1994 INTERNATIONAL SYSTEM DYNAMICS CONFERENCE
Organisational Learning - The
organisations
Rolf Wolff
Gothenburg Research Institute
Gothenburg School of Economics
Vasagatan 22, S-401 24
Gothenburg, Sweden
Tel: +46 31 774 09 68
Fax: +46 31 774 06 84
E-mail: rolfw @gri.se
Abstract
This contribution draws from several research sources in order to develop an organizational learning
creation of ecological minds
Olof Zaring
Gothenburg Research Institute
Gothenburg School of Economics
Vasagatan 22, S-401 24
Gothenburg, Sweden
Tel: +46 31 774 09 37
E-mail: olofzaring @gri.se
frame of refe towards 2 in business companies. 1. It will demonstrate
the necassity for companies to protect ‘their p systems from di ds through the
i of various legiti ‘in the ipany. 2. The paper will also show that
rational decision making i (like capital i planning) per se not adapt to ecological
n
demands, but to the contrary hide the ecological decisions taken in the decision making process. 3.
Based on these empirical case studies we therefore can develop the organizational-learning-structure
for ecological learning. The learning. is p with the different modes of decision making
in businesses (strategic choice, optimization, competition driven). Thus, this paper aims at
overcoming the many myths iz Pp posed on ies, both from the consultant
community and different green pressure proups, by i (even
defensive) are rational from the learning perspective.
that
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Organisational Learning and the Environment
Organisational learning perspectives
There are different positions and
organisations. These perspectives describe learning in terms of
i of theories-i , and the insti isation of experience in the organisational context:
(Argyris and Schon, 1978), (Cyert and March, 1963), (March and Olsen, 1979), (Hedberg, 1981),
(Shrivastava, 1983).
Jearning and adaptation of
In his recent book Henry Mintzberg, (Mintzberg, 1994) builds a bridge between organisational learning
ives and the Pp of Oo ion learning (OL) is critical for
the and ion of isational ies. For our purposes we have to ask whether
specific OL-perspectives are able to enhance our understanding of the empirical phenomena we are
in; the adap of ecological norms into the organisational decision-process and thus
strategy.
Cyert and March, (Cyert and March, 1963) label adaptation as “organisational learning and describe
three different phases of the decision making process: adaptation of goals, adaptation in attention rules
and adaptation in search rules. With regard to ecol di ion the “goal ion“ has to be
problematic from the definition point of view. “Ecological adaptation“ is per se an ambiguous, complex
and vague concept. It focuses a problem, but not a goal.
Adaptation in attention refers to the selective attention that the organisations bestows on different parts
of the environment. When studying “ecological demands“ we have shown (Schwartz and Wolff, 1991)
that organisations are both controlled by external demands, at the time they develop processes and
institutions by which they are able to handle conflicting demands. In the case of Volvo Schwartz,
(Schwartz, 1994) demonstrates how the company de-couples (Weick, 1979), (Wolff, 1982). the
production system from these demands, by creating a legitimating function, i.e. public affairs. The public
affairs function deals with the ecological demands from the outside, and by doing that enables the
production system to create new modes and solutions of production. De-coupling enables selective
attention and the development of new solutions.
The basic structure of the Cyert and March, (Cyert and March, 1963) perspective is external. Other
theorists focus on organisations in which members have the capacity to learn to predict changes in their
environments, identify the influences of these changes, search for relevant strategies, and develop
appropriate structures for implementation, (Hedberg, 1981), (March and Olsen, 1979), (Wolff, 1982).
With regard to ecological learning orgunisations have to question their assumptions of what they do, they
have to unlearm and develop new views and solutions. An internal learning theory is needed to explain
what is going on within the organisa when its inating theories-i are in question.
Usually an organisation responds to external signals by « ing its core theories-i ively.
The basic assumptions of these theories are rarely d. The inual and d sharing and
meshing, of individual assumptions, of individual images of self and others, of one's activities in the
context of the ion‘s theories-i ( 1983:12). The
construction and modification of these theories through individual and collective inquiry is what Argyris
and Schon, (Argyris and Schon, 1978), label organisational learning. The point being made is that
individuals are agents of organisational actions and learning. It is when a mismatch is detected in the
between pred of of action theories and actual result. A search process
emerges and basic assumptions are questioned. At best, new assumptions are developed and new
theories-in-use emerge.
