Abstract
This contribution demonstrates the potential of Niklas Luhmann’s organization theory to enrich current research on organizational phenomena. Although this theory originated more than half a century ago, we show that it is a powerful instrument to describe and understand the role that different old and new forms of organizations play in current crises and transformation processes. Hereby, we stress two combined advantages of the theory: (1) Luhmann offers a strong concept of organizations as self-referential networks of decisions. This helps to distinguish them from other social entities, for example, groups, social networks, or families. Moreover, the assumption of ‘substitutability of structures’ allows us to grasp the dynamics of a variety of organizations and does not fail to confront even ‘fluid’, ‘virtual’, ‘temporary’, and ‘unconventional’ forms of organization unknown at the time of the theory’s origin. (2) This theory of organization is unique as it is embedded in an encompassing theory of society that offers several concepts suitable to explain the reciprocal influence of organizations and broader social contexts. This prevents any under- and overestimation of the organization phenomenon in modern society.
Keywords
Introduction
In this paper, we want to introduce Niklas Luhmann’s theory of organization with the aim of showing its potential for the study of organizations and for enriching thinking about more recent organizational and social phenomena. Compared to almost all theories of organization that have emerged in large numbers to date, the distinctive feature of sociological systems theory is that, first, it can account for the phenomenon of organization itself as a particular social phenomenon. It emphasizes the constitutive relevance of decisions and describes organizations as systems of self-referential decision-making processes. Although abstract in this sense, it has shown that it is able to theoretically address numerous organizational phenomena for which other approaches have developed own theories of organization (e.g. formal structures, informality, micropolitics, organizational culture, organizational communication); at the same time, systems theory accounts for the organizational phenomenon in such a way that it can be clearly distinguished from other phenomena on the so-called meso-level of the social formations (e.g. networks, movements, groups). Second, and even more important here, Niklas Luhmann has developed his social systems theory as a theory of society, thus offering a conceptual framework for understanding the role of different organizational types and forms in contemporary society. We want to show at least in an outline how organizations with different organizational forms not only deal with complex societal expectations in different ways but are also able to (co)shape these. Their crucial role in modern society becomes evident above all in transformation processes, where the interplay of different organizational forms and their constitutive decision-making capability makes certain transformations possible and others impossible.
Before we turn to central concepts of ‘systems theory’, one remark should be made. Doubts may arise among readers since Luhmann’s theory was developed about 60 years ago, at that time, among others, as a critical follow-up to Talcott Parsons’ work. In view of the name, this theory might, at least in some parts of the world, not suggest itself as a contemporary, innovative, powerful, and forward-looking theory of the social but may instead appear ‘outdated’. Indeed, the empirical studies and findings that initially underpinned Luhmann’s theory—rich, comprehensive, and descriptive as they were—were related to insights from organizations and to their societal environments of his time. 1 Nevertheless, Luhmann not only clearly set himself apart from Parsons as early as the 1960s, but he continued to develop his very own version of systems theory throughout his life. This included, among other things, a radical shift in the foundations of social theory, moving from action to communication as the most fundamental element of the social. And while his sociological project may have shown some closeness to Parsons at the beginning, his theory (and methodology 2 ) at the end—with its turn to elementary operativity, consistent self-reference, and radical constructivism—could not have been further removed from that teacher.
Theory development, however, is not the only and not even the most important argument against the impression that systems theory might be outdated in the second decade of the 21st century. Rather, our argument is that this theory, even in its early outlines, was already designed to capture phenomena and developments that were not known at the beginning and even at the end of Luhmann’s creative period. In other words, we will show that this theory is a comparatively powerful tool for describing and understanding the role of old and new forms of organization in new environments, current crises, transformation processes, or, more generally, in challenges that shape contemporary society.
In the following, we will first introduce Luhmann’s concept of organization and underscore why it is a powerful concept. It is, among others, because it is able to understand organizations as a particular type of system formation in modern society, which can be clearly distinguished from other social phenomena often associated or confused with organizations. Thereafter, we briefly explain why this theory can also address organizational forms that have developed decades after Luhmann’s creative period and seem to undermine the basic assumptions of his theory of organizations. Having introduced all this, we emphasize that the systems-theoretical sociology of organizations is embedded in a comprehensive theory of the social that offers the means to describe organizations in relation to modern society. Outlining at least some perspectives on how current and future research captures the role of organizations in change and crisis, we finally demonstrate the particular strength and potential of this theory for the analysis of relevant social phenomena.
