Institutional Credibility & Organizational Credibility Research Paper

I Introduction

Organizational credibility and institutional credibility are two closely intertwined by different concepts which help to understand the function of society and organizations, basic rules which exist at different organizational levels and the nation as well as conflicts that may emerge, when internal organizational rules or external institutional norms are neglected. However, in spite of the considerable progress organizational theory has made so far, there are no homogenous view on functioning of organizations and society because there are different theories and schools that offer different perspectives on their functioning and on institutional and organizational credibility. At the same time, the development of different theories and schools raises the question of the credibility both organizational and institutional. Nevertheless, the variety of theories still gives implications that there are specific rules and norms which contribute to the organizational development and operations as well as to the development of the nation and institutional credibility that means that various theories and schools rather contribute to the organizational and institutional credibility than hinder it.

II Organizational Credibility vs. Institutional Credibility

Organizational credibility is grounded on internal rules and external actions. Organizations develop their policies and conduct their operations on the ground of internal rules they elaborate for their employees to run organizations smoothly and to perform all functions of organizations and each employee within organizations well. At the same time, actions of public organizations are oriented on customers, who are outsiders for the company, including community members and other stakeholders, who use services of public organizations. Public organizations need to have organizational credibility to perform effectively because internal rules decrease the risk of conflicts and increase the effectiveness of the employee performance, as long as employees follow those internal rules. External actions involve services delivered by public organizations to customers.

Institutional credibility is different from the organizational one. Institutional credibility involves external rules of the nation applied to individuals and organizations in a nation. This means that there are common rules which exist at the institutional level and which organizations and individuals have to follow. Otherwise, the violation of external rules established by institutions leads to the respective action from the part of public organizations.  For example, the violation of a law or commitment of a crime, like robbery, leads to the action from the part of the police that conducts the investigation of the crime and arrests the suspect, while the court tries the suspect and determines whether the suspect is guilty or not. Therefore, the difference between organizational and institutional credibility is substantial since the organizational credibility is the credibility at the micro level since it involves internal rules within the organization, while institutional credibility is the macro level since it involves external rules that have a considerable, if not to say, determinant impact on the nation and organizations, groups, and individuals.

III Theories/schools and public organization’s credibility and overall institutional credibility of institutional environment

            1. Theory of bureaucracy

Max Weber was one of the early theorists, who gave insight into the organizational theory and how people interact within groups and organizations, but what was more important, he attempted to explain how society operates and how people interact within society. He developed the theory of bureaucracy which became one of the early theories that attempted to explain the organizational behavior. According to Max Weber, the bureaucratic organization is the most rational means to exercise a vital control over the individual workers. A bureaucratic organization is one that has a hierarchy of authority, specialized work force, standardized principles, rules and regulations, trained administrative personnel, etc. (Lipsky, 2010). In such a way, Max Weber viewed organizations and the nation as a hierarchical structure, where each group and individual performs specific functions and has specific duties.

The existence of the organizational hierarchy implies the existence of certain internal rules that allow the organization operate and function successfully and to keep the hierarchy stable. Therefore, Weber’s theory of bureaucracy contributes to the development of the concept of organizational credibility because the hierarchical structure of the organization required the existence of internal rules within the organization that guided its operations and regulated relationships within the organization.  

The similar effect the theory of bureaucracy had on institutional credibility because Weber extrapolated his view on the nation as a large organization, where people are still subordinated to the specific hierarchy established on the ground of laws and rules common for the entire nation and which all citizens and groups or organizations within the nation have to obey (Lipsky, 2010). Therefore, Weber implied the existence of institutional credibility as he admitted the existence of institutional rules and norms or laws that regulated social hierarchy. Similarly to organizations, the national hierarchy could not exist without those laws and rules which were acceptable for and accepted by society. Otherwise, the deviation from such rules leads to the social unrest, conflicts or even revolutions within the nation.

