Juan Antonio Pérez López - Foundations of management

We would find ourselves in the same situation if we were to try to understand the workings of a radio using a model that only studied the transmission of sound waves (if one thinks about it, this is what children do when, unaware of physical realities such as electromagnetic waves, electromagnets, etc.: they conclude that the radio must be inhabited by little people who speak).

However, the basic problem is not in this lack of understanding but in its practical consequences: that is where the true danger lies. If a person were to try to run an institution applying rules that would be valid for a technical system, the result would be chaotic. Eventually, it would cause the death of the organization due to breakdowns in its vital processes. This could be likened to what would happen to a child if he were to apply the rules he uses to drive his toy car to driving a bus.

It would be misleading to think that this sort of mistake is unusual in the management of human organizations. Many of the organizations that die without having fulfilled their mission do so because of this management defect: they die from disease, from a defect in their vital processes. It is also true that others die due to the difficulties they face in the environment they operate in, just as a person, even if healthy, can die as a result of an accident, murder, or some abrupt deprivation of what he needs to live.

In any case, whenever a manager complains that he lacks the power to make his subordinates obey him, or that his subordinates do not understand him, or that circumstances give him no opportunity to do what he wants to do, it would be wise to analyze whether his organization is being run as if it were a technical system, all the symptoms being merely the natural resistance an organism or institution offers to being run like a machine.

A preliminary step in the analysis of these questions would be the examination of human motivations. Thus, the theory of motivation forms a core part of the knowledge required to understand and control organizations. Motivation theory attempts to explain relationships between needs, motivations and the objects that satisfy them, analyzing the procedures that human beings follow to satisfy their needs.

One might think that since the mistake of making decisions on the basis of a reduced model is so dangerous, one should always use the most complete model: the institution. Why take the risk of treating an institution as a mere technical system, especially if there seems to be no risk in treating a technical system as an institution?

The answer can be inferred from the above explanations and examples: it is much more difficult to manage an institution than a technical system, and it happens that some human organizations are “almost” technical systems. In any complex organization, there are many other partial or subordinated organizations that comprise them; in many cases, the latter may be run as technical systems, provided that someone supervises the one running them to make sure of tending to organic or institutional aspects. Moreover, the specific quality of the manager who makes or develops an institution is what is usually called leadership, and it always implies a high degree of self-sacrifice which not many people are prepared to make.

On the other hand, the processes of purpose definition, communication and motivation are much simpler, and lend themselves more readily to “technification” and formalization in technical systems than in organisms. Consequently, they can be studied and learned about with a certain ease. These same processes are very complex and un-generalizable in the case of institutions. Consequently, much of the learning required to implement them properly can only be acquired through personal experience. Organisms occupy an intermediate position on this scale.

The following pages will apply the foregoing concepts to the case of business organizations. We hope this brief discussion will help outline the attitude with which the study of business management as the management of a human organization must be approached.

A business firm is a human organization, but a particular type whose purpose is to produce and distribute wealth. The production and incentive systems of any business organization attempt to regulate the production and distribution of goods and services. All the people who take part in running a company do so in order to obtain certain goods and services, among other reasons. One should note that in the previous sentence, the words “among other reasons” are included because omitting what these words indicate would mean a reduction of business firms to technical systems.

Not only is this a common error, it lies at the root of much of what is written about business. Indeed, it is not equivalent to say that all the people related to a company (promoters, managers, workers, customers, suppliers, etc.) seek to satisfy economic motives (obtain certain goods or services in exchange for their contribution) and to say that the sole

motive for their involvement is to obtain these goods or services.

It is not even appropriate—in most cases—to say that the sole motive is an economic one. It is probably, though not always, the sole motive for customers and suppliers. It is also often the case with shareholders or those who provide the capital. However, it is virtually never the sole motive in the case of managers, employees and promoters of the business idea. It may in some cases be the dominant (but not the sole) motive, but in many other cases, even this is not so.

The range of reasons why human beings become involved in organizations whose purpose is to create and distribute material goods (i.e. companies) is as broad as the range of reasons that induce them to become involved in any other type of organization. However, a characteristic feature of business organizations is their generality (they affect everyone) and the importance of economic motives (obtaining of goods and services). This is so because the company's very purpose is to produce and distribute material wealth.

The constant presence and importance of this kind of motive in business firms is the reason why one tends, when explaining how they must operate, to omit all the other motives. Thus, theorists of the nature of business firms often use the technical system as a model to represent them.

However, this in itself is not so serious. The problem is that managers of companies make the same mistake, trying to run them like simple technical systems. The reason for this partial blindness is not difficult to explain; at the same time, it shows why this blindness is such a common mistake.

Whenever a manager's actual motivations are dominated by economic considerations, he will tend to manage as if they were the only ones that truly counted. If he were to discover that his personnel had other types of motives, he would address them if by so doing he could save money (he would try to satisfy these motives if he could save what he would have to provide in compensation for their non-satisfaction). It is easy to see that in some companies the basic strategy of many negotiation and participation processes is to manipulate personnel psychologically, trying to “motivate” them as cheaply as possible. In such cases, the company is not conceived of as an organism but as a mere technical system from which points of friction must be eliminated.

A company can be conceived of as a technical system, an organism or an institution, both in the way it is explained and in the way it is run. Company managers do not usually waste time and effort making explicit the models they use to make their decisions. Instead, they confine themselves to making decisions on the basis of the model they have interiorized through their experience (that is, through their own practical view of the company). This model expresses a manager's beliefs and is determined by the quality of his motives for performing his mission. These beliefs are the product of the values targeted and actually achieved in the course of previous decisions. The decisions he makes now enable us to infer what his beliefs about reality are and, consequently, the motives and values that actually govern his decisions.