Page 205 - The Resilient Organization

Postcard No. 3 from San Jose, California 191

INSTITUTIONAL KNOWLEDGE AND
MANAGEMENT PRACTICE

This section outlines what practitioners need to know about institutions
and deliberate institutional change (that is, changing the rules of the game).
Strong evidence shows that better institutions can enormously improve
social systems’ performance (North, 1990; Oliver, 1997). But it has been
challenging to identify how intentional behavior can improve institutions.
Here is a summary of what recent studies show.
Sociologists and economists agree that institutions promoting less-than-
optimal performance are common (see Part 2, “Step 1. Managing the
Consequences of Past Performance”). Studies that shaped the “new institu-
tionalism” in sociology and in economics had very different purposes, but
they agreed on this (Meyer & Rowan, 1991; North & Weingast, 1989).
North (1990) holds that most of today’s emerging-market, underdeveloped
countries are plagued by poor institutions. Thus, institutional issues as
serious as AT&T’s—with rules of the game that keep systems from
improving—are common. But how can a concerned member or group—
people with influence but not chief executive power—encourage positive
evolution of institutions? There are good reasons to think recent studies can
help activists answer this.

How Activist Managers Should Understand the
Nature of Institutions

Changing institutions is difficult because of the very nature of institutions. A
first step for managers who wish to learn from institutional theory is to
understand that nature. Institutions are not just rules-of-the-game entities
[“regulative structures” in Scott’s (2001) terminology]. They are also taken-
for-granted elements of people’s thinking patterns (Berger & Luckmann,
1966). Moreover, they are “logics of appropriateness” (March & Olsen,
1989) that tell people what to do in certain kinds of situations. (Scott’s terms
for the Berger and Luckmann and March and Olsen types of understandings
are “cognitive structures” and “normative structures,” respectively.)
These faces of institutions are powerful sources of inertia that activists
need to overcome. People with little or no obviously rational reason to