900
‘THE REPRESENTATION OF VALUES IN SYSTEM DYNAMICS MODELS
OF ORGANIZATIONAL PERFORMANCE,
James BE. Ryan
The Nelson A. Rockefeller College of Public Affairs and Policy
State University of New York at Albany
Albany, New York 12222
ABSTRACT
A theoretical framework from the field of Organizational
Theory called the "Competing Values Approach to Organizational.
Effectiveness" was used to analyze five System Dynamics models
of organizations, This framework is a perceptual ordering of
criteria that are often used to evaluate organizational perfor-
mance. An example of the procedures involved is discussed using
Richmond's "Organization Evolution" model. The purpose of the
exercise was to (1) determine if it was possible to express the
behavior of a dynamic model in terms of the Competing Values
Framework, (2) discover what conceptual and technical problems
might arise, and (3) draw some conclusions about the usefulness
of the Competing Values Approach to system dynamicists and the
usefulness of System Dynamics to organizational theorists. It
was found that it is possible to formulate dynamic models in
terms of the Competing Values Framework. However, conceptual and
technical problems arise since organizational theorists and
system dynamicists tend to work at different levels of abstrac-
tion. The Competing Values Approach may be used as one of many
theoretical frameworks by system dynamicists as an aid to organi-
zational inquiry. Organizational theorists, on the other hand,
can make use of System Dynamics since it allows a researcher to
study structure and complex interactions over time.
INTRODUCTION
The study of organizational performance involves value-
based judgments. This is the. lesson of a framework called "The
Competing Values Approach to Organizational Effectiveness" [1].
This framework is a perceptual ordering of eight sets of
eriteria which are often used to measure organizational
performance. These criteria can, in turn, be shown to be
related to a certain view of organizations which is held by
those who study them. This approach was applied to five
selected system dynamics models of organizations. The
application of this framework showed that most of these models
focus on only a few sets of performance criteria and that these
sets varied with each model. This is not surprising since most
models of organizational effectiveness in the literature are
narrowly focused and the method of system dynamics also
encourages such a focus. Most of the dynamic models examined
either ignored or only implied that there might be a broader
spectrum of criteria used to measure organizational performance.
The application of the "Competing Values Approach" also
demonstrates the conceptual difficulties involved in translating
the constructs and operationalizing the concepts of organiza-
tional theorists in order to present something useable to the
system dynamicist. Each can make use of the other's insights.
However, one should understand that there is not a perfect
complementarity between the method of System Dynamics and the
field of organizational theory. Research that may be useful
to both the system dynamicist and the organizational theorist
will have to proceed with some caution’ and care. In this paper
I will (1) explain "the Competing Values Approach to Organiza~
tional Effectiveness," (2) give an example of its application
to a dynamic organizational model, (3) show the results of its
application to other models, and (4) summarize some of the
issues raised by this exercise.
{HE COMPETING VALUES APPROACH TO
ORGANIZATIONAL EFFECTIVENESS
This approach attempts to bring order to a field that is
noted for its confusion. "Organizational effectiveness" has as
many meanings as there are theories of the organization. Much
of the effectiveness literature centers on "goal accomplish-
ment." Others criticize the goal paradigm. Some would iudge an
organization effective if it is "efficient." Still others see
the most important criteria for effectiveness as how smoothly
the organization runs. Approaches and opinions continue to
multiply. Growth is often considered the sign of a successful
organization. Those in the human relations school evaluate
organizational performance on the basis of how well off the
employees perceive themselves to be. How one approaches the
study of organizational effectiveness depends on which criteria
one is using.
The problem demonstrated by the use of so many different
criteria is that “organizational effectiveness" is a construct
or an abstraction that cannot be objectively specified. The
criteria for effectiveness are concepts which may be operation-
alized in specific terms. But, when a model of organizational
effectiveness is presented in terms of a few criteria, only a
small part of the total construct space of "organizational
effectiveness" is examined. An organization may be effective on
the basis of one criterion and ineffective on the basis of
another, Thus, no clear idea of "organizational effectiveness"
emerges. We see parts, but not the whole (2, pp. 107-112].
