of the new system, while at the other plant the system is a relative success. My argument has two parts. First, I argue that resistance to bureaucratic rules is rooted in the lack of involvement that front line actors are afforded in managing anomalies that occur in the application of rules. Second, lack of involvement is more likely to result in active resistance to rules when actors are familiar with one another and with work tasks. While much research emphasizes the benefits of familiarity for performance, I find that actors who are familiar have both the motivation and the ability to resist bureaucratic control, even when rules are designed to serve their own interests. In the second essay, I extend the findings in the first essay to develop a dynamic theory of the success and failure of governance systems in organizations. Consistent with existing literature, I find that pressure to conform to externally imposed norms of bureaucratic rationality can cause dynamics of gradual decoupling between rules and practice. However, I find that the mechanism by which such pressures operate can be different than previously described. Rather than compelling organizations to adopt practices that are inefficient or opposed to the interests of managers or workers, external pressure creates a conflict that is temporal: necessary efforts to demonstrate compliance in the short run directly undermine efforts to make rules effective in the longer term. When organizational actors have the flexibility to build organizational capabilities absent imperatives to demonstrate strict compliance at all times, formal structure can evolve to become a highly effective means of organizing. Absent such flexibility, rules can become a source of conflict characterized by worker resistance, tighter control, and decoupling. In the third essay, I develop and calibrate a detailed simulation model to illustrate why management efforts to develop capabilities that support governance systems so often fall short. For this essay, I study the case of energy efficiency and maintenance reliability in the built environment. Even where proactive investments would improve both regulated outcomes and the bottom line, I show that managers might easily abandon investments early, before crossing a tipping threshold that allows for the realization of full benefits. Thus, successful self-regulation depends not only on managers recognizing and acting on opportunities, but also on managers understanding tipping dynamics and sustaining investments beyond levels that might initially appear sufficient.

(cont'd) Essay 2 - The phenomenon of decoupling between formal organization and work practice has been a central theme in organization studies for decades. How do we account for the prevalence of formal structure if it is so often ineffective? Existing theories of decoupling emphasize the inherent conflict that formal structure produces, between external legitimacy and efficiency on the one hand, and between worker consent and management control on the other. Yet, such theories fail to fully explain how formal structure is occasionally highly effective as a means of achieving reliable outcomes. Based on a comparative ethnography of the implementation of a safety management system in two industrial plants, I develop a dynamic theory of the success and failure of rule systems in organizations. Consistent with literature in the institutional tradition, I find that pressure to conform to externally imposed norms of bureaucratic rationality is an important source of decoupling. However, rather than compelling organizations to adopt practices that are inefficient or opposed to the interests of managers or workers, external pressure creates a conflict that is temporal: necessary efforts to demonstrate compliance in the short run directly undermine efforts to make rules effective in the longer term. When organizational actors have the flexibility to build organizational capabilities absent imperatives to demonstrate strict compliance at all times, formal structure can evolve to become a highly effective means of organizing. Absent such flexibility, rules can become a source of conflict characterized by worker resistance, tighter control, and decoupling. These results have important implications for modern efforts to manage risk in areas such as quality, safety, and environmental performance through governance systems based on transparency, accountability and standard rules.

(cont'd) Essay 3 - In recent years a growing stream of research has sought to identify how the actions of managers can influence compliance with regulation and corporate social responsibility in areas such as environmental performance, workplace safety, and financial accounting. One such strategy that has received widespread attention is the search for proactive "winwin" investments that improve both regulated outcomes and the bottom line. Yet, the prevalence of win-win investments raises an important question: if proactive investments are really profitable, why are they so often not performed, especially when their existence is so widely acknowledged? To develop insight into this question, we develop a detailed simulation model of a proactive investment in building maintenance and energy use. While a proactive investment can produce substantial positive returns, we illustrate why achieving full returns can be so difficult. Specifically, even when managers make substantial proactive investments, investments may not be large enough or long enough to cross a tipping threshold. In such cases, despite the appearance of success in the shortterm, performance gradually erodes to its original state, wiping out gains. Thus, successful self-regulation and process improvement depends not only on managers recognizing and acting on opportunities, but also on managers understanding tipping dynamics and sustaining investments beyond levels that might initially appear sufficient.