Hall, Roger I., "The Natural Logic of Management Policy Making: Its Implications for the Survival of an Organization", 1983

532

‘THE NATURAL LOGIC OF MANAGEMENT POLICY MAKING:
ite implications for the survival of an organization

Roger I, Hall
Faculty of Administrative Studies
University of Manitoba
Winnipeg, Manitoba
Canada R3T 2N2
(204) 474-8436

This paper received joint first prize in the 1983
International Prize Competition sponsored by the
College on Organization of The Institute of Manage~
ment Sciences for the Most Original New Contribu-
tion to the field of Organizational Analysis and
Design, Chicago, April 25, 1983.

The study was supported by a research grant from
the Social Sciences and Humanities Research Council
of Canada.
2

‘THE NATURAL LOGIC OF MANAGEMENT POLICY MAKING:
ite implications for the survival of an organization

Roger I. Hall*

Abstract:

A process-theoretic approach, seldom used but not without pro-
mise for organizational behavior research, 1s employed to postulate a
process model of the natural logic evident in organizational policy
making. The model is used to explain how the policies of a sample
firm (for which twenty years of data are available) became adopted
and how, together with critical events, this caused the firm to
evolve in particular directions rather than others. Implications of
the study are put forward in terms of identifying pathologies of the
policy making process. Some prescriptions are put forward for the
proper control of organizations by supervisory bodies, such as boards
of directors. It is suggested that Management Science, in the form
of systematic procedures for adaptive organizational design and
updatable cause maps, may have an important future role to play in
senior management affairs. Questions are raised for government and
society concerning sustaining and regulating firms in both the public
and private sectors in the light of the study.

Key Words: Process Model, Evolutionary Learning, Socio-political
processes of organizing, Policy Making, Cause Maps,

Survival.

* University of Manitoba

Draft Jan. 1983

533

3
1. Introduction

To the outside observer, the decision making process in an or-
ganization that results in a series of policy changes made over a
period of time seems unfathomable, shrouded in mistery and sometines
downright illogical; particularly when if leads to the failure of the
organization. It is suggested that such failures may be twenty years
in the making (Argenti, 1976). Hence, in researching organizational
policy making, there is a basic problem of gathering data over a
sufficient period of time that are also rich in detail about the
internal organization, external events and other such qualitative
aspects bearing on major policies taken. It presents the researcher
with a formidable task (Miller and Friesen, 1982).

The lack of an integrated and coherent theory of organizational
decision making poses an additional problem since, when longitudinal
data are available with, hopefully, the requisite amount of richness,
there is little or no structure for making sense of the data. So,
for example, Miller and Friesen's (1980a) pioneering study categor-
izes the ways organizations pass through a transition without neces-
sarily being able to explain how the management chose one set of
transitional policies over another. Both these deficiencies will be
addressed in this paper by: (1) postulating an integrated and, hope~
fully, coherent model of the natural processes of management policy
making, and (2) using the model to structure both anecdotal and time
series data about a company to explain its policies. Tentative con-
clusions (bearing in mind that we are dealing with a single company)
will be drawn concerning pathologies of the policy making process and
ways of avoiding them.

2. A Process Model of the Natural Logic of Policy Making!

The model to be developed may be classified as a process model

of organizational policy making. According to Mohr (1982):
4

Process models are used little in organization theory and
even less in many other social science subfields. When
they are used, they are often underdeveloped. There is a
tendency to present and conceptualize the stages in the
process but to omit the forces that drive the movement from
one stage to another. The latter, however, are essential
(p. 14)

Such a conceptualization of the stages in the process of policy for~
mation in an organizational setting (including the driving forces)
will be attempted here.

Moreover, the model may also be classified under Nohr's (1982)

heading of descriptive quasi-theory:

A final and closely related consideration regarding the
flow-of-events property of the process-theory style is its
attractiveness as an object of descriptive quasi theory.
Description as theory in the more mature sciences has
targeted the form, matter, and motion of phenomena, but the
kind of description that would seem to have the greatest
potential in social science is description of processes -
how things are done by people and groups. To the extent
that the pursuit of description increases in prevalence as
a research goal, social science will take on an increasing
ly process-theoretic flavor, at the expense of variance
theory (p. 215).

The intention, therefore, is to build a description of the macro-
phenomena of organizational policy making that may, hopefully, con~
tribute to theory. The insights, so generated, will lead us later to
draw some normative conclusions to improve the process or guard
against pathologies of natural organizational policy making.

The model is built around system states that represent the col-
lective memory and retained set of the organization, and organizing
Processes that are guided by the retained set. These states and pro-
cesses are assembled within an evolutionary learning and organizing
framework (Campbell, 1965; Weick, 1969; Aldrich, 1979) that links
action to learning and back to action in a feedback sense. The model

is outline in Figure 1 and a more detailed description follows.

Fugue be Bete

534

An Evolutionary Framework
Weick (1969) and Aldrich (1979) conjecture that an organization

evolves enactment, selection and retention processes that enables it
to handle ambiguous information resulting from the organization's
actions on its environments. The organization adapts to ite complex
enacted environments by trying to remove equivocality using standard
procedures and recipes stored in its retained set or long-term men~
ory; itself an accumulation of learning from past activities.

Enactment processes: An organization may start out its life by
making random trials or, more likely, by choosing actions based on a
very rudimentary map of causality.” The choice of action will result
from the enactment processes, that are guided by thé planning and
organizing procedures retained in the organization's memory. The

enactment processes for policy making, it is proposed, comprise such

activities as formulating budget plans, recognizing problems and
choosing policies that are implemented through the organization's
primary actions on its environments. Should these actions fail,
equivocality reducing procedures are evoked from the organization's
memory to make the budget plan work. This is effected through the
organization's controlling actions, such as trying to manipulate the
organization's environments or internal slack (Cyert and March, 1963)
to make the plan self~fulfilling.?

Selection processes: Residual information, discernible from the or-
ganization's actions upon its environments, is registered by the

selection processes. These processes are governed by the attention

directing framework supplied by the retained set. Thus a new rela-

tionship, such as the price sensitivity of sales, may be selected for
attention or simply ignored. It is now available for retention in
the organization's memory and, hence, may influence future decisions.

Retention processes: The retention processes are used to admit the

relationship, thus selected, to the organization's storehouse of
knowledge—its memory, so to speak. The processes are governed by

the perceiving and interpreting framework supplied by the retained

set that may reject or edit that which is selected to fit the exist~
ing set of retained knowledge, or modify the existing set in light of

the new information, or even discredit the existing set and adopt its

converse. These authorized adaptive changes are made to the retained

set of the organization. The retained set is now available for in-
fluencing both the enactment process (e.g., relationships to be used
in choosing action) and the selection and retention process (e.g-,
retained procedures for selecting relationships to be retained).

‘The driving forces: The forces that drive the enactment, selection

and retention processes of the organization, it is argued, are: (1)
the desire of subunits to increase (or defend against loss of) their
status and power relative to other sub-units (after Pettigrew, 1973;
Salancik & Pfeffer, 1977), and (ii) the desire by groups and indivi~
duals to reduce or control to acceptable levels the various forms of
equivocality threatening confusion or chaos (after Weick, 1969 and
Jung, 1965). .