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With regard to ecological learning the question is whether there are any mismatches between predicted
results and actual outcomes of organisational actions. Some preliminary research results from the oil
industry indicate that at least in investment decision making, assumptions are not questioned basically,
when ecological demands enter the decision arena. Rather, these demands are incorporated into a loosely
organised decision making process, see Zaring, (Zaring, 1993).
The develop of an organisational mind (knowledge base)
The effectiveness of organisations is a function of its long term strategic choices, choices of
and the ‘ive structure which support these pres (Duncan and
Weiss, 1979). Organisational choices are based on the ledge base it
mind. The organisational mind is the ion of the experi and the J ledge of its
dividual Still, the isational mind is more then the sum of its individual minds, as the
“organisation* reminds us of the fact that knowledge endures despite the fact that individuals enter and
leave the organisation.
Duncan and Weiss define organisational learning “ “as the process within the organisation by which
ledge about acti ts s and the: effects of the environment on these relationships
is developed (1979:84). This ledge is distributed across the is i to its
members, has consensual validity, and is integrated into the working procedures and administrative
structures of the organisation. With regard to ecological learning the threats to learning occur as a
of isational ideologies, rigid aan ae
established legitimating standards.
When confronted with environmental demands, a company has to judge whether this demand is a threat
to the elements of the knowledge-base, or whether the threat can be met by its established routines. The
first type of threat would require what Argyris and Schén would label “double-loop-learning“, the other
would be classified as “single-loop-learning (Argyris and Schon, 1978),.
LEARNING ENVIRONMENTAL PRACTICES
Background
This case description concerns decision making in off-sh ions within an i ional oil
npany. One of the jpany‘s major busi is the exploration and exploitation of oil and gas
finds.
Oil and gas production, however, result in polluting emissions of oily waste water, drill cuttings and mud
and emissions to the air emanating from the large production of energy on platforms. Operations often
take place on the continental shelf within territorial waters, and are therefore sanctioned and overseen by
a number of government authorities. Most activity, including that affecting the environment, is thus
subject to i and In addition, this particular oil company sets high
internal envi i dards. The corp I strategy Provide: strategic guidance: the
company’s activities may involve risks to the environment but the “supreme goal“ of the company is that
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neither its activities or products shall lead to “injury, damage or loss“. Activities are to be assessed in
“accordance with “global goals for inak . The I strategy u
how trade-offs between environmental concerns and cost are to be made. Procedures for implementing
high level of concern for the environment are provided: the seeking of ‘Profits through continuous
improvements, the pursuit of cost i ;, and the of of
activities and products.
The oil company is Partially vertically i d, medi ized in i ional terms, and principally
d with the and ion of crude oil products. Its core operation is the production
of oil. The company develops and operates off-shore production and distribution systems (refineries and
other plants) as well as retail outlets for its products.
Much of the corporate activity is planned in a bottom-up fashion. This enables managers pursuing an
idea to create an i to problem ions and solutions and hence secure
acceptance { for the final proposal. Signi on envi issues are said to take the form
of de-offs or ad hoc decisions by operational
Considering the envi vy dards imposed from higher echelons and the bottom-up nature of
decision-making, the case study examines a change of drilling procedures. The case study is centred on
these and other factors influencing a learning process that led toa change in prescribed technical
procedures.
Learning to Improve Drilling Procedures
For economic development, oil fields depends upon the use of drilling mud to stabilise and lubricate the
well bores. Oil based mud is normally thought the best for deep, hot, high angle wells. Cuttings drilled
with this mud are cleaned and discharged to the sea or shipped ashore for disposal. The cuttings retain
small amounts of oil that remain a source of environmental contamination. The problem of minimising
contamination from drilling mud are chiefly the problems of oil fields in their production phase. One
alternative to oil based drilling mud is water based drilling mud, that does not carry with it the
environmental problems of oil based mud.
Recognition and Diagnosis of the Problem
In the division ible for oil prod ion of drilling mud was found to be abnormally
high at some drilling sites. Drilling specialists were dispatched from the division staff functions to
investigate and discovered that the use of oil based mud also caused. problems for the working
environment on platforms. The problem was thus recognised as a result of signal from the management
control system: excessive cost. This necessitated a diagnosis of the problem where environmental
Pp were d. The major | problem was concerned with the working
on p It was also ised that the use of oil-based mud was detrimental to the
marine environment.
