Organizations and businesses face a range of demands from institutions, including regulators, funders and professional bodies. Since these institutions may provide the guiding principles for the organization’s work, control vital resources, or have the power to give legitimacy, their demands must be taken seriously.
In an area such as the military, with a linear chain of command, demands are simple. But some organizations have to deal with incompatible or contradictory demands because they work in more fragmentary fields. For example, healthcare in the US is controlled by multiple, uncoordinated authorities with very different priorities. Organizations such as biotechnology firms, microfinance enterprises, museums, symphony orchestras, mutual funds and law firms operate in similar environments. In these sectors, no single authority has the final say, but each one is powerful enough that it must be listened to.
Increasing Institutional Complexity
Increasing globalization means more conflicting demands, as organizations must deal with both local and global institutional pressures. Moreover, fragmentary fields are on the increase, with more specialized institutions and more devolution to local authorities. And many organizations are adopting hybrid strategies, for example by combining commercial goals with a social mission.
So what does an organization do when faced with conflicting institutional demands? Several researchers have examined this question. But many have treat organizations as unitary actors – like individual people with fixed views. In fact, organizations are complex combinations of groups, each with different values, goals and interests. If different conflicting demands are championed by different groups within the organization, there will be internal conflict.
We wanted to discover how organizations really experience and respond to conflicting demands, so we developed a model to explain and predict their reactions, building on the work of previous researchers. Our model takes into account the nature of conflicting demands, the way they are represented within the organization and the motivation of different groups to push for their preferred demands to be met.
The Ends Versus the Means
Organizations face two types of demands: those that relate to ends, and those about means. In other words, some demands are about what the organization should be doing, while others are about how it should go about achieving its goals. In general, conflict over means offers more potential for compromise and flexibility, while conflict over goals is more fundamental and difficult to resolve.
The way conflicting demands are represented within an organization depends on how individuals perceive them. People who have been trained in a particular logic are more likely to stand by it, or to reject other views. This can happen if they have had a particular type of professional training, for example.
Sometimes, just one group represents a particular demand (single representation). At other times, different groups each have a view (multiple representation). Or there may be no sympathy for the demands at all (absence of representation). Researchers have found five strategies that organizations use to respond to conflicting demands, with different tactics available within each strategy. The first strategy is acquiescence, or simply giving in. The second is compromise, which can involve balancing competing expectations, pacifying those whose wishes are not met or bargaining with the different parties. The third strategy, avoidance, might mean concealing non-conformance, buffering the relevant activities from external contact or escaping by leaving the sector entirely. Defiance, the fourth strategy, involves either dismissing or ignoring one or more demands. Finally, manipulation means trying to change the game by co-opting, influencing or directly controlling the sources of pressure.
Strategies to Deal With Conflict
Our argument is that the nature of the conflict (means versus goals) interacts with the level of internal representation (absent, single or multiple) and the power held by each internal group to determine how the organization will most likely respond.
Conflict over means is not too challenging, since it involves only peripheral demands. In the absence of any internal representation, compromise and avoidance are the most likely strategies – they are less risky, with the best chance of finding an acceptable middle ground. If one demand is represented in the organization, compromise is less likely. Instead, avoidance and defiance are the most likely responses, with some individuals willing to go further to defend their interests. If two demands are represented, the picture changes again. If the groups are equally powerful, compromise is again a possibility. If one group is dominant, it may attempt to manipulate the source of opposing demands to get its way.
Conflicts over goals are more serious, since they go to the very heart of the organization – its fundamental reason to exist. Compromise is probably impossible. Without internal representation of any conflicting demands, the most likely responses are avoidance or defiance. If one internal group has a stake in the dispute, manipulation may also be used, as the group does what it can to make its own view prevail.
The situation where there are multiple groups championing different conflicting demands in terms of goals is very serious, potentially challenging the organization’s very existence. Compromise is difficult, and avoidance is hard when the opposition is so close at hand. If one group is dominant, it is likely to try manipulation to get its own way. But if groups have equal power, none of the strategies will work: the situation is deadlocked and the result will be organizational paralysis or even breakup.
This happened in 2008 at the leading management consulting firm Booz Allen Hamilton. For many years, it managed to reconcile the very different approaches used by consultants working for the public and private sectors. But when a minority of executives tried to force everyone to work their way, conflict ensued and the company eventually split into two.
Our model is simplified in a number of ways. The power structures in different sectors and fields are not static, but evolve over time, and demands are more complex than is reflected in our model. Nevertheless, our work provides a useful new way to understand how organizations manage conflicting institutional demands, and why some conflicts are useful strategic opportunities while others may lead to the organization becoming paralyzed or even tearing itself apart.
"When Worlds Collide: The Internal Dynamics of Organizational Responses to Conflicting Institutional Demands", published in Academy of Management Review