External uncertainty, such as the emergence of new technologies
or ways of doing business, can cause the release of both these
forces. The subunits with the requisite skills to reduce the uncer
tainty facing the organization will seek to use the opportunity to
increase their status and influence, and other subunits will seek to
defend against the threatened loss. Such uncertainty will spark
political activity as groups challenge each other for command over
resources to remove the uncertainty. The escalation of uncertainty
created by these challenges can raise the collective feelings of
equivocality to unacceptable levels. The challenges are usually

settled by compromises, such as creating new domain boundaries for

535

apportioning the work of the organization and new standard procedures
for handling interdepartmental disputes (after Pettigrew, 1973;
Mumford and Pettigrew, 1975; Coser, 1964).

If the uncertainty takes on the nature of a full-blown survival
crisis, the intergroup political activities become deadly serious as
one group unseats the dominant group and usurps its power. The new
dominant group provides the organization with a fresh orientation and
strategy with which to engage its environment and confront its diffi-
culties (after Turner, 1976).

Retained set: By such means, the past interactions among groups in
response to a changing environment will have largely determined the
present state of the retained set. For the purpose.of policy making,

the retained set, it is proposed, consists of: (1) the stock of

standard procedures for reducing equivocality, (2) the current orien-
ation or strategy with which the organization engages its environ-
ment, (3) the present architecture that provides the social setting
through which future demands on resources are made, and (4) the cur-
rent structure of the maps of causality. The importance of the

latter to policy making calls for a more detailed description.

3. The Organization's Cause Maps

The maps are fragmented into a number of loosely coupled subunit
maps describing the causal paths that lead from policy to achievement
of subunit goals (after Cyert and March, 1963; Weick, 1976). Axelrod
(1976) has argued that these maps will be simplified structurally to
exclude feedback loops, and resolve indeterminancy (paths of cause-
and-effect from policy variable to goals with opposing correlations).
The maps of causality comprise three sorts of relations (see Figure
2): (1) simple logical or accounting relations, (2) relations that

are a matter of observable fact from the feedback of the results of
controlled activities, and (3) relations subject to belief and envi-
ronmental conditioning, where the necessary evidence of proof is not
available or is confusing. The different types of relationships
Would seem to call for different treatments by the organization's

selection and retention mechanism.

Fige ee Reve™
First, the simple logical and accounting relations map the flows

of resources within the jurisdiction of each subunit. They do not

usually come up for conscious consideration unless the architecture

(e-g-, a subunit boundary) changes. Second, the factual relations,

whose values can be estimated with reasonable precision from uncon-
founded results of the interaction of the subunit's actions with its
environments, are selected to update the currently retained values of
these parameters. For example, the cost of obtaining a sale by vari-
ous promotion methods may be estimated precisely by monitoring sel-
ling activities. Third, relations of the belief kind become part of
an interlocking set of beliefs that are a part of the subunit's in-
ternal culture and are not readily changed in spite of disconfirming
evidence (after Steinbrunner, 1974). Key indéterminant or disputed
cause-effect relations are supplied by the “belief set” of the domi-
nant group.

Once a particular policy has been chosen, its success in ameli~
erating the problem, for which it was evoked, can be registered. If
it is successful, it reinforces the dominant group's beliefs under-
pinning its choice. A precedent has been set, so that, when that
particular problem arises again, the policy is a prime candidate for
reconsideration. This reduces the uncertainty about the outcome,
and the work of selecting a policy becomes a matter of organizational
stimulus-response (after Cyert and March, 1963). The policy itself

becomes a retained standard procedure for reducing equivocality.

536

9

If the policy is unsuccessful, but the problem does not reach
crisis proportions, then the organization has two avenues of beha~
vior. First, it may abandon the policy because it does not in any
way conflict with the dominant group's central core of beliefs-it is
merely struck from the list of successful policies. Secondly, if the
dominant group feels the need to justify its retention of an unsuc~
cessful policy because of its place in their interlocking “belief
set" (adwitting failure may bring into question their whole strate~
By), and if the evidence of failure is not overwhelming (as is often
so), then it is explained away in such terms of poor implementation
or bad luck. Furthermore the group may redouble its efforts to make
it work (Staw et al., 1981). The retention system of the organiza~
tion is protected from vaccilations in policies due to pure chance
effects by such a mechanism, but there is a risk that a bad policy
will be retained.

Finally, {f the policy failure engenders a crisis threatening
the organization's survival, then the socio-political processes pre-
viously described selects a new orientation. A new dominant group
with a new orientation and set of beliefs takes over. After an in-
ternal cultural readjustment, its beliefs supplant those of the dis-
credited coalition in determining the organization's cause map.

The role of the retained set in determining policy making: Having

described how the retained set adapts to experience, we return full
circle to the crucial influence it has over the enactment process in
general and policy making? (a major subset of the enactments of

the organization) in particular. The enactment process, in similar
fashion to the selection and retention processes, is driven by the
forces of subunit desire for greater status (or to defend against
loss) and a general desire to reduce equivocality to manageable pro-

portions. The enactment process of (1) forming budget plans, (2) re~
10
cognizing problems, (3) choosing remedial policies and (4) making the
plan work are laid out in summary form in Table 1. The hypothesized
processes ~~ described in greater detail in Hall (1981) -- draw
heavily on the seminal work of Cyert and March (1963), Lindblom
(1968), Axelrod (1976) and other decision school theorists who have
observed the way managers and groups of managers go about their

decision making work.

Table I Bees hs

4. Using the Model to Explain the Policies of the Sample Firm
An attempt will now be made to use the model to explain the
policy decisions made by the management of the Curtis Publishing Com-
pany--the owners of the old Saturday Evening Post magazine. The
macro-issues affecting policies (the firm's orientation, departmental
structure and maps of causality) will be examined in this section. A
more rigorous testing of the model to examine its ability to repli-
cate the fine detail of the management's decisions (the micro issues)
constitutes a major piece of research outside the scope of this pre-
sent study.4
The Organization's Orientation
The time series data in Tables 2 and 3 depict four distinct
periods of environmental conditioning of the old Saturday Evening
Post. These have been identified as (liall, 1976: 199-203): phase 1
the war years (1940-1944), phase 2 the post war boom (1945-47), phase
3 the years of stagnation (1948-1950), and phase 4, the circulation
war (1951-1960).

Tables 274 3 go here
In phases 1 and 2, the critical problems facing the company were the

lack of supplies of paper due to war time rationing, and lack of both

537

ll

printing capacity and supplies when both the demand for the maagazine
and the size of its annual volume grew in the post war boom. It has
been argued that the coalition in the firm best able to cope with
thig uncertainty will rise in status and power. The coalition can
use this power to accord its goals top priority and divert resources
into their attainment. One could posit, therefore, that the produc~
tion operations coalition of the company would rise to power during
this period and that the company would show a production orientation
in its implemented policies.

This orientation can be seen from the firm's costs (Table 2).
The production costs grew from $46.7 million constant dollars (48 per
cent of revenues) in 1940 to $86.7 million constant dollars (53 per
cent of revenues) in 1947. In contrast, the proportion of revenues
spent on circulation promotion dropped from 30 per cent to 23 per
cent over the same period. The production and circulation promotion

operating ratios are compared in Table 4A,

‘Fable Wgoss here

From this it appears that the production operations coalition
effectively diverted a greater share of the firn's resources into its
domain. This was achieved by allowing the magazine's pages to grow
from a total of 5604 pages in 1940 to 7920 pages in 1947 (Table 3)
and with it the volume of printing required. Although circulation
promotion expenditure was held back relative to production costs, it
was increased in absolute terms from $29.4 million constant dollars
in 1940 to a high of $41.3 million constant dollars in 1946. This
further stimulated the demand for the magazine and further increased
the magazine printing requirements. It would appear that a coali~
tion, once established, can secure its power base by pursuing poli-
cies that control the uncertainty facing the organization and, hence,

the continued need for that coalition's services. As further evi-
12

dence of the firm's production orientation, it built a $40 million
printing plant, acquired three paper mills and 262,000 acres of tim-
berland (Freidrich, 1970, p. 15). The production coalition in 1947
was at the zenith of its power.

