Organizations are among the most significant structures through which society functions. Through its business, civic, social, and religious organizations, society carries out much of its economic and social life. Understanding how organizations work, how they are designed, how they change through internal processes and can be changed from without, as well as how change can be guided, is of immediate interest both to those who work in organizations and those who study them.

In today's fast-paced, fast-changing, and increasingly competitive world, the effectiveness of business organizations has become the focus of considerable attention. When such organizations falter or fail, the consequences can be far-reaching, even devastating. Business organizations provide a rich, complex, but barely tapped lode of knowledge about organizational performance and the processes of change. Although research approaches in this field are still in their infancy and need to be further developed and validated, the field is fertile ground for greater understanding of organizations, organizational performance, and organizational change broadly conceived.

Organizations through the ages have been characterized by a tension between the forces of stability and the need for change. Much of the strength and utility of organizations comes from their inertia, helping to make them reliable in what they do and accountable for what they do. Indeed, some

argue that their tendency to inertia can provide organizations with some short-term competitive advantage. From organization theory and much research, we know that organizations do not adapt readily or easily; many organizations that change do so in ways that are neither successful nor effective. Organizations must continually balance the forces of stability and the push for change.

Nevertheless, organization theory and managerial wisdom suggest that, to survive, organizations must be compatible with their environments, which include all the external social, economic, and political conditions that influence their actions. In the current environment of rapid technological and societal change, organizations must adapt quickly enough to maintain their legitimacy and the resources they need to stay viable. In the committee's judgment, the greatest opportunities for enhancing organizational performance today are likely to be found on the change side of the equation. The major focus of this book is therefore on considering organizations in the context of change.

Organizations today must function and attempt to flourish under conditions that are complex, rapidly changing, and in some respects unprecedented. The stakes are high and the risks are great. Of the 500 largest firms on the first such list published by Fortune magazine in 1956, only 29 remain. Voluntary mergers and joint ventures, hostile takeovers and poison-pill resistance to them, conglomerations and divestitures have created an organizational environment of prolonged turbulence.

These changes are manifestations of a deeper and more general transformation: the shift in the developed world from an industrial to an information economy. As recently as 1960, about half the workers in industrialized countries were involved in making things. By the year 2000, no developed country is likely to have more than one-eighth of its workforce performing such tasks. Only the earlier Industrial Revolution and the more gradual mechanization of agriculture were comparable in their magnitude of change and ramifying societal effects.

The driving force of these changes is technological and primarily involves information technology. This technology, which has been created within the lifetime of today's adults and which today's children take for granted, has developed at a remarkable pace. To illustrate: a musical greeting card that plays ''Happy Birthday" has more computer power than existed in the entire world before 1950. A home video camera has more processing power than the original IBM 360 mainframe computer.

Our computer-transformed capacity to generate, store, analyze, and communicate information is changing the way we live, work, and think. New

possibilities, new opportunities, and new demands arise at every level, from the individual to the transnational and the global.

The request for this inquiry into the nature of organizations and organizational change came from the U.S. Army Research Institute. Like other organizations, the Army of the 21st century will face a world of new technologies, new and multiple missions, and new threats and opportunities. Under today's budgeting constraints, the challenges posed by these changes must be met with fewer personnel than have been available in the past. The Army must consider the possibility of utilizing new organizational designs, different ways of conceiving of leadership, changed value systems, and mission challenges that call for very different modes of preparation and training. The Army shares these concerns with other organizations in both the private and public sectors.

Accordingly, the Army Research Institute asked the National Research Council to form a committee to examine issues related to the improvement of individual and group performance in organizations. The committee was asked to perform the following tasks:

1. To assess the implications of organizational change and redesign for performance;
2. To evaluate new approaches to management designed to improve individual, team, and organizational performance;
3. To review and evaluate approaches to organizational leadership, including techniques for leader development, training, and motivation;
4. To develop a framework for evaluating approaches to intra- and interorganizational collaboration; and
5. To review and evaluate approaches to the management of conflicts within and between organizations, with special attention to implications for new Army missions.