The effort to map the construct space of organizational
effectiveness with proper criteria has been, until recently, a
largely intuitive or “arm chair" effort. Following Pennings’
and Goodman's call for an empirical approach [3, p. 165], Quinn
and Rohrbaugh conducted a series of studies which involved
gathering judgments about organizational effectiveness from
recognized experts in the field. Using a modified list of
Campbell's [5] criteria for measuring organizational effective-
ness, they impaneled experts who gave judgments about the simi-
larity and dissimilarity of every possible pair of sixteen items.
With these comparison ratings, it was possible to identify the
cognitive dimensions by which these comparisons were made.
Using multi-dimensional scaling, it was possible to identify
three dimensions which were most prevalent in explaining the
variance among comparisons [1, pp. 122-130].
902
Quinn and Rohrbaugh found that the three dimensions which
emerged can be taken as independent axes or continua that
represent core values shown in Figure 1, The vertical axis
represents a set of values ranging from an emphasis on flexi-
bilitv to an emphasis on control. The horizontal axis indicates
a continuum ranging from an internal focus to an external focus.
Risecting both axes, and running through the third dimension is
the axis which represents a set
£ values ranging from an
emphasis on means to an emphasis on ends. This axis is repre-
sented in two dimensional space by having these means and ends
imbedded in each of the four quadrants. These three axes taken
together represent the three sets of core values of the
Competing Values Framework.
Associated with means and ends in each quadrant formed
by intersection of the horizontal and vertical axes are eight
sets of performance criteria, sixteen in all, which were drawn
from Quinn and Rohrbaugh's study. Figure 1 presents the distri-
bution of these criteria along with the core values. tJ
Quadrant I, the two sets of criteria are adaptability -
xeadiness and growth - resource acquisition. The former is a
means, while the latter is more of an end. In Quadrant II,
cohesion - morale is a means, while training - value of human
resources is an end. In Quadrant III, information management -
communication is a means, while stability - control is more of
an end, Finally, in Quadrant Iv, planning - goal setting tends
to be a means, while productivity - efficiency is an end.
pee
Tne date eansin stots
ENDS f MEANS
—
wane | a
MEANS — Cohesion, t ENDS
a '
! Growth,
ft Resour
. ‘Acquisition
\
is
' EXTERNAL
+ 1. EE
at =
—
en
‘Communication,
Productivity.
Efficiency hips
MEANS
stability,
Control Setting
ENDS MEANS
F OAL MODEL
IIFINTERNAL PROCESSES MODEL WW-RATIONAL Gi
903
Listed in the four corners of Figure 1 are four general
models which encompass the maior classifications of organiza-
tional models found in the literature. Examination of the
organization as an open system center on its sensitivity to the
environment, hence the value on an external focus is shown.
This view of the organization also concentrates on the organiza-
tion's effort to acauire resources from the environment in order
to grow. To deal with the environment, the organization must be
adaptable which requires a hich emphasis on the other core value
of flexibility.
The human relations model has, as its central concern, the
people inside the organization. Thus it has an internal focus.
Group cohesion and morale are valued as means to the end of
making employees feel more satisfied with their work. The value
of human resources and the training of individuals require the
organization to emphasize flexibility in its policies rather
than rigid rules.
The internal processes model shares the internal focus of
the human relations model , but also emphasizes control rather
than flexibility. The model concerns itself with the technical
side of the socio-technical system. Means include informa
communication that is used to provide stability and control
within the organization.
Finally, the rational goal model of quadrant TV emphasizes
control through planning and goal setting in order to produce
goods and services efficiently. These goods and services are
then to be delivered to customers who form part of the "task
environment" of the organization [4, p. 203]. This view of the
organization also emphasizes the external focus of the open
systems model.