In phases 3 and 4 of the company's developmental history, the uncer-
tainty facing it changed from lack of supplies to lack of readers.
In the period 1948-1950, due to the very high subscription rate
charged, the readership ceased to increase (Table 3). This brought
an abrupt halt to the company's growth.

In the subsequent period 1951-1960 the magazine became embroiled
in a circulataion war and aggressively acquired readers to maintain
the circulation relative to its competitors. This suggests a shift
in power to the coalition concerned with circulation promotion.
Again we can posit that power will follow uncertainty and that re~
sources will follow power. From the evidence (Table 4) the propor-
tion of total revenue spent on promoting the magazine rose from 25
per cent in 1948 to 41 per cent in 1960. Over the same period, pro-
duction coste fell from 55 per cent to 48 per cent of revenues. Re~
sources were effectively diverted to the cause of the dominant coali~
tion by the policy of increasing advertising rates to raise funds for
the increased promotion expenditures. The increased advertising
rates resulted in fewer advertising pages and hence, a slimmer maga-
zine that reduced the printing requirements. As further evidence of
its circulation promotion orientation, the company acquired a subsi-
diary company that handled subscription sales and circulation promo-
tion for some 50 magazines (Friedrich, 1970, p. 15).

The transition from production to circulation orientation does
not seem to have been particularly smooth. In 1950, in what seemed
to be a panic measure, there was a substantial increase in promotion

expenditure (19 per cent), but to no avail; the readership remained

538

13

at the same level. At this point the president of the company re-
signed and it was thereafter that the new orientation became evident.
This substantiates the previous statement that a crisis or, at the
very least, a series of critical problems is required to bring about
a cultural readjustment in an organization and a change in orienta~
tion.

The Organization's Maps of Causality

An attempt will now be made to employ the process model to re-
construct the maps of causality used by the various subunits in the
organization to structure their decisions. The major subunits pro~
viding the variety of skills and activities required for publishing a
magazine can be identified as: (1) a circulation department handling
the sales of subscriptions, (2) a publisher's department handling the
sale of advertising space in the magazine, (3) an editorial depart-
ment concerned with hiring writers, page layout and other matters
affecting the content of the magazine, (4) a production operations
department responsible for printing, binding and delivering the re~
quisite number of magazines, and for securing the factors of produc~
tion needed for this purpose, and (5) the office of the president of
the company to coordinate these activities for the purpose of achiev~
ing the desires of the owners, as represented by the chairman and
board of directors.

The goals assumed for the departments are those related to the
scale of operations, such as the revenue, expense or quantity asso-
ciated with the department's operations. The remuneration of the
senior staff of the departments is usually determined, at least in
part, by such measures (i.e., the larger the scale of operations, the
greater the responsibility and remuneration). The president and
board, on the other hand, are assumed to be more concerned with pro-

fit and growth to meet the objectives of the shareholders or owners.
14

Figure 3 depicts the causal maps, using the directed digraph scheme
of Axelrod (1976), as the anecdotal evidence (Friedrich, 1970) sug-

gests they must have existed.

Figure 3 g6es here”

Each departmental map represents the causal path from policy

variables, that may or may not be under the direct control of the

department, through intervening variables to the department's goals.
The causal paths are derived mainly from straight forward accounting
relations with a few additions concerning the behavior of readers and
advertisers to price changes and promotional activities, as uncovered
in a previous study (Hall, 1976). The directions of causality are

shown by arrows and the sign of correlation between pairs of vari-

ables (links) is shown as +, 0 or ~ to represent the positive, zero”

or negative effect of the variable at the tail of the arrow on the
variable at the head. The type of relation or link is notated in
accordance with the previous discussion on maps of causality as

accounting relation, factual relation, and believed relations. The

interrelationships between the departmental maps are also shown.

The paths through the maps of Figure 3 from the prime policy
variables that could be manipulated in a budget plan (i.e., subserip~
tion rate Cl, advertising rate Al, and circulation promotional expen-

diture C2) to the ownership goals are detailed in Table 4.

Table & goes here
Each path is an argument from cause to effect and represents a
policy, such as increase the advertising rate to increase the amount
of profit (path #11). Some are simple (e-g-, path # 6 has only two
links), ‘and some are tenuous (e-g-, path # 10 has nine links). We

have posited that where indeterminancy exists, the shorter path will

539

15

be the easiest to argue in committee and hence the most likely to be
chosen (after Axelrod, 1976). Alternatively, paths representing
arguments congruent with the organization's current beliefs also nay
be, likely choices. The policy chosen will then be subject to envi-
ronmental conditioning. That is, if the policy works it will be
retained for future use.

Note that path # 14 represents a feedback loop of positive
polarity. The firm's traditional editorial-advertising formula
(Friedrich, 1970, p. 244) is the major element in the loop coupling
editorial to advertising pages, so that any increase in readers will
stimulate more advertising and herice more editorial pages that, in
turn, attracts more readers. It is a standard procedure derived from
Pi

t interdepartmental conflict. However, we have posited previously
that the equivocality reducing processes will make the organization
oblivious to this obfuscating recursive path of causality.5 We

can, therefore, strike it from the list of paths in any official map
of causality used by the organization to structure its decisions.

The thirteen remaining paths in Table 4 have been reorganized in
Table 5 to show the total effect on each departmental goal of in-
creasing each policy variable. This has been accomplished by sumaing
the correlations of each link in the path from cause to effect. So,
for example, the path # 7, “increase promotion expenditure” would be
seen as having a positive effect on the circulation department's goal
for increasing “readers”, a positive effect on the production depart-
ment's goal for increasing the “amount of printing and production
expenses”, but a negative effect on the president and board's goal

for "profits".

3 peschee
Before 1948, as will be demonstrated, the organization had good

reason to believe that the demand for its magazine was price inelas-
16

tic (d.e., the link between subscription rate Cl and readers C5 in
Figure 3 was either zero or positively correlated). After the year
1948 it became obvious that this correlation was negative because the
policy of increasing subscription rates had brought about a stagna~
tion in total readers. Therefore, the signs of correlation for the

arguments or paths affected by this reversal in sign of correlation

have been grouped in columns headed “b” (before 1948) or (after
1948).

Scanning down the columns, one can see the degree of coincidence
in the signs of correlations from each policy change to each depart-
mental goal for the various arguments. For example, the paths that
link the policy “increase subscription rates” to the circulation de-
partmental goal of “readers”, before 1948, are all of zero correla-

tion. At this time, one would expect the circulation departmental

coalition to be indifferent to an increase in subscription rates.

After 1948 these same correlations became negative, which one would
expect to lead to a preference to lower subscription rates to in-
crease the acquisition of readers. Similarly, the effect of increas-
ing subscription rates, before 1948, on “circulation revenue” is seen

to be of positive (path # 1) or zero correlation (path # 2):

pre~
ference to intrease subscription rates to boost circulation revenue
would be expected. After 1948, the correlation of path # 2 became
negative so that there is now one path of positive and one of nega~
tive correlation. It is not now clear what effect increasing sub-
scription rates has on circulation revenues; an indeterminant situa-
tion. The policies for a particular departmental coalition to prefer
in order to further their own aims can now be constructed by noting
for each of their goals whether they would desire to increase or

decrease the policy variables or whether they would be indifferent or

whether the policy has an indeterminent effect on a goal. This is

540

uv
set out in Table 6. Indeterminancy, where it exists, is resolved by
the process, stated in Table 1, of taking the simplest and most
direct chain of arguments. Table 4 is scanned for the path with few-
est Links to the point of indeterminancy and the policy it suggests

noted in Table 6.