The Weber’s bureaucratic theory differs from the traditional managerial organization in the sense because it is impersonal, and the performance of an individual is judged through rule-based activity and the promotions are decided on the basis of one’s merits and performance. However, such impersonification of organizations and focus on rule-based activity laid the foundation to the development of the concept of organizational and national credibility because credibility is grounded on rules, either internal, in case of organizational credibility, or external, in case of institutional credibility. Weber believed such rules were fundamental for organizations as well as for the nation. Hence, he contributed to the development of organizational theory and ideas that back up organizational and institutional credibility. Weber attempts to explain the organizational hierarchy and national hierarchy also contributed to the development of ideas on organizational and institutional credibility because the existence of hierarchy implies regulations of relations within organizations and outside organizations, when they interact with each other or with individuals. Such theory is also applicable to public organizations which, in their essence, are organizations that subordinate to the same rules and principles of the organizational structure and behavior as other organizations, according to Weber, although stakeholders of private and public organizations and their operations may differ.

            2. Scientific management

The scientific management theory is well known for its application of engineering science at the production floor or the operating levels. This theory has also had a considerable impact on the management theory and organizational theory as well. The scientific management theory was developed by Fredrick W. Taylor, who, in a way, similar to Max Weber believed that the order and strict subordination and fulfillment of specific function could contribute to the effective organizational performance and effective functioning of organizations. Even though F.W. Taylor focused his attention at the organizational level mainly, his theory may also applied at the national level as well. However, the focus on the organizational level implies that the scientific management theory contributed rather to the development of the concept of organizational credibility, while institutional credibility was, in a way, too broad term for F.W. Taylor’s theory.

The scientific management theory focused on improving the efficiency of each individual in the organization. The major emphasis is on increasing the production through the use of intensive technology, and the human beings are just considered as adjuncts to machines in the performance of routine tasks.

The scientific management theory holds the premise that the improvement of the efficiency of the employees at the operating level first which in turn improves the efficiency of the management and overall improvement of the organizational performance.

At the same time, the scientific management theory was very pragmatic and did not really seek to explain the organizational behavior in broader terms, such organizational credibility. Instead, the purpose F.W. Taylor was very specific and relatively simple. The scientific management theory of F.W. Taylor aimed at the improvement of the worker’s efficiency and minimizing the task time. In other words, this theory looked for ways of optimization of the organizational performance rather than on the explanation of the organizational structure and behavior. Nevertheless, willingly or not, F.W. Taylor contributed to the development of the concept of organizational credibility because the development of scientific management and search of ways to increase the organizational efficiency encouraged later researcher and theorists to have a broader view on the organization, organizational behavior and rules which organizations used to regular relations within the organizations as well as to maintain external interactions between the organization and other stakeholders.

As for institutional credibility, the scientific management theory has made little, if any contribution, to the development of the concept of institutional credibility. Broader issues outside of the organization and external forces that influence the organizational performance and operations were of little interest for F.W. Taylor and his followers. This is why the scientific management theory does not expand the theoretical perspective or framework of the theory beyond organizational boundaries. This is why institutional credibility and the impact of institutions on organizations remain under-researched by Taylor and other theorists who shared his views and ideas. This is why the scientific management theory contributed to the development of further studies that led researchers to the development of the concept of organizational credibility rather than institutional credibility because researchers, who stuck to this theory, focused on the organizational behavior and operations solely and did not expand their study beyond organizational boundaries.

            3. Administrative management school

The development of the administrative theory contributed to the further progress of the management theory and study of the organizational behavior. Also, the administrative theory contributed to the further progress in the development of the theoretical framework for organizational and institutional credibility. This theory attempted to study and explain the organizational structure and functioning. The administrative theory also attempts to understand relationships between people and their interaction, as well as rules behind that interaction.

The administrative theory is based on the concept of departmentalization, which means the different activities to be performed for achieving the common purpose of the organization should be identified and be classified into different groups or departments, such that the task can be accomplished effectively.