As can be seen by the above description, each of the four
general models has two complementary or neighboring models that
share the same part of the control - flexibility or internal -
external continuum. Each model also stands in obvious contrast
to its counterpart in the opposing quadrant with which it shares
no common part of these two continuua. For instance, the open
systems model is obviously different from the internal processes
model in environmental orientation, control values, and perfor
mance criteria. By the same token, Figure 1 suggests that a
researcher who is strongly attached to the goal paradigm of
guadrant IV is more likely to pay attention to issues involving
planning processes rather than group processes which is the
focus of the human relations model in quadrant II.
In summary, the "Competing Values Approach to Organiza—
tional Effectiveness" as presented in Figure 1 provides an
inteqration of theories found in the organizational literature
in general. More specifically, it provides a framework for
observing how different performance criteria are associated with
different views and models of the organization. Because of its
comprehensiveness and parsimony, the framework is useful for a
variety of purposes including generating hypotheses, studying
the work of other researchers, field research, and organiza-
tional diagnosis.
Example of an Application
The latter two purposes have been the subject of recent
attempts to examine what performance criteria and values are
perceived by Employment Service employees to be emphasized in
their organization. Employees answered questionnaires that
tentatively explored issues involving the eight sets of perfor-
mance criteria of the Competing Values framework. Using an
appropriate scaling and after aggregating and averaging, it was
possible to plot scores directv on Figure 1 [5]. What emerges
is the employees' general perception of the organization's value
profile. A generic example of a tvpical studv's output is given
in Figure 2.
This particular profile would suggest that people in the
organization under study perceive that a strong emphasis is
placed on control of internal processes for the purpose of
efficient delivery of good and services. Since every organiza-
tion has different goals and processes, the ‘operationalization
of performance criteria would vary with each organization
studied. But, although specific items would vary, the general
framework would remain the same. The "Competing Values
Approach" gives the researcher a tool which allows the examina-
tion of a broader spectrum of organizational performance areas
than that which might be covered had the organization been
approached on a more intuitive basis.
APPLYING SYSTEM DYNAMICS TO THE COMPETING VATUES APPROACH
The procedure for the application of the Competing Values
Approach +o dynamic models involved operationalizing as manv of
10
FIGURE2:
‘Example of an operationalization of the Competing Values Approach
ILHUMAN RELATIONS MODEL {OPEN SYSTEMS MODEL
FLEXIBILITY
ENDS GA MEANS:
Value ot Human |
Resources,
Framing
"Adaptability,
Readiness
“Growth,
Resource
‘Acquisition
INTERNAL, NU EXTERNAL,
i wale be eb eto eet
Bieerineabend sa6
Focus
Information
‘Management,
‘Gommunication
1
1
MEANS
ENDS
coer
Setting
MEANS
+
CONTROL
IIMINTERNAL PROCESSES MODEL IV-RATIONAL GOAL MODEL
IL
the sixteen performance criteria of the framework as possible in
in terms of a model's variables, Rquations definina the rele-
vant performance criteria as a function of an original variable,
or set of variables, were added to each model and functioned as
simple output variables with no feedback interactions.
An Example
The system dynamics model most amenable to this approach
was Barry Richmond's effort which illustrates an organization
undergoing structural change [6]. Richmond addresses system
dynamicists in this study. His purpose is to suggest that there
is a justification for using special limiting functions to model
significant changes in a broad range of social and physical
phenomena [6, p. 1]. Traditionally, these functions are
considered to be poor technique. His specific example is of
interest to organizational theorists.
Richmond draws on Greiner's paper, "Fvolution and Revolu-
tion as Organizations Grow” [7]. Greiner suggests that
organizations undergo structural changes as they arow from
shoestring enterprises to large, product-diversified entities.
At some point, this growth will cause problems within the
organization. Richmond starts from this point and develops a
model of a generic organization.