A Strong Concept of Organization
Niklas Luhmann is well known for his grand theory. However, only few people know that organizations were the starting point of his theory’s career. As a trained administrative lawyer with practical experience in an administrative court and a ministry of culture, he initially dealt almost exclusively with administrative organizations. Impressed by Herbert A. Simon’s work, the concept of decision gained particular significance right from the beginning but was first applied to a particular type of organization only. Luhmann assumed at the time that while economic organizations may produce cars, tires, sugar, or other things as their output, decisions are the characteristic output of administrative organizations. Stating that administrative decisions are communicated from the administrative organization to its environment, to citizens, or to other organizations, the linkage between decision and communication existed in a nutshell, but no such social theory—that would describe decisions themselves as communications—existed at that time. Later, Luhmann abandoned distinguishing administrative and production organizations and put decision-making at the center of his sociology of organizations. However, the idea that organizations are constantly operating ‘decision machines’ was for the time being still a long way off.
Rather, in his first important book on organizations, which some scholars still consider to be the actual lighthouse in a vast and restless sea of ideas about organizations, Luhmann (1964) analyzes, as the title indicates, ‘functions and consequences of formal organization’. According to the basic problem of maintaining a system/environment-boundary, he analyzes in this book a series of organizational structures and describes their basic as well as their derivative functions. Concurrently comparing organizations to ‘elementary’, ‘simple’, or even ‘primitive’—in any case: non-formalized—forms of the social, he asks how and in what ways the formalization of a structure contributes to ‘certainty of expectations’ and other, less basic functions that may guarantee the maintenance of the system boundary and thus the reproduction of the organized system.
Luhmann’s functionalism, however, is not ‘conservative’ as Parsons was said to be. Given that ‘function’ in Luhmann’s theory from the beginning is linked to substitutability, one important message of ‘Funktionen und Folgen formaler Organisation’ is that organizations can substitute any of their formal structures for another—though not without all its consequences, concerning not only the manifest but also the latent functions, not only the planned and foreseen but also the unforeseen and dysfunctional consequences.
In order to understand how this is possible, we turn to the concept of membership in organizations. Membership in organizations is contingent in a very particular sense: because it is based on decisions. The fact that becoming a member of an organization neither happens by birth nor accidentally, stepwise and without communication, but is, in contrast, based on decision, implies more than becoming a participant in any other social system. Entering the system by way of a voluntary decision is equivalent to statementing that the organizational rules will generally be accepted—or, otherwise, the membership will be terminated by the system, if not given up by the individual. Since membership is conditioned, that is, made dependent on the acceptance of system expectations, it can be said to be a particular social mechanism that allows for the differentiation of organizations (Luhmann, 1964). This is because as a consequence of the generalization of members’ acceptance, organizations are largely released from individual motives. Instead, they can impute generalized motivations to their members. Thus, independent of individuals’ actual motives, organizations are put in a position to establish—and even change, if not substitute—their own structures by way of decision. Basically, they can do this without looking for the consent of all individuals participating in member roles. 3 Relieved from members’ motives, the system can further try to optimize and rationalize structures in view of particular functional requirements.
Luhmann described organizations as specifically modern social systems. This is not only because they are comparably powerful actors, capable of large and profound coordination efforts, as James Coleman (1982) has put it, but actually because the conditioning mechanism of membership opens up unprecedented potentials of decision-making by way of formalization.
Based on the aforementioned foundations, the emergent theory, especially in its early shape, is all but a management theory. Rather, due to its particular version of functionalism, it turns out to be some kind of ‘critical theory’ (Kette and Tacke, 2015). This is true at least as Luhmann underscores substitutability. All structural solutions can be compared to others—even if it has to be added, first, that structures can only be substituted together with all their consequences and, second, that no structure can be considered in isolation from others, and third, that deciding on structures is by no means equivalent to making one master decision only but is embedded in the organizational network of decisions. 4 In any case, we will have to keep this in mind when turning to new organizational forms and contributions that could be expected from organizations in regard to societal crises and transformations.