The committee's charge is similar in approach to that which guided its previous work on individual and team performance: to summarize current knowledge in the field but not to focus specifically on the military. Elaborating its charge to the committee, the sponsor noted that the Army is cognizant of its own organizational features; of more use to it would be a summary and explication of the wider organizational literature in a way that is accessible to the informed but not specialized reader. The Army will judge for itself how much of the committee's work is applicable to its organizational processes and problems. This report therefore does not provide recommendations for organizational changes in the Army or other branches

of the military, nor does it provide a research agenda for an agency that sponsors research on organizations. Only one topic, conflict management, is explicitly geared to current challenges faced by military organizations with changing missions. We do, however, include military examples in other chapters to illustrate key concepts.

The committee's work over a 10-year period for the Army Research Institute resulted in three previous reports. The types of performance covered in those previous studies include individual performance, such as the execution of learned motor, cognitive, and social skills; performance as changed mental or emotional states; team performance and cohesion; joint decision making; and coordination. We continue to focus on these types of performance here. For example, many of the performance competencies discussed in the chapter on leadership are the result of developing basic cognitive and social skills. Similarly, the challenges of new military missions discussed in the chapter on conflict management require the use of interpersonal skills.

In this volume, we are concerned with the connections between individual or team skills and the way organizations perform. For example, in the chapter on organizational culture, we discuss how the relationship between culture and performance is mediated by the way culture influences thoughts and feelings, and we pinpoint some of the cultural levers that can be used to influence performance. In the chapter on conflict management, we discuss the relationship between individual training and mission effectiveness, noting that effective soldier performance does not necessarily translate into overall mission effectiveness.

Performance is also considered in the context of interorganizational relations. The concern here is with the way different organizations combine to create new entities or cooperate to meet new challenges. When entering into such alliances, organizations need to consider the extent to which each contributes value as it attempts to accomplish its objectives. The extent to which each organization's strategic objectives are accomplished can be assessed in terms of the value added by the alliance in accomplishing those objectives. This includes the efficiency of joint or integrated operations, the congruity or fit of the structures and cultures of the merged organizations, changes of impact on the sector in which the combined organizations function, longevity of the relationship, and—in the case of multilateral operations—mission success.

To provide a survey of current knowledge about aspects of organizations that may affect performance, this book draws on the nascent research that is available on organizational design, culture, leadership, interorganizational relations, and conflict management. It is not a primer on organizations, nor is it a typology for comparing different types of organizations. The topics covered are regarded as the ones most responsive to the charge and relevant to the issues currently confronting the Army. Other topics of organizational science not covered in this survey include organizational development (e.g., Burke, 1994), institutional theory (e.g., Powell and DiMaggio, 1991), organizational learning (e.g., Argyris, 1993), and organizational economics, including agency theory, game theory, and transaction cost analysis (e.g., Eisenhardt, 1989; Dietrich, 1994; Putterman, 1986).

Figure S-1 is a schematic presentation of some themes that are useful in thinking about the aspects of organizations that this book addresses: what an organization needs, what an organization is, and what an organization does. In Part I we begin by considering organizational design. We then look at three popular techniques for attempting to improve organizational performance: total quality management, downsizing, and reengineering. We go on to explore other important aspects of organizations: culture, leadership, and interorganizational relations. In Part II we focus explicitly on the Army and its changing missions, looking at ways to increase its capacity to deal with new challenges.

The diverse and fragmentary nature of the research evidence available to us has important implications for what we can say about organizational performance. Studies of factors that may influence organizational performance include laboratory simulations, field studies, comparative and organization-specific surveys, and descriptive accounts of organizational processes and interventions. The vast majority of this research is carried out in private-sector organizations, which often place restrictions on the use of proprietary data. Indeed, much of the available information comes from the practical experience of consultants and managers.

The different analytical approaches do not address the same issues or even employ the same standards of proof. Each type has its strengths and weaknesses, and each implies its own definition of what kinds of evidence are most relevant and useful. As is the case in other areas of behavioral research, looking at a single study or only a few studies does not yield results that are definitive. Consider, for example, studies on the effects of total quality management on organizational effectiveness. The studies examining

FIGURE S-1 Organizational functions, processes, and performance. Note: Shading indicates topics not considered by the committee.

this question suffer from a variety of flaws, including inadequate samples, problematic measures, and incomplete analyses or interpretations. This does not mean that the literature offers no insights. If the flaws differ across studies and the results of a number of studies converge, the convergent results can indicate the direction of effects.