Base Run
Whe firm is founded by a few technically oriented entre-
preneurs who have little liking for formal management
905
12
activities. The time available is distributed among four major
activities which include sales, research and development, manu-
facturing, and formal internal communication which is used to
coordinate the other activities and to motivate a small group
of employees who are able to identify with the product. There
is no problem as long as the firm holds a steady market share
and the firm resembles a large group rather than an organiza-
tion. There is no formalization of procedures under these
conditions, and no need to move toward functional specializa-
tion or professional management.
Figure 3 summarizes the behavior of the firm. As the
market share of this organization begins to grow. The employ-
ment of general workers surges and the problems of the firm
begin. In the absence of other managerial initiatives in the
face of a growing workforce, identification with the product
falls, leading to a fall in group motivation, Manufacturing
costs climb while the initial surge in sales depletes inventory.
With the addition of more employees, none of whom are
specialists, more time is needed for informal communication to
keep up morale and to provide control and stability. Yet, less
time is available for each employee. The larger absolute
amounts of time required for other activities also increases yet
efforts at all activities must be spread more thinly in relation
to total output. Falling morale on the production line and
inattention to research and development leads to a decline in
product quality which, in turn, leads to falling market share
(6, 14-18].
<M
ACMS=S — MDPNPE
=D
De:
NOE=N
906
13
FIGURE 3: Original mode! output representing the firm
Boz
328 a
se xX 1
x i
x
x 1
'
1
t
1
1
SPESIALISTS
8 1
gif tes
1 MOTIVATION FROM
DEDICATION TO PRODUCT
14
At year 3.5 a combination of the owners' perceptions of a
need for change and their bias toward growth (two exogenous con-
stants in the model) triggers a policy change. The firm trans-
fers general employees to specialized functions and hires and
trains new employees in specialities. The number of specialists
depicted in Fiqure 3 is the summation of specialists in research
and development, sales, manufacturing, and functional managers.
With this change, the inefficiencies of past operations are
eliminated, more time is available for communication and the
firm regains and eventually exceeds its original market share
(6, pp. 18-24].
Figure 4 illustrates the growing firm's changing value
profile as policy is changed. At year 3.5 the emphasis on
adaptability begins to fall since the firm is now beginning to
use functional specialists. As this use proves more successful
with time, the need for change declines. ‘The emphasis on growth
climbs from a "normalized" value of "1" to "2" at year 3.5 which
xepresents the firm's owners predeliction for the policy change.
The emphasis on efficiency rises as the hiring of more func-
tional specialists and professional managers reduces manufac-
turing costs, Stabilitv and communication initially fall as
many general employees are hired. It initially rises as these
employees are transferred. It then falls as the firm suddenly
finds itself with many new functional specialists. After this
point, it slowly climbs as prdduction efficiencies allow for an
increasing proportion of the total time available to be devoted
to communication and the maintenance of stability which communi-
=c
TRAINT MORL=M STAB=S COMM:
ADAPT=A
EFF.
=6
Ro:
5.0000 GEATMSC
3.7500
2.5000,
i
FIGURE 4: Output representing emphasis on “Competing Values" criteria
ire)
0.0000,
SO.GET
SC.TMGE
GROWTH
foe)
2.5000
XXKXKXX PE EOEHE
fe)
a if
5.0000
Ay
7.5000
/
HX KKK KKK KR KKK XXX XKXKXK
1
110,000
907
16
cation brings. Training of employees can be emphasized after
functional specialities are delineated and worker morale climbs
due to increased communication.
Figure 5 illustrates a cross-sectional analvsis of the
firm's value profiles for years 2.5, 7.5, and 10 respectively.
The plotting units for this figure have a maximum of five
points. The values are plotted using the output from Figure 4.
