By Ryan Quinn
Back in graduate school, “Institutional Theory” was a topic I was sure I would never be interested in—just another concept presented in my first-semester Sociology of Organizations class.
Based on my reading at the time, it appeared that the purpose of institutional theory was to explain why organizations looked so much alike. For example, most for-profit corporations are hierarchies with CEOs, CFOs, and COOS. They have the same functions, conform to the same economic norms, and even copy each other’s practices, such as total quality management or re-engineering.
And it did not stop with corporations. Schools look like other schools, churches look like other churches, and so on.
I did not disagree with institutional theory. Certainly there are differences between individual organizations. But once you start to look, it is striking how similar these types of organizations are to each other. So the theory seemed to hold up well enough under scrutiny.
My problem with institutional theory was just that I found it boring. Who cares if they all look the same? Or that the people who participate in organizations tend to conform to what the people around them do? I was interested in the outliers—the people and companies who did exceptional things.
Institutions Change…and So Do Research Interests
I did not know it at the time, but even as I was trying to keep my eyelids open while reading my assignments, change was afoot among institutional scholars. I was not the only one who was curious about the exceptions—about how people and organization can defy convention, or how institutions change.
First, some scholars began to study institutional entrepreneurship—the people and organizations who actively try to change the conventions of our society—such as the people who made it legitimate to merge accounting and consulting practices, initiated alternative dispute resolution as an alternative to trials in courts, brought diversity management into different countries, and introduced reduced working hours for resident physicians into hospitals.
After a while, other scholars began to investigate institutional work more broadly, recognizing that entrepreneurship is only one kind of work that people do with institutions. In addition to trying to change institutions, people try to create and preserve institutions and also to fight against institutional change.
Why Should Non-Academics Care?
So why should someone who is not a scholar care about this work? I think there are two reasons.
The first reason is that people tend to take institutions for granted. In other words, institutions are things people assume are fact—“just the way things are, always have been, and always will be”—when they need not be fact.
For example, when people assume that personalities are “facts” that cannot be changed, that there is no other business model that can be used to compete in a given industry, or that their practices are ethical when others question those ethics, we are dealing with institutions.
Sometimes these institutions may be helpful, but sometimes they hold us back. Being able to see and understand how to create, change, or maintain institutions can be a powerful tool in a manager’s toolkit.
The second reason is because there may be ways—as a new paper by Warren Nilsson suggests—to engage in positive institutional change. Nilsson makes these important points:
This is a topic I intend to look into more closely. It is part of what makes organizations mysterious, at times, to the people who participate in them (“Why are those people behaving that way?”), and gives managers tools for co-creating positive opportunities from what may seem mysterious or irrational.