For that reason, whenever possible, we have grounded our judgments in the accumulated results of multiple studies. In some areas, such as organizational culture, this was not possible; the committee's efforts to answer certain questions were hampered by the lack of adequate research. In other areas, such as leadership, we relied in part on technical reports that may not have benefited from such quality control mechanisms as peer review. In still other areas in which there is very little published research, such as on new organizational forms, the committee relied primarily on its collective informed judgment.

Another problem is the differing levels of analysis of studies on organizational performance. On some topics, we draw on studies of small groups

for insights about organizational processes that have not been the subject of rigorous research. For example, findings from social-psychological studies on intergroup relations and negotiation contribute to an understanding of alliances and mergers. Similarly, experimental findings on the way people resolve conflicts in negotiating or mediating roles contribute to an understanding of the sorts of contact skills needed to meet the challenges of peacekeeping missions. When used in conjunction with nonexperimental analyses of the broad contexts within which organizations function, these studies help to elucidate the factors that may lead to effective collaborations or missions. On other topics also, the committee moves between micro- and macro-level analyses of organizational performance and, in so doing, learned about some of the difficulties involved in attempts to integrate the different kinds of studies conducted at these levels.

The committee's key conclusions reflect broad themes that cut across the chapters in the book.

• The Importance of Context. Organizations function best when they are appropriately matched to their environments. For contemporary organizations, the environment is increasing in complexity and instability, both continuously and rapidly. The constant change in the environment is prompting complementary changes in organizations looking for an optimal match between their missions and their external conditions.
• Changing Organizations. Organizations are constantly changing, their boundaries are difficult to define and vary over time, some are expanding their missions and taking on new objectives, and others are cutting off functions and focusing on their central objectives. A shift in their missions is what leads to changes in almost all aspects of organizations.
  
  There is no universal formula for producing effective organizational change; once a method of change has been selected, there is no widely accepted procedure for implementing it. And because of the complexity of the rapidly changing environment, it is not feasible to prescribe a standard strategy for change to better enable the organization to fit into its environment. A strategy that is beneficial for one organization may be inappropriate for another, even one with similar characteristics. Any strategy for change must be adapted to the particular set of conditions in place at the time.
• Research Lags Practice. Thirty years ago, organizational research was ahead of organizational practice. Research investigated new and potential practices and informed their development and implementation in the organization. The rapid growth in the complexity of the environment and

• the tempo of organizational change have altered the sequence of this relationship: research now lags practice. Given this and the fact that high-quality research takes time, organizations need a rational basis for developing strategies for change. When knowledge is lacking, organizational managers look for help wherever it can be found.
  
  That explains the large and expanding market for popular approaches to organizational transformation. Although some of the current prescriptions may have utility, most of them will turn out to be passing fads. Yet these ideas should not be ignored; subjecting the most popular ideas to systematic evaluation provides a more rational basis for adopting or rejecting them.
• Research Base Weak. Despite the progress of pioneering researchers in certain areas, both the research base and organizational theory are in their infancy. Consequently, neither one is complete enough to derive strategies for change in a rational fashion. There is even a lack of descriptive taxonomies to provide a framework to carry out research. Much of the difficulty lies in the accessibility and complexity of the subject matter, not in any lack of effort on the part of organizational theorists and researchers.
  
  The committee is therefore unable to draw conclusions, based on scientific evidence, on what does or does not work to enhance organizational performance in the areas studied. Although there are myriad innovations and claims, there is nothing we can point to with scientific support that invariably results in effectiveness. This negative conclusion includes the widely studied techniques of total quality management, downsizing, and reengineering. Negative findings, however, can embolden people to experiment and evaluate their experimentation.
• Making Progress. Research is more likely to address practical issues if it is guided by a conceptual framework that specifies relationships among the various influences on organizational performance, which are the subject of this book. Without such a foundation for research, results are likely to address only the narrow issues of whether one or another popular approach is more plausible. Developing theory and doing research on these relationships should take priority in any research agenda on organizational performance.
  
  In carrying out research on interventions, such as total quality management, a primary challenge is the development of precise and bounded measures of effectiveness. Evaluations work best when the intervention is clearly defined and consistently applied and when the resulting outcomes are clear, cogent, and measurable. In this connection, it is significant to note that measures of satisfaction are not necessarily measures of effectiveness. Each component of an organization's effectiveness, like its overall effectiveness, can be assessed only in terms of its contexts.