Plotting from Figure 4, we see that the profile of the firm at
year 2.5 indicates a low level of emphasis in all quadrants
because of present policies. But, by year 7.5, a new growth
policy has been put into effect and the emphasis on growth is
twice what it was at year 2.5. Emphasis on morale and training
also differs dramatically. By year 10, it can be seen that
there are significant differences in the firm's value profile
from that of year 2.5. Adaptability is down, growth and
efficiency have increased, all criteria in quadrant II have high
emphasis, and criteria in quadrant III are building toward
“normal” levels.
Formulations for Criteria Variables
The formulation for each criterion variable or set of
criteria variables is the ratio of the sum of the model vari-
ables that could be translated into a criterion of the Compet-
ina Values Framework at anv given time over the sum of these
same variables at time zero. This ratio is expressed
generically as:
Sum of criterion variable(s) at time x
Sum of criterion variable(s) at time 0
908
W
FIGURE 5:
Value profile of firm
for selected years
(a)Firm at yoar2.5
(©) Firm at year 7.5
(©) Firm at year 10
18
Such an expression allows the initial values of each criterion
or set of criteria to be "normalized" at a value of "1" at time
zero. Tn the case of Richmond's model, only one variable was
selected to represent at least one of each criterion in each
criteria set of the competing values framework with the
exception of planning - goal-setting.
Space limitations prevent a full discussion of the
rationale for the choices of model variables which represent the
seven sets of criteria for organizational effectiveness that are
depicted in Figures 4 and 5, However, listed below are the
equations which were added to Richmond's model which indicate
one criterion from each of seven criteria sets and the model
variable used to operationalize this criterion.
ADAPT.K = PNTCA.K
ADAPT - emphasis on ADAPTability
PNICA - Perceived Need to Take Corrective Action
GRO.K = SRGO.K
GRO - emphasis on GROwth
SRGO - Switch Reflecting Growth Orientation
MORL.K = LEM.K
MORL - emphasis on MORabe
LEM - Level of Fmployee Motivation
TRATN,K = LEM.K
TRAIN - emphasis on TRAINing
LEM - evel of Employee Motivation
COMM.K = ICHPT.K
COMM - emphasis on COMMunication
TCHPT - Internal Communication Hours as a Percentage of
Time available
STAB.K = ICHPT.K
STAB - emphasis on STABility
ICHPT- Internal Communication Hours as a Percentage of
Time available
EFF.K = DE.K
EFF - emphasis on EFFiciency
DE - Differentiated Employees
Planning and goal setting are not specifically addressed in the
model.
CONCEPTUAL DIFFICULTIES
The formulations shown above are by no means the only ones
which may have been used to express the performance criteria of
the Competing Values Approach to organizational effectiveness.
Richmond's model has over three hundred equations and over two
hundred and fifty variables. Many different combinations of
these variables may have been used to produce formulations. To
ask why these particular formulations were used and not others
is to begin to explore some of the difficulties that arise when
attempting to build "crosswalks" from one field to another.
909
20
Table 1 lists those models which were examined using the
Competing Values Framework and specifies, through the use of
“plus” signs those criteria which seemed to be conceptually easy
to operationalize in terms of each model's variables. At the
bottom of Table 1 is the arrangement of the three core criteria
to indicate where the performance criteria appear in terms of
the Competing Values Framework. The lesson of Table 1 is simply
that these models tend to focus on a relatively narrow range of
performance criteria compared to what might have been treated
explicitly. As stated at the beginning of this paper, such a
focus is characteristic of most organizational models from all
fields. In many cases, this narrow focus is proper since many
aynamiz models tend to be problem specific in their level of
inquiry.
Table 2 indicates those performance criteria that were
either difficult to operationalize in terms of a model's vari-
ables and those criteria which appeared to be totally missing.
Those criteria which appear to be completely missing, shown by a
double "minus" sign, indicate for the most part, that these
criteria wouldn't be considered relevant to the problems bein
defined or the questions being asked. Of more interest are
those criteria which are indicated by a single "minus" sign,
These indicate a @ifficulty in moving from a level of abstrac-
tion to a more concrete level that is often characteristic of
system dynamics models.
