The concept of organization serves as a key factor in determining if an organization or company reaches its goals and objective while exemplifying their mission. Nonetheless, there are various theories of organization that can be utilized such as the institutional theory (I.T) of organization. This theory focuses on the environmental factors experienced by an organization such as “external or societal norms, rules, and requirements that an organizations must conform to, in order to receive legitimacy and support” (Shortell and Kalunzy, 2000, p.24). The institutional theory depends, heavily, on the social constructs to help define the structure and processes of an organization.
The most basic principle and distinct characteristic to the institutional theory is conformity. Conformity is the meter stick that is used to determine the legitimacy of an organization. The concept of conformity establishes “rational myths” in which it is just “rational” that an organization would incorporate certain social norms, rules, and requirements into it mission and goals (Shortell and Katunky, 2000, p.24). In order for an organization to be endorsed as a valid one, it must conform to the “rational myths”. For instance, it is “unthinkable for a business school not to have an MBA degree [program] and not teach accounting, strategy and marketing,” (Johnson & Greenwood, 2002, pp.4-5). In this example, societal expectations and norms dictate the requirements needed to achieve an MBA degree because if accounting, strategy, and marketing was not taught, the program would be viewed as illegitimate. So, the program in an astute effort to obtain legitimacy the program may conform. As a result of conformity, many organizations began to resemble one another because they are faced with the same social pressures (Johnson & Greenwood, 2002, pp.44-46). This process is known as isomorphism. Isomorphism has proven to be a beneficial component of the institutional theory because it can offer an alliance between organizations with the same focus (i.e. usually seen in public health through the development of a coalition). Within the case, it is pivotal that Dr. Amayo attempted to construct a clear mission statement and concise core values and objectives so that the organization conforms with the norms surrounding a governmental communicable diseases agency and matches the goals of its constitutes(Welton & Cole, 2000). However in a slim market, isomorphism may not be beneficial. It may encourage or create competition among similar organizations who are trying to serve that same population or market (Johnson & Greenwood, 2002, p.44-45), so one’s focus may shift to the competition rather than the service or product.
Despite, the level of conformity presented by the Institutional theory, the theory is quite promising because it bridges the gap between societal views and organization’s actions. Management is more aware of social views and opinions and more willing to incorporate societal norms and expectations, rules, regulations, and requirements in its daily operations of an organization. This concept of unifying these two entities: environment and management has proven to be the ultimate advantage to theory in addition to isomorphism. Nonetheless, there are a few disadvantages associated with the theory. One disadvantage to the institutional theory is that it places a tremendous amount of constraints on management to conform to the norms, rules, or requirements (Johnson & Greenwood, 2002, p.44-46). High level of constraints can prove to be deleterious to the organization because it can inhibit versatility, creativity, and diversity within a particular field (Johnson & Greenwood, 2002, p.44-46). Another disadvantage to the theory is the creation of “cookie-cutter” organizations and the legitimacy of organization that are outcast from the “cookie-cutter” format. One example of this is within the arena of academia. For example, Drexel University- School of Public Health is non-traditional school of public health because it utilizes the Problem-Based Learning (P.B.L) format and non-traditional methodology of learning. In my opinion, the legitimacy of the institution was questioned due to the PBL format and non-traditional methodology of learning and may have hindered its acceptance into the world of Public Health. However, this example, also, shows how the skepticism produced by the institutional theory maybe diluted over time with further understanding and the transformation of societal norms whereas PBL has become a more acceptable learning style. It is this concept of legitimacy that oftentimes makes organizations resistant to change in fear of breaking away from the norm because their legitimacy may be challenged (Johnson & Greenwood, 2002, p.44-46). Also, within this type of environment, management may have a minimal amount of freedom to make decisions which may hinder the structural process with an organization.
The institutional theory places emphasize on the crossroads of the environmental factors and their influence on organizations and corporations. In the case, we are presented with a Management /Organization Paradigm and Management Operation paradigm, both paradigms incorporates external factors in its framework to demonstrate the validity and importance of external factors in contributing the organization, structure, and legitimacy of a corporation or organization (Welton & Cole, 2000, pp.4-5). In the Management Operation Paradigm, the external factors-legal, political, and social which sets the stage for the institutional theory in the paradigm because one can see the direct connection that the external factors plays in the framework of an organization as noted by the flow chart of the paradigm (Welton & Cole, 2000, pp.4-5). In addition, the paradigms suggests that the relationship between the mission statement, values, vision, and etc. (see Paradigms in case for other component of organization)and external factors are oscillating components that goes back and forth in the development, structure , and strategic management of an organization (Welton & Cole, 2000, pp.4-5). This means that the relationship between both is constantly changing so that one can accommodate the other.
The institutional theory can be a rewarding concept to an organization because its stakeholder, as a whole (society), plays a vital role in determining the legitimacy of an organization, directly, and have much more power in the operations of an organization. Many other theories of organization do not extend the same level of power to its stakeholders in which the stakeholders set the standards. It is for this reason that that the institutional theory is a promising theory, despite its disadvantages. Nevertheless, this theory is not advantageous for every organization but can be determined by a “best fit approach” (Handy, p.107). This approach examines the capability of an organization mission, goals, vision, and strategic plans to the basic principles of a theory in an effort to determine which theory fits best with that particular organization (Handy, p.107). This approach is important because as explained within this paper, the institutional theory can provide a few downfalls that may hinder productivity.