The quest for acceptable policies: We have posited (Table 1) that in
searching for solutions to organizational budgetary problems, the

coalitions will search their cause maps for acceptable solutions.
Looking along the rows of Table 6 it becomes obvious that before 1948

the departmental coalitions would agree unanimously on the policy of

raising subscription rates to ameliorate an unsatisfactory total

revenue or profit; there being no obvious conflict. One would also

expect to see the policies of increasing circulation promotion expen-

diture and lowering advertising rates used to divert excess resources

into the dominant coalition’

production oriented goal of increasing
the amount of printing when all other goal expectations are being
net.

Referring to Tables 2 and 3, we can see that during the period
1940 through 1948, the subscription rate was increased significantly
six times and decreased once, circulation promotion expenditure was
increased by a significant amount five times and decreased once, and
the advertising rate was lowered twice--a remarkable fit with the
preferred policies argued from the reconstructed departmental maps of
causality.

After the year 1948, when the believed effect of subscription
rates on readers underwent a radical revision in the light of a stag-
nating readership, what policies were open to the management? Scan-
ning the columns of Table 6, we see, for thé emerging dominant circu-

lation coalition, that increasing promotion expenditure, and perhaps,
18

lowering subscription rates would be the preferred policies. Fur-
thermore, increasing promotion expenditure is the only clear policy
for increasing total revenue. For increasing profits, there is no
clear policy--all policies lead to indeterminancy. How would the
organization deal with a problem in profits? It was posited earlier
(Table 1) that a policy elite resolves indeterminancy by choosing
policies that are based on the most simple and direct arguments
offering immediate tangible results and that are most favorable to
the dominant group. This would eliminate the obvious candidate poli-
cles of further increasing the subscription rates or decreasing the
Promotion expenditure. We are left, therefore, with manipulating
advertising rates. The shortest path (see Table 6) argues for in-
creasing advertising rates to increase both revenues and profits. If
it is successful in implementation it would likely be retained for
future use.

It 4s argued, then, that the management would prefer the poli-

eles of increasing promotion expenditures, and increasing advertising

‘rates to meet the revenue and profit goals of the company. If cir-
cumstances allowed it, the dominant circulation coalition would have
a predilection to lowering subscription rates to divert excess re~
sources (such as profit) into their goal of increasing readership.
An examination of Tables 2 and 3 shows that after 1948 the sub-
scription rate was lowered twice, and both the advertising rates and
circulation promotion expenditures were raised ten times. Again this
accords with the policies suggested by an analysis of the organiza—

tion's maps of causality.6

5. Organizational Origami
The Japanese art of Origami consists of folding a piece of paper

to produce an object such as a bird, dog or horse. The order of the

541

19

folds will uniquely determine the object and,.once a fold has been
made, certain objects only can still be made and others become ex-
cluded. Similarly, the order that certain strategic decisions are
made will uniquely dictate what kind of organization will evolve and
what kinds will be excluded (Allen et al-, 1982). The process model
of organizational policy making will be used now to explain how the

future of the company became enfolded (note, not unfolded) by the

order of the management's responses to critical events that threat-
ened to destabilize it. Some of these events were caused by the or-
ganization’s own previous actions and some by uncontrollable events
such as a war-time shortage of supplies. From this exposition, some
general conclusions will be drawn about pathologies of management
policy making and ways of circumventing them to enhance the survival
of an organization. The success or failure of the various policies

pursued by the company are summarized in Table 7.

Table T OBE

The pre~1948 strategy of the dominant production operations coalition

concerned lowering advertising rates and increasing circulation pro-

motion expenditure to stimulate demand and the amount of printing
required. This was afforded by raising subscription rates. The
policy appears to have been used in the first instance to ration the
magazine during a period of war time paper shortage and great popu-
larity due to its war stories. The policy was so successful in rais~
ing profits ‘to unprecedented heights that it became retained as a
general policy for raising revenues long after the war-

It can be seen from the number of times subscription rates were
successfully raised (Table 7) that the organization would have had
every reason to believe that the sale of subscriptions was insensi-
tive to the subscription rate charged. This stands in direct opposi-

tion to the findings of a statistical analysis based on the complica

20

ted movement of subscribers through the system (Hall, 1976) and pro~

vides an illuminating example of the contrast between intuitive and

scientific causal analysis.

Unfortunately, it transpires that the organization, in this in~

stance, learned the wrong response-~a massive misattribution of
causality that was to plague it for the remainder of its existence.
The loss of regular readers brought about by the doubling of sub-
scription rates over the period 1940 to 1948 was masked by the in-
crease in trial readers inducted by ever increasing promotion expen-
ditures. The percentage of readers who were trial subscribers rose
accordingly from 36 per cent in 1940 to a high of 48 per cent in 1946
(Table 3)--loyal readers were slowly replaced by those whose loyalty
was in question.

The policy of lowering advertising rates and raising circulation
promotion expenditures to increase both the pages in the magazine and
the number of magazines to be supplied to subscribers was met with
mixed success. It has also been demonstrated that this production
expansionist policy would result in an increase in production costs
out of proportion to the increase in revenues from subscription and
advertising sales, and hence depress the profit margin (Hall, 1976;
Weick, 1977). Again, this effect was masked by environmental forces.
Due to paper shortages during the war years, the number of pages in
the magazine was limited and the production costs held in check.
This led to a very high profit margin for a magazine publishing com-
pany of 14 per cent in 1944 (Table 2) that further locked the company
into a production operations orientation. Friedrich (1970) describes
the gulf that developed between the internal cultural values of the
Production-operations group, represented by the president at that
time, Walter Fuller, and those of the editorial group as:

Walter Fuller, in any case, determined to change Curtis
from a great publishing company into a great printing com-

542

aL

Pany. The difference is not immediately easy to under-

Stand--Curtis's own management never did understand it--for

it violates our instinctive sense of economic values. But

the essential difference is this: Publishing is based on

ideas--and ideas are valuable--they can be bought and sold.

Printing, by contrast, is a manufacturing industry, and it

is based not on ideas but on physical objects--printing

Presses, factory buildings, paper mills, tons of wood pulp,

vats of ink, fleets of delivery trucks. To a mind that

‘does not believe in the value of ideas, wealth and security

can lie only in the accumulation of physical objects. And

no such mind can ever understand publishing (p. 14).

The post-1948 strategy: In 1948 the policies of the company failed
as profits dropped markedly by 23% and readership stagnated at a time
of growing competition from other magazines. In the ensuing evalua~
tion of the situation it must have become apparent that the root of
the problem was readership. We have shown how this led to a circula~
tion promotion orientation and a new set of policies. How did these
policies fare?

In 1951 the subscription rate was dropped by eight per cent
(Table 3) but failed to produce the desired results. The readership
actually declined marginally and the policy seems to have been selec~
ted out--it was never used again. The policy failed, not because it
was a bad one, but because of a number of other issues. First, the
magazine volume dropped by about 200 pages at the same time (Table 3)
thus making the magazine less attractive to trial readers who were
deciding whether to subscribe regularly (Hall, 1976). Second, the
complex flow of readers through the subscription renewal system
creates delays in the policy taking effect immediately; in fact the
readership grew by 6 per cent in the following year (Table 3). Last-
ly, the policy of reducing subscription rates was probably of mar-
ginal interest to the emerging dominant Circulation coalition, who
would be more interested in building their empire with more subscrip-
tion salesmen. They may have found ways of lessening the effect of

the policy by selling subscriptions less aggressively in order to
22

force the senior management to agree to divert more resources to cir-
culation promotion activities. Again this illustrates how a dominant
coalition may pursue policies that maintain the uncertainty facing
the organization--in this case a high turnover of subscribers--and
hence a continuing need for the coalition's services in dealing with
the uncertainty--in this case selling subscriptions.

