The Necessity of Formal Rules in Organisations

                                                                          

 

Peter Engholm

Monash University, 1999

 

 

 

ABSTRACT:

There should be no disagreement about that the existence of formal rules in organisations can contribute to improved effectiveness and efficiency. However, There are both positive and negative aspects in regard to the use of formal rules, and the question is how these can be rationally and legitimately implemented into the structure of organisations to ensure success. This paper looks at some of these aspects, and it shall be argued that formal rules is a necessary component of effective and efficient organisations - as long as they are rationally and legitimately implemented and used.

 

KEYWORDS:

Rules, Rationality, Legitimacy, People, Management, HRM

 

FULL TEXT:

There should be no disagreement about that the existence of formal rules in organisations can contribute to improved effectiveness and efficiency. Imagining a large organisation without any formal rules is just as unlikely as having no traffic rules in the society. People would constantly want to go their own way, driven by self-interest and ignoring the wants of and decisions by others. The result would be complete chaos.

It is rather the use, and quality and quantity of these formal rules that gives rise to different opinions and discrepancies in this issue. There are both positive and negative aspects in regard to the use of formal rules, and the question is how these can be rationally and legitimately implemented into the structure of organisations to ensure success. This paper looks at some of these aspects, and it shall be argued that formal rules is a necessary component of effective and efficient organisations - as long as they are rationally and legitimately implemented and used.

In the beginning of this century, Max Weber developed an “ideal” type of organisation which was not meant to represent the actual structure of all modern organisations, but designed to clarify the role of formal rationality in bureaucratic control by the use of an extreme case (McNeil, 1978). Weber saw the use of formal rules as a necessary component in this “ideal” type of organisation - a theory created after observing the present organisational climate. Changes after the industrial revolution such as the move towards a more capitalist society with increasingly complex organisations, the technological boom, and the increased emphasis on education and specialisation, brought along a need for better coordination and control of the workforce.

Blau and Meyer (1987: 20) define formal rules as existing “to assure uniformity in the performance of every task, regardless of the number of persons engaged in it, and the coordination of different tasks”. They agree with Weber that rules are means towards increasing the organisation’s control of the workforce and production, with improved effectiveness and efficiency as positive ends. Each worker must conform to prescribed standards, even in situations where a different course of action appears to the individual to be most reasonable. By defining rationality as “an ideal that is beyond the capacity of human decisions”, Blau and Meyer (1987: 59) hence indicate that the application of formal rules is rational and would also legitimate the absence of informal, personal decision-making.

Such sets of rules would bring advantages other than better coordination and control. Gouldner (1967) argues that rules minimise workers’ need to get involved in complicated decisions in their working environment, relieving anxiety and insecurity. Workers would also consider formal rules just and legitimate as everyone would have to obey them, that is, everyone would be treated equally. Blau and Meyer (1987) also refer to research that suggest that formalisation and standardisation, in contrast to some opposite views actually might diminish centralisation and enhance decentralisation within organisations.

Formal rules can, however, also have a negative impact on an organisation’s effectiveness and efficiency, as well as on its employees. One of the criticisms is that of excessive rigidity in the application of rules and regulation. Too much focus on formal rules can lead to the incapacity of the organisation to change in response to external shifts, and innovation, flexibility and competitiveness could be negatively affected (Blau and Meyer, 1987). Merton (1968) warns that adherence to rules, originally conceived as means, may become transformed into ends themselves so that the regulations would need interpretation by experts. Peter (1985: 43) takes this criticism a step further in his discussion about the excessive amount of laws in our society, stating that:

“We have excelled in the escalation of quantity over quality in the creation of laws. The motivation may be good, but the tendency is not toward organisation and clarity but toward piling on more and more complexity - and in some cases absurdity”.

His example of a law in Pennsylvania that states that fire hydrants must be checked one hour before all fires is one example of how excessive use of formal rules and regulation in organisations and society in general can become an absurdity.

Criticisms of formal rules often involve the negative impact they have on employees’ performance and motivation. Apathy and resentment may develop in the workplace if employees find themselves too restricted by rules. Formal rules may also be accompanied with authoritarian relations between workers and their managers, resulting in a hostile workforce leading to decreased performance and productivity.

To sum up the discussion so far, it has been shown that organisations need some sets of formal rules to maintain control and cooperation, but excessive use may result in various negative effects. Hence, it must be argued that it is impossible to construct a general model for a successful implementation of formal rules within an organisation. Mouzelis (1975) clarifies this by arguing that an organisation’s efficiency and effectiveness is determined by other factors specific to that organisation, for example, the existing technology and the organisation’s informal working environment and culture. Weber’s “ideal” type may be used to understand some parts of modern organisations, but does not cover everything. The same goes for theories from, for example, the Human Resources school and the contingency school. They provide us, however, with valuable ideas and insights into best practice management, which should be considered in each organisation’s assessment of the application of formal rules.

One company that seems to have an effective rule policy is Microsoft Corporation, who has adopted a strategy showing a close resemblance to Tom Burns’ ‘organic type of organisation’. This ‘organic type’ describes an organisation with continual adjustment and redefinition of individual tasks, and with interaction and communication emphasised rather than orders stemming down a hierarchy characterised by strict formal rules (Pugh and Hickson, 1997). What Microsoft tries to do, is to allow many small project teams and team-members considerable autonomy and responsibility, with just a few rigid rules that enforce a high degree of coordination and communication. At the same time, the projects rely on rigid discipline at a few key points to make sure that teams coordinate their work (Cusumano, 1997). This shows how an organisation with a minimum of bureaucratic rules and regulations still can maintain rationality and legitimacy in its operations.

In conclusion, this paper has shown that some sets of formal rules are necessary to maintain control and coordination in larger organisations. However, depending on the quantity and quality of rules applied, the result on efficiency and effectiveness may vary. Whether the rules are considered legitimate and rational depends on various other factors such as the organisation’s internal culture and informal environment. Formal rules alone will not make an organisation more effective and efficient if these are by-passed.

 

Any reproduction or distribution of this text is prohibited without express permission by the authors. Please contact peter@engholm.nu for permission or further information.

 

REFERENCES:

Blau, P. M. & Meyer, M. W. (1995). Bureaucracy in Modern Society, 3rd ed., New York: McGraw-Hill.

Cusumano, M. A. (1997). “How Microsoft makes large teams work like small teams”, Sloan Management Review, Fall 1997, pp. 9-19.

Gouldner, A. W. (1967). “On Weber’s analysis of bureaucratic rules”. In R. K. Merton (Ed.) Reader in Bureaucracy, 2nd ed, pp. 48-51.

McNeil K. (1978). “Understanding organizational power: building on the Weberian legacy”, JNL: Administrative Science Quarterly, Vol 23.

Merton, R. K. (1968). “Bureaucractic structure and personality”, Social theory and social structure, 3rd ed., New York: Free Press, pp. 252-253.

Mouzelis, N. P. (1975). Organisation and bureaucracy: An analysis of modern theories,
London: Routledge & Kegan, Ch.2.

Peter, L. J. (1985). Why things go wrong, New York: William Morrow and Company Inc, pp. 43-44.

Pugh, D. S. & Hickson, D. J. (1997). Writers on organizations, 5th ed., Thousand Oaks: Sage Publications, pp. 46-49.