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Search for a Solution
The drilling specialists that were di toi ive drilling-mud ion knew
that the main solution to the problem was known as water: tea mud. they thought that it could be used
if the drilling routines and technology was suitably modified. Water based mud had not been the only
proposed solution: support for continued use of oil based mud was strong among other drilling
specialists in the oil company. The key decision-makers were the line mangers responsible for the
drilling undertaken on platforms, they were reluctant to try out new methods that might effect production
costs and make a negative showing in the management control system. These managers could be
regarded as non-experts in drilling. This resulted in a situation were line managers were unwilling to
‘peri and drilling jalists dead-locked in an over the various merits of the proposed
solutions to the problem. ‘In the view of the proponents of water based drilling mud the opposition to it
was a “mythological“ conventional wisdom, dating from experiences in the Mexican Gulf in the 1930s.
Design and ion of an Al ive Technol
The dead-lock was ly broken. The prop of water-based mud were allowed, after
considerable internal lobbying and debate among technical specialists, to try out their solution by the
drilling manager of one platform. They managed to be given a free hand to test and develop a technique
for one: high angle wells with water based mud. The first test was carried out in a comparatively new
part of p where line were p (by the drilling specialists) to be less
eeavnne and less “Americanised“ than elsewhere. The opposition from pro oil-based mud specialists
were reduced when a recognised consultant in this field spoke out in favour of oil-based mud.
Although the ensuing tests were not all successful, new standard ing p d were devel
and changed in favour of water based mud. According to the participants in this process this could | be
attributed to several factors. The initial reason for this was an unexpected cost reduction in drilling
operations: mud costs decreased by one third. This cost reduction allowed the tests to continue in the
face of various technical difficulties later on in the evaluation process, These difficulties were overcome
because line managers were then lured by the potential cost red of water-based mud
The tests resulted in wells - even acute angle wells - being drilled without oil based mud. The working
environment of drilling crews and among sub-contractors as well as the local marine environment also
benefited.
But the first experiment had created commitment in line managers, which instilled in others the
confidence necessary to develop a new competence in using water based mud.
Conclusion
The internal p di used by a pany for ional decisi king can i in
d directi The control system served both as a hindrance Ginitially) and as a
help (in the evaluation stage) to the i of drilling . The learning
process was “cued by the control system and it enabled coalitions to be formed in favour of the new
technology. The coalition formed by specialists and managers was enabled by the potential cost savings
d, while the specialists were ivated by idealistic beliefs in their sustained effort in
opposition to oil-based mud. In the choice stage in the learning process external factors were important.
The possibility of getting positive press coverage and the favorable opinion of the drilling mud sub-
contractor reinforced the process. In this case the operational decision-making can be viewed as a form
of adaptive rationality, (March, 1978), where as well as isational factors are initiate and
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enable the learning process, see Burgelman (Burgelman, 1988), where a new, environmentally friendly,
operating procedure emerges from the bottom of the organisation.
DISCUSSION
Ecological in business and products raises totally new questions in a business
organisation. From the point of learning various issues are raised:
a. what are the driving hanisms by which isations unlearn old and learn new ways of solving
problems ?
b. in what ways and to what extent are old sets of problem solutions replaced or re-evaluated ?
c. how do different levels and knowledge-areas in organisations interact in order to develop new
paradigms for problem solving ?
d. what are the rational decision models at hand to support decision making towards ecologically
sounder adaptation ?
The case of water-based mud in oil production illustrates barriers against learning. The
institutionalisation of certain problem solutions are de coupled from their original historical development
and handled i in the organisation, on the side of the Proponents of the old myths, as “truths. As such
truths they are imbedded both in the ige base, as well as common praxis in the oil
industry. Both processes of institutionalisation give each other mutual strength and .
In spite of the “ecological success“, the tech was into standard di based on
“known“ criteria for success, i.e. cost reduction.
As has been discussed by Jénsson & Lundin, (Jonsson and Lundin, 1977), opposing myths in
organisations compete with one and another. It is an outcome of successful advocating opposing
technologies that may - or may not - create changes in the insti ised parts of an
mind. In our case the ad of the new technol d in creating a space for experiments,
which then step by step replaced the old knowledge (technology/myth) with a new one.
Ecological adaptation of business Tequires new holistic views. This includes also systems perspectives
beyond traditional boundaries of In the same way as systems of value creation are
analysed and compared in cost-benefit- terms, parallel to that an ecological perspective has to be
integrated into the value-creation-process. This way the substance of the “value-added“ will be
transformed step by step.
From a decision making point of view research has to look at the interplay of strategic choice, rational
decision models and patterns of competition in an industry. Depending on what type of company and
ecological problem that are involved (contingencies), the evolution and outcome of the decision process
will vary. Frequently, the values and dispositions of the decision makers will influence the decision
more than optimisation models.
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