The focus on the organizational structure and relations between parts of the organization and its structural elements contributed to the further development of the theoretical framework for organizational credibility and institutional credibility. The theory is more beneficial for the development of organizational credibility because it focuses on the organizational structure and understanding of the interaction between departments within the organization. Hence, the theory studies rules and laws that define the interaction between departments as well as between people within the organization and such study apparently contributes to the better understanding and elaboration of the concept of organizational credibility which involves rules that define the interaction between people within the organization and the delivery of organizational services by each department.

Nevertheless, this theory may also be extrapolated to the national level that contributes to the development of the concept of institutional credibility. As the administrative theory studies the organizational structure and department operations, this framework may be used for the study of operations of the government and the nation, where departments may be viewed as public organizations and employees are public officers, who deliver their services to people.

The administrative theory is given by Henri Fayol, who believed that more emphasis should be laid on organizational management and the human and behavioral factors in the management. Managerial principles and ideas developed by H. Fayol are applicable to organizations and institutions although rules in organizations are interpolated whereas institutional rules are extrapolated and focus on organizations, social groups and individuals to help them to comply with those rules.

Thus, the main focus of the administrative theory is on how the management of the organization is structured and how well the individuals therein are organized to accomplish the tasks given to them (Natemeyer & Hersey, 2011). The administrative theory focuses on improving the efficiency of management first so that the processes can be standardized and then moves to the operational level where the individual workers are made to learn the changes and implement those in their routine jobs. In this regard, the administrative theory contributes to the development of both concepts of organizational and institutional credibility because the standardization of organizational processes helps to understand rules and laws according to which those processes are performed and external or institutional drivers that influence those processes. The administrative theory stimulated the further study of relations within organizations and between organizations and their departments and structural elements, as well as suggested ways to make that interaction more effective.

            4. Pre-human relations school

The further development of studies of the organizational behavior and management theory contributed to the further development of operational and institutional credibility. The pre-human relations school became the classical theory which was one of the early theories that have shifted the focus from organizations proper to humans. The pre-human relations school placed emphasis on the important role of humans as agents of the organizational behavior, while the science management theory and Weber viewed people as mere tools or parts of the organizational machine. Even though, according to the pre-human relations theory, the organization is considered as a machine and the human beings as different components/parts of that machine, but it was the first theory, who took humans seriously and considered their needs and contribution to the organizational performance rather than just viewed them as mere tools to achieve organizational goals.

Some writers of the pre-human relations theory emphasized on the technological aspects of the organization and how the individuals can be made more efficient, while others emphasized on the structural aspects of an organization so that individuals collectively can be made more efficient (North, 1990). At the same time, their ideas lead to the development of the assumption that people in organizations have to obey to organizational rules and norms to perform their functions well. Such assumptions laid the ground for the further development of the concept of organizational credibility. The trend to emphasize technological aspects developed a conservative view on the organizational behavior and interaction between individuals.  Such perspective still viewed employees as mere parts of the complex organizational machines, but theorists insisted that employees need to work according to rules and norms that allowed the organizational machine run smoothly all the time. In this regard, the pre-human relations school crated conditions for the development of organizational credibility. The focus on the structural aspect of the organizational behavior and the role of humans in operations of the organization enhanced organizational credibility even more and encouraged researchers to explore how organizational rules and norms influenced operations within the organization and services delivered to external stakeholders of the organization.

The pre-human relations theory laid emphasis on the physiological and mechanical variables and considered these as the prime factors in determining the efficiency of the organization. But, when the efficiency of the organization was actually checked, it was found out that, despite the positive aspect of these variables the positive response in work behavior was not evoked (Tompkins, 2005). Such findings gave insight into the concept of organizational credibility and gave implications to institutional credibility because it became obvious that technical factors were not enough for the effective organizational performance. Instead, the organizational behavior was probably influenced by other factors such as organizational norms and rules, existing cultural norms, traditions and what later was identified as institutional norms and ultimately stimulated the identification of the concept of institutional credibility. This is why pre-human relations school contributed to the further development of the concept of organizational credibility and studies in this field and, what is more, gave implications for the development of the concept and studies of institutional credibility.