The policies that emerged after a period of transition, was to
aise promotion expenditures to solicit readers, and raise adver-
tising rates to pay for this. It can be seen from Table 7 that these
policies were successful after 1951 and, therefore, reinforced and
retained for further use. However, they were only successful super—
ficially because the increase in advertising rates resulted in fewer
pages in the magazine which in its turn resulted in fewer trial
readers continuing with the magazine (Hall, 1976). The yield of
regular readers from trial readers fell off in consequence, which
reduced the effectiveness of the policy of increasing promotion ex-
penditures. The company was faced with ever increasing promotion
expenditures to meet its aspirations for growth. Circulation promo-
tion expenditures were increased by 130 per cent over the period 1948
to 1960 but readership increased by only 60 per cent (Table 2 and 3).
In consequence, profit margins became severely depressed and the
company's survival put in jeopardy.

The management never seemed to find a way out of this policy
cul-de-sac. The severely weakened financial situation made the com-
pany susceptible to such’ normal business tribulations as depressions
and increases in labour costs—situations noted by Argenti (1976) for
putting the final nail in the coffins of corporations. After a
series of death throes documented by Friedrich (1970), Culligan
(1970), Christensen et al. (1973), and Hall (1976) the magazine was

discontinued in 1969.

543

23
Why was the management blind to alternative policies, and why
did they stick so long to their policies in spite of evidence that
all was not going well? As we have seen from the analysis of the or-
genization's causal maps, the particular admix of goals of the domi-
nant coalition and environmental conditioning excluded such policies

as decrease circulation promotion expenditures. The organization was

barren of alternative policies and all arguments backed up by experi-
ence led to repeating the same-policies. Such a situation would ob-
viously create a lot of stress within the organization. This has
been shown to lead to a shortening of the time horizon, a narrowing
of the perspective, and an increased rigidity and polarization of
thought processes of decision makers (Mumford and Pettigrew, 1976;
Staw, 1977; Staw et al., 1981). It can lead possibly to what
Forrester (1970) describes as ". . . a downward spiral develops in

which the presumed solutions make the difficulty worse and thereby

causes a redoubling of the presumed solution (p. 55)". In the next
section, we shall attempt to identify some of the pathologies of

organizational decision making that may have led to this situation.

6. Pathologies of Organizational Policy Making

The natural logic process model of organization policy making
presented here attempts to explain how an organization, with limited
understanding of its environments and a limited capacity for proces-
sing information, learns to adapt to complex environmental systems.
From this point of view the intuitive processes used by organization-
al groups are very sensible. But, as we have seen, they can also
give rise to pathological situations categorized by: (1) maladaptive
mutations when the organization changes its orientation, (2) poli-

ticing to stay in power, and (3) misattribution of causality in its

environments.
24

Maladaptive mutations: The search for a new direction that takes
place after an organizational crisis has been compared to a biologic-
al mutation (Winter, 1970:). As he puts it:
Thus, while decision rules themselves are the economic
counterpart of genetic inheritance, the failure-stimulated
search process (for better decision rules) apparently has
no analogue to biological evolution -- it would correspond
to a mechanism that automatically generates a burst of mu-
tations when they are needed (p. 13).
However, there is a chance that a selected mutation may be mal-

adaptive. The board of directors or whoever is responsible for

selecting a new dirction for an organization may wrongly diagnose the

environmental uncertainty and select an inappropriate set of priori-

‘ties. We have seen how a stagnation in readership growth of the old
Saturday Evening Post brought about a circulation promotion orienta—
tion although the real problem was an excessively high subscription
rate. The decision rules or policies that emerged were to spend
heavily on circulation promotion and increase advertising rates to
pay for this. The net outcome was a loss of advertising and a slim-
mer magazine less attractive to the newly inducted trial readers who
did not stay. We could dub this a ‘maladaptive mutation” since Hall
(2976) has demonstrated that an alternative policy offering steady
growth and survival lay undiscovered!

Politicing to stay in power: The dominant coalition can pursue poli-
edes that control the uncertainty facing the organization so that its
services are in perpetual demand. This misuse of its powers can sys-
tematically divert the organization from a sensible mix of policies
and may even jeopardize its survival. As we have seen for the
Saturday Evening Post, this political process led, at one time, to an
overspending on production activities, and at another time, to an

overspending on circulation promotion. This tendency to pursue a

successful strategy to some ridiculous extreme has been noted by

Miller and Friesen (1980). It 1s most likely to occur when the

25

Supervisory body for the organization is weak. There is evidence

(Friedrich, 1970; Christensen et al., 1969) that the board of direc-
tors of the Curtis Publishing Company became progressively remote
from the day-to-day operations of the firm and thus susceptible to
manipulation by powerful groups within the organization.
Misattribution of causality: In interpreting causality in its com-
plex external environments, it appears that an organization is guided
by its maps of causality. Where part of the map is missing, it does
not perceive any relationship. As has been described, the policy
elite of the old Saturday Evening Post seened to be oblivious to the
recursive relationships that tightly coupled readers, advertising
sales and magazine pages. It resulted in an unstable system.
Whether the readership of the magazine increased or decreased, the
sane result was obtained-~profits dropped (Hall, 1976; Weick, 1977).
We have posited that, if a relation is indeterminant, its nature
becomes a matter of belief backed up by confirming experience. The
belief is supplied by the organization's internal culture and orien-
tation, which, as we have seen, can be inappropriate. Einhorn and
Hogarth (1978) have shown that managers (and even statisticians) when
faced with a task of validating hypotheses tend intuitively to rely
solely on the "positive hit rate” (i-e., they look only for confira-
ing evidence), yet this is a very poor validator of causality. They
speculate that the scientific concept of “null hypothesis” (i.e., an
hypothesis can only be disconfirmed by evidence but never confirmed)
has either not been disseminated generally enough or runs counter to
human though processes, because it is rarely used in management situ-
ations. This kind of crude hypotheses testing could have been re-
sponsible for the massive misattribution of causality made by the
management of the old Saturday Evening Post in supposing that sub-

scription sales were price inelastic in the pre-1948 era. The re~
26

sults, as we have seen, were disasterous in inhibiting subscription
sales at a time of increasing competition and in later driving the
firm to adopt other catastrophic policies.

It is a perpetual enigma that a complex organization (like the

Curtis Publishing Company) can coordinate such a rich array of highly

specialized activities (from editing to printing) and yet formulate

its major policy decisions on out-of-date maps of causality contain-

ing untested beliefs and the simplest of arguments. Furthermore, it

seems that once these maps become established, they are difficult to
change and require a crisis or substantial turnover of senior mana~

gers to affect any radical revision.