From the mid-1970s onwards, Luhmann devoted more of his time to elaborating his envisaged theory of modern society. Other types of systems, in particular the differentiation of the functional systems of economy, politics, law, religion, education, medical treatment, art, science, and so on, became the main focus of his attention. Organizations, however, retained a systematic place in Luhmann’s theory of society: in the course of the emergence of modern society, he argues, organization systems interpose systems of interaction on the basis of co-presence of participants, which have always existed, and the historically new functional systems. Even if, to many scholars of systems theory, the differentiation of functional systems has been the main and defining characteristic of modern society, Luhmann’s theory is in fact inadequately received as a theory of modern society if the difference between the three main types 5 of system building (interaction, organization, and society) and their own differentiation from each other is omitted. 6
We at least briefly want to remind here that in the course of elaborating the encompassing theory of modern society, many of Luhmann’s concepts were reshaped. Unsurprisingly, this also concerned his organization theory. One important aspect of reshaping concerns the prominence of the concept of structure which was exchanged by the prominence of conceptualizing system operations and respective processes, relegating structures in theoretical terms to a secondary position. The perspective shifted from a foremost functional-structural theory, as which it appeared in the 1960s, to a clear operational and processual theory since the 1980s at the latest. Regarding organizations, this meant defining them on the operational level of decision-making instead of the level of formal structures (Tacke, 2019). A second, related aspect of reshaping systems theory concerns the underlying social theory. While the early Luhmann (in accordance with Chester Barnard, 1938) assumed that systems consist of actions as their ultimate element (with the consequence that individuals are part of the system’s environment), the concept of communication finally took this place. Theoretically, this implied understanding actions from now on as a special case of meaningful communication, that is, as a simplifying ascription of a communicative utterance to an agent (Luhmann, 1995 [1984]). In view of organization theory, this turn finally allowed Luhmann to even theoretically grasp two important assumptions of his and others’ early observations: first, that organizations communicate decisions (Simon, 1947), and, second, that the process of uncertainty absorption (March and Simon, 1958) is actually a process of communicating decisions. 7 But how to describe a decision as communication?
It is obviously characteristic of any decision that it is contingent, that is, it not only determines something, but it could also have turned out differently. There are no decisions without alternatives. Following this, understanding communication as a decision is somewhat paradoxical. The decision is only understood as a decision when it communicates a determination (we invest in A!). Besides the determination, it must also be communicated that there were alternatives (not investing in other opportunities like B or C). If the meaning of the communication was not accompanied by more or less explicit contingency, it could not be understood as a decision. Organizing, to Luhmann, is the ongoing shifting and concealing of this paradox. This is important here, as it follows that uncertainty absorption, the transformation of uncertainties into certainties, does not create ultimate security but only provisional certainties.
Having once started with the insight that membership is a decision-based mechanism that makes organizational structures decidable, the theory in the end is dominated by the insight that organizational systems reproduce themselves on the basis of nothing but decisions. The membership decision finally seems to be only one among many decisions. Decision-making becomes reflexive, not only in the sense that one decision decides over possibilities of the next, but also in the sense of deciding over structures of decisions (such as hierarchies or standard procedures), that is, decisions, which not only orient a subsequent decision but many decisions in advance. Organizations are assumed to be constituted by decisions as their communicative elements, which they self-referentially produce out of other decisions of the same system, be they recalled or anticipated. Even missing decisions and non-decisions may be treated as decisions in hindsight. Phenomena such as gossip, informal routines, or emotions may also become relevant to the system but, if at all, only in the context of the organizational networks of decisions. Networks of decisions, enabled on the basis of the membership mechanism, which itself is based on decisions and their defining contingency, are constitutive to organizations and this is exactly the meaning of the formulation ‘system is decision’.