            5. Human relations school

The human relations school naturally emerged from the pre-human relations school and became the new school that focused more on human relations and emphasized the importance of humans as agents of the organizational behavior, who are not only vulnerable to various influences within and outside the organization, but who are also capable to influence the organizational behavior on their own through their system of values, cultural background and what is possible to define as institutional credibility or institutional rules which influence the worldview of people and shape their system of values, to a significant extent. The human relations theory is the extended version of the pre-human relations theory wherein the behavioral science gets included into the management. According to this theory, the organization is the social system, and its performance does get affected by the human actions (Tompkins, 2005). The view on the organization as a social system was the major contribution to the development of the concept of organizational credibility. The organization as a social system requires credibility because its internal rules and norms are essential to run the social system smoothly. The lack of internal rules acceptable for all employees and managers or, at least, for the majority of the organization’s staff, the organization will be unable to operate effectively and productively. The organization will stumble as a social system because professionals working in the organization will suffer from conflicts and permanent struggle. They need a sort of social contract within the organization to make the organization an effective and functional social system under the human relations theory. Hence, the organization needs organizational credibility.

A human relations theory primarily focused on the human beings in the organization (Natemeyer & Hersey, 2011). Such approach was essential for the development of the concept of institutional credibility as one of the essential concepts in the study of the organizational behavior and social behavior at large. Humans are vulnerable to the impact of multiple factors and their behavior in the organization is determined not only by organizational rules and norms, but also their behavior is vulnerable to the impact of external drivers, institutional norms and rules which influence their worldview and system of values and define their performance and contribution to the organization. In such a context, the human relations theory also contributed to the development of the idea of the interconnectedness between organizational and institutional credibility. As humans are vulnerable to external influences, they need to have institutional credibility to have a clear system of values and rules their relationships outside their organization. They also need internal, organizational rules and norms, or organizational credibility, to work effectively within their organization and to deliver services, for example, public services to clients of their organizations.

The human relations theory posits that an organization is the combination of both the formal and informal forms of organization, which is ignored by the classical organizational theory. The informal structure of the organization formed due to the social interactions between the workers affects and gets affected by the formal structure of the organization. Usually, the conflicts between the organizational and individual interest exist, thus the need to integrate these arises (Lipsky, 2010). The human relations theory asserts that an individual is diversely motivated and wants to fulfill certain needs which are defined by institutional norms and organizational rules, to a significant extent.

            6. Natural systems perspective

The natural systems definition states that “organizations are collectivities whose participants are pursuing multiple interests, both disparate and common, but who recognize the value of perpetuating the organization as an important resource” (Scott & Davis, 2007, p. 30). In other words, organizations are social systems that seek to survive that means that organizations need organizational credibility which becomes one of the pivotal concepts of the natural systems theory. Organizational credibility is essential for the effective functioning of organizations, because the natural systems theory holds the premise that organizations should have a system of values and rules which define the interaction between people and sets norms of their behavior within the organization. 

While natural systems theorists acknowledge the formal rules, roles, and goals of an organization, they assert these serve as a front that conceals the informal and interpersonal structures that explain and predict human behavior in an organization. Organizations share common attributes with all collectives and are subject to the forces that affect such social systems (Natemeyer & Hersey, 2011). Rules and norms contribute to organizational credibility because professionals working in the organization understand what they are expected to do and how to conduct within the organization to get the positive feedback and positive incentives from the part of the organization. They try to comply with those regulations and rules and enhance organizational credibility.