7. Prescriptions for Aiding Policy Making

The pathologies outlined above appear to stem from (1) a lack of
proper supervision of the management to enhance healthy adaption and
contain intergroup power-politicing, (2) the absence of any reliable
procedure for formally constructing the organizaton's maps of causal-
ity and checking their verity, (3) the absence of guiding principles
for decision making in complex interactive systems where the natural
policy making process becomes less reliable, and (4) excessive insti-
tutionalization of standard procedures that leads to loss of variety
of controls and ability to react to circumstances.
Supervising the management: Agenti (1976) suggests that members of
the Board of Directors are usually the last to know that the collapse
of the firm is imminent. Without a strong board and a timely infor-
mation system to help them, who is to supervise the management of the
organization? All too often the board is a compliant one heavily in-

filtrated by members of the management. Roos and Hall (1980), using

a cause mapping technique, have shown that a viable role for the

evaluator of an organization is to uncover the power strategy used by

545

27
managers in acquiring excess resources.

Procedures for constructing maps of causality: There are now avail-

able a number of simple influence diagramming techniques to assist
organizational members to write down and analyse maps of causality
(Hall, 1978). The meta-modeling methodology of System Dynamics
(Forrester, 1968 and Coyle, 1977a), together with the user-oriented
system simulation languages of Dynamo (Pugh, 1970) and Dysmap
(Ratnatunga and Stewart, 1977), shows considerable promise as a tool
for constructing simple but powerful corporate system models to aid
policy analysis (Coyle, 1977b; dall, 1978; Hall and Menzies, 1983)
and to complement planning (Coyle, 1978).

The kind of analysis undertaken above for the Curtis Publishing
Company could form the basis for a cause map analysis method. Start-
ing with a rudimentary map of the generally accepted accounting,

factual and belief relations for an organization, through successive

elaborations by adding chains of arguments as they become evoked
(say, through the interaction of a consultant with the management), a
formal corporate system model could be developed. At each stage, the
model could be tested to see whether markedly different behavior is
exhibited to that expected from the simple map. Also, belief rela-
tions could be subjected to more rigorous testing. The model could
be used to coach the management to handle more complexity in their
policy domains in the same way demonstrated by Hall and Kenzies
(1983) for a failing organization. Kelohaju (1982) has devised a
method that works in the opposite direction. Starting with a full~
scale system simulation model, the links are systematically cut until
the simplest model, that still traps the essence of the behavior of
the initial model, is produced.

Some guiding principles for control: Kuhn (1976) explains General

Motors success under Alfred Sloan and Ford Motors failure under Henry
28

Ford between 1918 and 1937 in terms of cybernetic and system theory
concepts. Henry Ford's mode of organizing, on the one hand, relied
more on intuition and “gut-feel", and perhaps closely paralleled the
natural logic process model of policy making described above. Alfred
Sloan's thinking, on the other hand, more closely paralleled the
positions taken much later by the cyberneticians and system design
theorists such as Ashby (1956) and Churchman (1971). The cybernetic
planning approach raises for conscious debate and evaluation the
selection of: goals, strategy, organizational structure, regulation,
and performance evaluation. More recently, Mackenzie (1982) has put
forward a systematic procedure for accomplishing much of this.
Mintzberg (1973) paints the picture of the manager, like a bat-
tle commander, reacting to situations as they arise (sometimes by the
minute) with a dynamic mental map of the issues. if, like battle
coumanders, they could be equipped with an effective organization
adaptable to the changing competition, and an easily updatable map of
the ever changing policy terrain, they would be in a better position
to exploit opportunities or defend against threats as they emerge in
‘real time’. The providing of an effective adaptable design for the
organization using, say, the algorithmic methods of Mackenzie (1978a,
1978b, 1982) and the providing of an accurate cause map using, say,
the methods suggested by Hall (1978) and elaborated further here,
would constitute a considerable departure from the usual Management
Science approach to policy analysis. However, it might point the way
for Management Science to take a more active and supportive role in
senior management's affairs for which it has had little to offer so
far Qtintzberg, 1973)
Loss of Control: We have seen how the process of political activity,
whereby coalitions within an organization challenge each other in an

attempt to expand their influence, can result in a compromise among

546

29

contending forces institutionalized in standard rules and procedures.
These rules and procedures may reduce the number of regulators or
policy levers available to the organization and violate Ashby's
(1956) Law of Requisite Variety. The law has been paraphrased by
Bossel (1977) as:
If the regulator has less variety than the system to be
controlled, then there are possible states of the system
which are unattainable under the command of the regulator.
In other words, the system may. become uncontrollable if the number of
policy levers is reduced. The advertising-editorial formula of the
old Saturday Evening Post would afford such an example. This formula
represented a compromise between the publisher and editor over who
was to command the pages of the magazine. It resulted in the loss of
regulator variety since no deviation from the formula could be
detected over a twenty-year period (Hall, 1976). It led to an
unstable situation as described by Hall (1976) and Weick (1977).
Government intervention in the private sector can also reduce the
regulator variety available to a company. The collapse of the Penn
Central Railway is attributed in part to this cause (Agenti, 1976).
Day (1982) has shown that the simple feedback structures en-
bodied in self-organizing systems, such as commodity markets, when
certain critical parameters are approached, can produce wild fluctua~
tions and chaotic results. Similarly, the unusual and sudden changes
in the basic behavior of a positive feedback loop (also found in
self-organizing systems such as firms and their markets), has been
demonstrated by Rahn (1982). Although the study of chaos is rela~
tively new, it does not take much imagination to perceive the poten-
tial use of system modeling to warn organizations when their markets
are becoming chaotic or their own internal policies are leading them
into a zone of chaos.

Again it would seem that the System Dynamics methodology could
30

come to the rescue here, since it is a particularly apt technique for
modeling complex interactive feedback systems and analysing them for
stability in the face of uncontrollable external variability. From
such a study it is usually possible to demonstrate the effects on
the system of, say, a proposed union-management compromise agreement,
and devise policies for the organization that are "robust"-~ i.e. re~
duce the destabilizing effects of the compromise on the system

(Sharp, 1977). It offers a way for putting control back into the

system.

8. Implications for Government and Society
If corporations are being organized as described by the natural
logic process model, rather than on, say, cybernetic principles, then
we can expect that, as they become bigger and more complex, their
chance of succumbing to organizational policy making pathologies
increases. Some giant corporations become an important part of the
social scene and their failure threatens the livelihoods of a large
number of people. For example, the old Saturday Evening Post kept
some eight thousand people in employment! What should government do
about it? Is it possible to legislate the strengthening of the
supervisory role of boards of directors, or impose other forms of
supervision on the management? Or might this not become yet another
Antervention of government in the private sector reducing the variety
of corporate actions and, hence, actually, hastening the demise of
companies in trouble—i.e., breaking the Law of Requisite Variety
stated above?
Should government policy be directed to keeping tottering giants
alive by massive injections of subsidies, erecting tariff barriers or
nationalizing them? This is not an argument of public vs. private

ownership or Capitalism vs. Socialism, since we are concerned here

547

31

ebout a general malaise of bureaucratic organizations. Publicly
owned enterprises are just as likely to suffer from them (Roberts,
1975), and, given a less stringent set of financial and market con-
straints, they may even be more susceptible!

Alternatively, should the opposite policy be adopted to actually
hasten the demise of ailing giants to prevent a wastage of resources
as they use up their accumulated strength to maintain a stranglehold
on the market? There is usually a viable kernel in a moribund organ-
ization that can be resuscitated by the timely but painful surgical
operation of cutting out the dead parts (Agenti, 1976). Alternative-
ly, the management can be fired wholesale and replaced, as when one
company is taken over by another (Nystrom et al., 1976)--the organi-
zational equivalent of a cortical transplant.