Each of the criteria listed in the Competing Values
Framework is relatively easy to operationalize provided one is
E OF CONCEPTUAL, DIFFIGULTY-CRI
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23
already aware of this outlook. Then, as shown in Rohrbaugh's
[5] study, one can direct research to properly inquire about
each criterion. However this exercise, as represented in Tables
1 and 2, began with the restriction of taking other people's
view of the organization as a given. From this restriction, it
is relatively easy to provide a classification of other people's
work, a form of which appears in Table 1, But, since the
performance criteria are really presented at the level of
abstraction of a general concept, they may be only tenuously
identified in an organization's own terms fi.e., model vari-
ables) unless a model is focused on an area of performance that
is directly associated with these criteria.
CONCLUSION
A discussion of the differences between the outlooks and
methodological approaches of System Dynamics and Organizational
Theory is beyond the scope of this paper. Important differences
are implied in the description of this study. However, some
tentative conclusions can be drawn from this particular effort
and they are discussed below.
The results of Tables 1 and 2? do not suggest that system
ists should not study organizations. The short history
dynam:
of System Dynamics contains many examples of insightful inquiry
into the workings of businesses and institutions. The results
of this effort only suggest that, while it is possible to create
formulations which express dynamic organizational models in
terms of a different framework, this particular type of exercise
gut
2h
may only be of limited usefulness to svstem dynamicists. Those
who work with dynamic modeling may legitimately continue to use
theories from other fields in order to construct models and the
Competing Values Approach could be another useful framework with
which to work when inquiring into some facet of organizational
behavior.
This effort also suagests that organizational theorists
could find more uses for System Dynamics. The fact that it is
possible to create the kinds of formulations demonstrated in
this paper indicates that the methodology of System Dynamics
could be more widelv used among researchers who wish to study
organizational problems. System Dynamics is eminently suited
for the study of structure and complex interactions that produce
changes over time. Dynamic modeling allows the researcher to
posit important relationships among variables in a sequential
fashion without losing the ability to observe and examine the
final results of these relationships. The ability to formulate
these relationships and the ability to use theory-driven models
to produce a convenient form of longitudinal analysis would be a
valuable asset. It is also possible that this approach would
help to explain some of the inconsistencies that appear in much
of the organizational research that uses standard data analysis
to generate hypotheses about certain "key determinants" that
explain organizational behavior. So, while the methodology and
outlook of System Dynamics is not entirely compatible with the
field of Organization Theory, more use of the possibilities that
do exist could benefit both fields.
{1
[2]
(31
{4]
{5]
{6]
(77
912
25
References
Quinn, Robert E. and John Rohrbaugh, “A Competing Values
Approach to Organizational Effectiveness," Public
Productivity Review, June 1981, p. 122-140.
Cameron, Kim, "Construct Space and Subjectivity Problems in
Organizational Effectiveness," Public Productivity Rev
dune 1981, p. 105-121.
Pennings, Johannes M. and Paul S. Goodman, "Toward a
Workable Framework," in Paul S. Goodman and Johannes M.
Pennings (Eds.}, New Perspectives on Organizational
Rffectiveness (San Francisco: Jossey-Bass, 1977), ps
Tée-18e. :
Galbraith, Say R.; Oxganization Bestar (Reading,
Massachusetts: Addison-Wesley, +
Rohrbaugh, John, “Operationalizing the Competing values
Approach," Public Productivity Review, June 1981, p.
141-159,
Richmond, Barry M., "Endogenous Generalization of
Structural Change in System Dynamics Models: An
Tllustration from a Corporate Context,” paper presented at
the 1981 System Dynamics Research Conference, Institute on
Han and Science, Rensselaerville, New York, October 14-17,
i981,
Greiner, Larry F., “Evolution and Revolution as
Organizations Grow," Harvard Business Review, July-August,
1972, p. 37-46.
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