At the same time, the natural systems theory also contributes to the enhancement of institutional credibility because people use institutional rules which they extrapolate on their work in the organization. Employees of organizations view their work and role in the organization in the context of their social roles in the complex system of social relations defined by the natural systems theory. In this regard, institutional credibility turns out to be pivotal because people need to have confidence in their social roles and the relationships between different social institutions. Their organization is just a part of the complex social system with diverse institutions that interact with each other and influence the life of people, their views, beliefs and wellbeing. The natural systems theory holds the premise that society is a complex social system, where institutions or social rules and regulations that define the interaction between people and set fundamental values of society play the crucial part in the stability of the social system.

Therefore, the natural systems theory contributes to the enhancement of both concepts, the concept of organizational credibility and the concept of institutional credibility. Organizational credibility is essential for the effective functioning of organizations and the stable performance of organizations. The natural systems theory may be applied to the development of a broader view on society as a complex social system, where different people, organizations and institutions interact with each other. Such a view on society or nation makes institutional credibility a pivotal concept because institutional credibility contributes to the effective functioning of the key institutions of the nation which contribute to the stability and effective interaction between members of society and different social groups or organizations. In this regard, the natural systems theory created an important theoretical framework for the elaboration and introduction of concepts of organizational credibility and institutional credibility.

            7. Structural functional theory

The structural functional theory is another theory which coins organizational credibility and institutional credibility as the key concepts of the organizational behavior and social interaction between people and between social groups. The structural functional theory emerged along with the progress of the organizational behavior theory and focused on the study of structural and functional elements of organizations and society. The structural-functional theory, or structural functionalism, views society as a system of functional and interconnected units that work together as a whole to produce a state of stability and order (Natemeyer & Hersey, 2011). Because of their interconnectedness, the individual units of society can affect each other. If one of the functional units is weakened, the structural-functional view anticipates a possible effect upon the entire society (Natemeyer & Hersey, 2011). These ideas are pivotal for organizational credibility and institutional credibility because they relate to the establishment of inner organizational rules which are essential for organizational credibility and external rules and norms which are essential for institutional credibility.

The structural functional theory holds the premise that the organizations consist of interconnected units with each unit performing its own specific function. Each unit consists of smaller teams and professionals, who are also responsible for specific functions and fulfilling their duties. According to the theory, functioning of all units and the organization itself requires the close interaction between all units and professionals at different levels. This means that the organization needs internal system of controls and regulations which define succinctly functions and responsibility of each unit and employee and provide them with the proper code of conduct to help them to conduct and fulfill their functions properly. Therefore, they need organizational credibility which involves organizational rules and helps to deliver outside services to customers and other stakeholders, such as local communities, for example.

At the same time, the nation also consists of units and each nation has its structure with different units performing different functions. The government performs the executive function, the parliament performs the legislative function, and the supreme court of a nation performs the judicial function, and so on. Each unit of the nation performs its specific function. The relationships between those units are close and the structural functionalism theory stands on the ground that all units in society are interconnected. This means that all units interact with each other. The degree of their interaction may vary but, nonetheless, they do interact and they have to interact to perform their functions well and to hold their place in the national structure as a complex social system. The interaction between units at the national level requires institutions which are hallmarks that beckon people on the right and socially acceptable rules and norms, which the majority of the nation is ready to obey. Each unit of the nation and each individual in the nation are expected to fulfill their duties and to obey to those institutional rules and norms that give the nation institutional credibility.

The nation has different institutions that shape the system of values of people and the nation. They are core values and rules which allow the nation to maintain the balance of power and to maintain the existing social order. The breach of such rules leads to the loss of institutional credibility. As a result, the nation faces the problem of the social unrest and instability as some units of the national structure start stumbling as they have lost institutional credibility or if the overall institutional credibility of the nation is questioned by a large part of the population.

At this point, it is possible to refer to the problem of the police violence which challenged the institutional credibility of the police as a law enforcement agency that is supposed to be responsible for the observation of the law and enforce the law to prevent crimes, while some of police officers slip to committing crimes themselves and violate existing rules and norms themselves. Therefore, the structural functionalism contributes to the enhancement of institutional credibility as one of the main concepts concerning social relations and organizational behavior.