If organizations have some natural life and death cycle
(Kimberly et al-, 1980), perhaps government policy should be directed
to stimulating the growth of young companies to replace the ailing
ones. What kind of primordial culture is required for seeding young
companies? How can employees be transferred smoothly from ailing to
growing organizations with the least disruption to their lives? The
evolutionary view of organizational adaption requires exploring--it

might provide some clues to answering these questions.

9. Summary

This paper has attempted to cover much territory (perhaps too
much!). In the first place it has been argued that longitudinal
studies of organizational adaption are difficult to undertake. Not
only is it hard to obtain data of sufficient richness over an exten~
ded period, but theories with which to organize the data are lacking.

A process-theoretic approach is used to postulate a descriptive
theory of the natural logic of organizational policy making.
32

The model is used to explain how the policies of a sample firm
became adopted and how, together with critical events, this caused
the firm to evolve in particular directions rather than in others.
Some implications follow from this analysis in terms of pathologies
of policy making, prescriptions for avoiding them, and questions for
government and society concerning sustaining and regulating firms
whether privately or publicly owned.

A new role for Management Science in senior management affairs

is suggested that would involve systematic procedures and algorithms

for equipping organizations with effective and adaptive organization-

al designs and accurate and updatable cause maps of the organiza-

tion's policy domains. Thus equipped, it would be left to the

managers to exploit opportunities or defend against threats as they

emerge in ‘real time'--something they are already conditioned to

doing.

Notes

1. This section is a revised and condensed. version of a working

paper originally presented at the International Institute of Manage-

ment Conference on The Functioning of Complex Organizations, Berlin,

1978, and subsequently published (Hall, 1981). The remainder of the
paper is completely original although drawing on data from a previous
study (Hall, 1976).

2. Whilst being conducted on a tour through a petro-chemical distil-
lation plant, it came to the attention of the author and his students
that there was a major discrepancy between the description of the
unevenness of the production throughput, as given by the operating
personnel, and the extremely smooth output of the plant, as reported

to the senior management at the head office. When confronted with

548

33

the evidence, the plant manager explained that he had a target to
achieve. When a crude oil with a high yield was processed, the ex~
cess production was pumped into various storage tanks around the
refinery field. It was pumped back into the system to make up the
shortfall when a poor quality crude was fractionated. By this means,
he was able to report a steady achievement of his targets to the head
office, in spite of enormous variations in production. This provides

a striking example of an equivocality-reducing enactment process. it

implies, however, that such primary operating data are unreliable for
management science purposes!

3. A policy is defined here as an important decision resulting from
group processes within the organization and not imposed from above or
without (as for example, a president or receiver empowered to make
sweeping changes unilaterally). It may or may not be tied to a
strategy or longterm master plan for the organization. In fact the
natural policy making process (e-g., raising prices to offset short~
run profit shortfalls) may systematically subvert a strategy (e.g-,
to produce a low priced product for mass sale). This interplay of
natural policy process and strategy raises some interesting questions

for business policy research.
4. A project is underway to build a computer simulation version of

this process model of organizational policy making. It is the inten~
tion to examine the budget planning process in detail--eg., how many
cycles through the budget were required, was an acceptable decision
found or was it necessary for the dominant coalition to force a deci-
sion, what did the organization learn from the results and how did
this effect subsequent decisions?

5. To examine this phenomenon, students in classes studying decision
making participated in a magazine publishing game (Hall, 1974).

Working in teams and assuming the roles of managers of the depart-
1976

1979

198

1956

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roy

1978

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McGraw HILT (OR)

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Woh. 3, (1978), pps EAN

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ight-Atlea' Pres, 1966:

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ew York: Harper and Rov,

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37
TABLE 1 - A Summary Description of the Enactment Process of Policy Making

550

If these relationships are un-
use simple forecasts based on extra~

of the financial accounts as the basis of
established relationships retained from past

Construct a budget plan using the structure
the plan.

The standard procedures evoked from the
Estimate each budget item using clearly

Retained Set
polating past results.

experience.

clear,

Reduce the uncertainty of producing
unsatisfactory financial results at

year end.
to be used for computing each line of

Reduce ambiguity about the assumptions
the budget.

FORMULATE BUDGET PLANS
RECOGNIZE PROBLEMS

Driving Forces

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These define the organ~

Identify shortfalls and surpluses in

with the organization's expectations for each

Compare the results computed by the budget
goal.

achieving the goals.

Reduce disagreement in recognizing
problems.

oust

ust

ust

ization's problens.

Compare with previous

operating ratios and growth rates of items in

the proposed budget.
year's figures to identify the symptoms of

Use standard financial procedures to compute
the problem.

Reduce uncertainty and disagreement in
diagnosing the cause of problens.

A search is made for acceptable policies that

do not violate subunit goals.
Choose the policy most frequently used be-

politically powerful subunits at the expense
fore.

dispel the symptoms of the dissatisfied goals
of the politically weak.

using its retained map of causality.
Select policies that meet the goals of the

Each subunit evokes preferred policies to

Seek to increase subunit status or defend

against threats to it.
Bring closure to the policy process when

inter-group conflict cannot be avoided.
Bring closure to the policy process when

choosing among several competing policies.

Minimize inter-group conflict.

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increase dis-

chosen for implementation

and direct argument offering immediate tangi-

ble results.
slack resources exist, invoke a slack reduc~

tion program (e.g-, cut production costs).
eretionary expenditures on promotion, or re-
Control internal variables only (i-e., do not
change variables that affect the environment,
such as prices if at all possible).

variables into the budget and recompute the
search and development).

shortfalls and surpluses.
If the target is over subscribed, invoke a

Repeat the process until all problems are
slack absorption program (e.g

solved or no solution can be found.

Make only small incremental changes to the

Enter the authorized changes to policy

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Choose the policy based on the most simple

Evoke policies that attend to the dis~

satisfied goals one at a time.

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. If the target is being under subscribed and

when

indeterminancy existe under stressful

conditions.

Bring closure to the policy process when
indeterminancy exists.
Avoid uncertainty concerning the reaction

of the organization's environment to its

actions.
Bring order to planning and coordinating

the proposals of subunits.
Reduce the uncertainty associated with

Reduce the uncertainty of not meeting
over achieving targets.

budgeted targets
reactions to policies that manipulate

Bring closure to the policy proce:
slack.

Reduce the uncertainty of negative

TABLE 1 - continued

MAKE THE PLAN WORK

TABLE 3 -

Decision Variables and Results for the old Saturday Evening Post

,
Year Subscription Rate” Advertising Rate” Readers" Advertising Pages Magazine Volume?
& & & 3 € &
_ : —-& g :
foe £F Gg fs i i
bet | fig : i
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Phase 1
1940 3.08 = 19.6 - 3.250 - 36 2796 - 5604 a)
1941 2.96 —5* 18.7 4k 3.39 oe al 37 2863 a 5666 i
1942 3.52 (20% 17.3 8k 3.33 -2* 34 2372 ~17* 5332 -6*
1943 415 18* 16.9 -2 3.44 Eid 38 (2822 19% 5628 6*
1944 4.50 ge 17.3 2 3.39 -1* 47 2932 ae 5700 1s
Phase 2
1945, 4.79 oF 17.1 1 3.45 2k 51 3143 7* 5822 2e
1946 4.86 2 17.1 0 3.78 10% 48 4033 28% 7336 26*
1947 5.21 7* 16.9 a1 3.96 5* 46 4449 10* 7920 8
Phase 3
1948 6.02 16* 16.5 2 3.90 -1* 45 4351 -2* 7780 -2*
1949 5.97 a 17.2 ‘Ge 4.02 Eid 4a 4132 Se 7568 -3*
1950 5.97 i) 17.1 1 4.03 Oo Ly4 4425, hed 7808 3*
Phase 4
1951 5.52 Be 16.9 Ae 4.00 -1* 43 4363 -1* 7664 -2*
1952 5.40 2 19.5 15* 4.22 6* 4S 4194 ce al 7600 1s
1953 5.36 “k 20.8 7* 4.52 T* 44 4186 o 7644 ue
1954 5.34 oO 22.7 on 4.70 ae 40 3686 -12* 6992 -3*
1955 5.36 oO 24.2 q* 4.70 2* 40 3686 0 6896 as
1956 5.28 -1 25.6 6 4.91 5* 40 (3507 5* 6616 Sal
1957 5.10 -3e 27.4 7* 5430 cd 47 3300 —6* 6490 -2e
1958 5.00 me 30.3 * 5.75 cid 44 (2892 -12* 6038 oe had
1959 14.93 1 34.1 13* 6.12 6* 42 2817 <3 5932 2%
1960 14.85 -2 36.1 6 6.30 3* 43 2788 -1t% 5910 o
Sources: 1 Assoc. of National Advertisers money values expressed in constant dollars (CS)

2 Advertising Age

3 Physical count of annual volumes

by the author

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TABLE 4 - Paths through the Organization's Maps of Causality
from policy variables to end ownership objectives

Path No. of 4
# Policy: links Arguments
Change subscription rates Increasing subscription rates leads to:

1 Cl, C4-B1, 86,883 4 more circulation revenue, total revenue and profit.

2 C1,C5,C4~31,B6,B7,B8 5 more, fewer or no change! in readers, circulation
revenue, total revenue and profit.

3 CL,C5-P1,P4-B4,B5,B8 4 more, fewer or no change! in readers, volume of produc~

, tion, production expenses and a loss, gain or no affect)

on profit.

4 — €1,C5-A2,A3,A5, A4~B2 ,B6 ,B7, BS 7 more, fewer or no effect! in readers, advertising

rate per reader, ad'g pages sold, ad'g revenue, total
revenue and profit.
5 CL, C5-A2,A3,A5-E1,E3-P2,P3,P4-B4,B5,B8 8 more, fewer or no change! in readers, ad'g rate per

reader, ad'g pages sold, magazine pages, amount of =
printing, production expense, costs, and loss, gain or no
affect! on profit.
Change circulation promotion expense Increasing promotion expenditure leads to:
6 — C2-B3,B5,B8 q increasing costs and decreasing profits.
7 €2,3,C5-P1,P3,P4~-B3,B5,B8 6 wore trial readers, readers, increasing printing,
production expense and costs, and decreasing profits.
8 €2,C3,C5,C4-B1,B6,B7, BS 6 more trial readers, readers, circulation revenue, total
revenue and profit.
9 2, C3,C5-A2,A3,A5, A4-B2, B6,B7, BB 8 more trial readers, readers, lower ad'g rate per reader,
more ad'g pages sold, ad'g revenue, total revenue and
profits.
10 62,03, C5~-A2,A3,A5-E1,E3-P2,P3,P4-B4,B5,B8 9 more trial readers, readers, lower ad'g rate per reader,
more ad'g pages sold, magazine pages, printing,
production expense and less profit.
(continued) ai
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TABLE 4 - continued
Change advertising rates Increasing advertising rates leaders to:
11 AL, A4~B2,B6,B7, BB 4 wore ad'g revenue, total revenue and profit. -
12 AL,A3,A5,A4-B2, B6, B7, BB 6 higher ad'g rate per reader, fewer ad'g pages sold, less
ad'g revenue, total revenue and profit. a
13. AL,A3,A5-E1,E3-P2,P4-B4,B5,B8 7 higher ad'g rate per reader, fewer ad'g pages sold,
magazine pages, less printing, production expense, costs =
Recursive path 2 and more profit.
14 A2,A3,A5-E1,£3,A2 4 more readers leads to lower ad'g rate per reader, more
ad'g pages and magazine pages which attracts yet more
readers.
5

Note:

1. Depending upon whether the sign of correlation for the link Cl to C5 is +, - or zero.

2. This path will affect all paths containing the concepts A2 and A3, It links the policy
variable Advertising Rate Al to Readers A2— a counter-intuitive relation.

3. Non active links between the same concept in different departmental maps of causality
are shown with a hyphen, e.g. C4-BL.

4. The number of links is one less than the number of concept variables in the causal path.

Source: Figure 2
TABLE 5 - Policy Arguments based on Paths through the Maps of Causality.

EFFECT ON DEPARTMENTAL GOALS OF

EFFECT ON POLICIES
ON SUPERORDINATE.

Path Circulation: Publisher: Editorial: Production: President & Board
Policy No.
Readers Circulation Advertising Advertising Magazine Amount of Total Profits
Revenue Pages Revenue Volume Printing & Revenue
Pages Production
__ Expense
b a b a b a b a b a b a bd a b a
Increase 1 *: + * * & +
subscription 2 0 = o = o - 0 -
rates 3.0 - oO boa 0 +
4 0 i oO - oO - 0 = 0 =
5 0 a ° - oO * ° os oO *
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Libraase: § - *
‘promotion 7 + i
expenditure 8 * ood + *
9 * + + + +
10 + + + + -
Increase lu + + +
advertising 12 -< ca * a
rates 13 +
Note: b- before 1948

a - after 1948
+, 0, ~ sign of correlation from policy to goal
Source: Table 4

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TABLE 6 - Desired policies for Attaining Departmental Goals
DEPARTMENTAL GOALS COMPANY GOALS
Circulation: Publisher: Editorial: | Production: President & Board:
Policy <
Variable Readers Circulation Advertising Advertising Magazine Amount of Total Profits
Revenue Pages Revenue Volume Printing & Revenue +
Pages Production
Expense

Before 1948:
Subscription indifferent increase indifferent indifferent indifferent indifferent increase increase
rates
Promotion increase increase increase increase increase increase increase indeterminant
expenditure {lower}
Advertising indifferent indifferent lower indeterminant lower lower indeterminant indeterminant
rates [increase] [increase] [increase]
After 1948:
Subscription lower  indeterminant lower lower lower lower indeterminant indeterminant
rates [increase] [ncrease] [increase]
Promotion increase increase increase increase increase increase increase indeterminant
expenditure [lower]
Advertising indifferent indifferent lower indeterminant lower lower indeterminant indeterminant
rates [increase] [increase] (increase]

Source: Table 5

{Policies suggested by causal chains with fewest links]

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THE ORGANI ZATION'S MEMORY

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MAPS OF CAUSALITY
ORIENTATION
ARCHITECTURE

STANDARD PROCEDURES FOR
REDUCING EQUIVOCALITY

Retained set of the organization:|

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Planning & organizing
framework

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Degree of: om
- equivocality °

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. Evoked procedures for:

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- increasing or defending

subunit status

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ENACTMENT SELECTION RETENTION
PROCESSES . PROCESSES PROCESSES
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Desire to control equivocality

FIGURE 1.

A Process Model of Policy Making

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SELECT LOGICAL
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MODEL OF —————————-M CAUSE-EFFECT

ACCOUNTING
THE FIRM
RESULTS OF

POLICY

POLICIES

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AMEND LIST OF
SUCCESSFUL

/

- 49

SELECT FACTUAL

Yes

FIGURE 3. The Organization's Cause Maps

JUSTIFICA’
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GROUP'S BELIEFS?

DOES POLICY FAILURE NO CHANGE
-,

DISCREDIT DOMINANT