            8. Open systems perspective

One more theoretical approach that contributed to both organizational credibility and institutional credibility was the open systems perspective. This is a relatively new perspective on the organizational behavior and social relations, but still its origins emerge from past theories and schools which coined the key concepts of the organizational behavior and social relations, including organizational credibility and institutional credibility. At this point, it is worth mentioning the fact that the open systems perspective contributes to the development of a solid theoretical framework which coins and justifies the importance of organizational credibility and institutional credibility.

The open systems definition states that “organizations are collectivities of interdependent flows and activities linking shifting coalitions of participants embedded in wider material-resource and institutional environments” (Scott & Davis, 2007, p. 30). In other words, organizations are activities that involve groups of individuals with varying interests working together in an environment. Such a perspective on the organization inevitably raises the problem of the proper management of the organization and identification of effective tools that can help to create the adequate environment, where organization can operate effectively. In this regard, organizational credibility is the adequate response to the question concerning effective tools to regulate operations of organizations and to keep them functioning as solid bodies, where different elements and units function and collaborate together effectively.

At the same time, the environment, where the organization operates, gives implications to the enhancement of institutional credibility because institutional credibility creates the environment, where organizations operate. To put it more precisely, institutional credibility is grounded on rules and norm that are socially acceptable and which create the specific socio-cultural and political environment, which organizations have to operate in. Organizations need institutional credibility because it helps them to adapt to the specific environment and operate successfully. Organizations should offer employees rules that institutional norms. For example, if an organization fails to meet cultural norms of its employees, which are institutional norms in their essence, the organization will underperform because employees will be unwilling and unable to perform successfully in the hostile organizational environment. Therefore, organizations have to comply with institutional credibility and provide employees with opportunity to match and balance both organizational and institutional credibility.

Where rational and natural systems theories tend to view organizations as closed systems that are separate from their environments, open systems theory recognizes that the organization exists in an environment, which continually shapes, supports, and infiltrates the organization (Lipsky, 2010). This idea implies the evolution of the environment and organizations that gives dynamics to organizational credibility and institutional credibility. To put it more precisely, institutional and organizational credibility tend to change along with changes that occur to the nation under the impact of cultural changes or political changes, or any other changes that lead to the re-evaluation of rules, regulations and the system of values of the nation.

IV Conclusion

Thus, the variety of theories and schools contributed to the development and enhancement of the concept of organizational credibility and institutional credibility. Even though views of different theorists vary consistently, they still created the ground for the emergence of the concept of organizational credibility and institutional credibility. Early theories, like the scientific management theory or Max Weber’s theory of bureaucracy, have rather implications that encouraged researchers to focus their studies on organizational and institutional credibility. Such theories along with some others, like the administrative management school or the pre-human relations theory, often focus on organizations and contributed to the development of the concept of the organizational credibility. Later theories, like human relations theory, structural functional theory, natural systems theory, or open systems perspective, contributed to the development of not only organizational credibility but also institutional credibility. As a result, organizational credibility and institutional credibility became fundamental terms which help to understand the organizational behavior and the key process that take place within a nation.

References:

Lipsky, M. (2010). Street-Level Bureaucracy: Dilemmas of the Individual in Public Services. Russell Sage Foundation. Updated edition. ISBN: 978-0871545442.  (Paperback).

Natemeyer, W. E. and Hersey, P. editors. (2011). Classics of Organizational Behavior, fourth edition. Waveland Press, Inc.

North, D.C. (1990). Institutions, Institutional Change and Economic Performance. Cambridge University Press. ISBN: 978-0-521-397346-0 (Paperback).

Scott, W. R., and Davis, G. F. (2007). Organizations and organizing: Rational, natural, and open system perspectives. New Jersey: Pearson Prentice Hall.

Tompkins, J. R. (2005). Organization Theory & Public Management. Thomson-Wadsworth. ISBN: 053417468X (Paperback).

The terms offer and acceptance. (2016, May 17). Retrieved from

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