While Luhmann’s early version of systems theory embraced the open systems paradigm, it finally stresses system closure. This assumption, which refers to the self-referential production of decisions in a web of own decisions, has often been misunderstood (as if a system were a closed container). Obviously, this becomes particularly important when it comes to understanding the role of organizations in crises or societal transformation processes. But even though in the course of decision-making any decision is dependent on the system’s own decision network, system closure does not preclude openness. On the contrary, all social systems are at the same time open systems. This is because they do not only communicate on communications but these meaningful communications have factual topics that ultimately refer to environments. As all issues the system deals with have external references, organizations and other systems are open systems, too. Among the important consequences of this approach (closure/openness) is therefore that systems theory emphasizes the mutual differentiation of the social systems and thus systems’ autonomy. As far as autonomy means that no social system can directly influence another, the theoretical argument of autonomy evidently complicates describing and elaborating the relation(s) between organizations and society (i.e. the functional systems). We will have to come back to this when we consider organizations in view of crises and transformation. Before doing so, however, we ask whether Luhmann’s theory, which cannot but denote system boundaries, is well prepared to describe even new organizational forms.
Old and New Organizational Forms
Following Luhmann, formal organizations are a unique social form. As networks of decisions, and due to their particular form of participation (membership), these systems can be clearly distinguished from other social formations such as groups or social networks. 8 While these other forms may seem to show similarities to ‘organizing’ if not ‘organization’, their mode of reproduction is clearly different from self-referential decision-making.
The concept of organizations captures a unique social form, but there is, of course, a huge variety of organizations. They all have in common their reproduction through decisions, but their decision structures take on different forms. Critically following Simon (1947; March and Simon, 1958), Luhmann describes this variety by referring to three basic decision premises: decision programs (e.g. standard procedures, plans, or projects), networks of communication (e.g. hierarchies or teams), and personnel (whereby personnel refers to aspects of professional training as well as expectable aspects of the behavior of individual persons). On the basis of the combination of these premises, or rather the combination of their manifold manifestations, an enormous variety of specific types of organizations can be distinguished and described (Apelt and Tacke, 2023). 9
Especially when new forms of organization are of interest, it does not seem to be sufficient (anymore) to describe the variety of possible forms of organizations only by the combinatorics of their decision premises. Luhmann already pointed to differences in quality in the context of his analysis of formalization. So far rarely seen, formality for Luhmann (1964: 38f.) is a ‘gradual characterization’. He explicitly states that the term ‘denotes the extent to which expectations of a system are formalized’. Thus, we can ask if and how tendencies of formalization are favored or slowed down. Gradualization can also concern different structures. Some organizations strongly formalize decision programs but not networks of communication; other organizations choose to formalize forms of communication but leave ample space for shaping ad hoc procedures.
Gradualization, in particular, can be scrutinized both by way of comparing different cases as well as by way of more extensive or historical comparisons. However, it certainly makes little sense to compare small organizations, for example, start-ups emerging in the garage, which in the beginning create hardly any formal roles and decision structures beyond highly personalized expectations, with expanded formal organizations that strategically ‘de-bureaucratize’ and weaken clear-cut formal expectations. However, studying the former can, for example, help to understand to what extent and with which consequences flexible elements can be introduced into bureaucratic organizations developing, for example, collegial pockets within these organizations (Lazega, 2020).
Due to its strong concept of organization as networks of decisions that may consist of different structures and grades of formalization, systems theory seems to be well prepared for the analysis of old as well as new organizational forms, be they ‘fluid’, ‘virtual’, ‘unconventional’, or ‘temporary’ (u.a. Bakker, 2010; Brès et al., 2018; Dobusch and Schoeneborn, 2015).
The so-called ‘de-bureaucratization’ has often been discussed as a ‘dissolution of boundaries’ (e.g. Ashkenas et al., 1995) and, not surprising, as a central challenge for systems theory which stresses the relevance of systems’ boundaries. However, the dismantling of structures and the gradual deconstruction of formal structures do not dissolve boundaries as long as there are organized decisions that are attributed to the system and not to individuals only (even if organizations may draw strategic profit from diffuseness). In short, Luhmann’s organization theory does not stick to specific, historically developed organizational forms (such as bureaucracies) but can encompass a variety of structural solutions capable of orienting, shaping, and sustaining decision-making processes. In this sense, the underlying functionalist approach does not prejudge particular structural forms of organization.
Organization and Society
A strong concept of organization, as we have introduced it earlier, is essential in order to analyze the role of organizations in society. As we will briefly demonstrate in the following, Luhmann’s systems theory is well equipped even for this purpose. His theory of organization is embedded in an encompassing theory of society, thus offering a framework that is suitable to explain the reciprocal influence of organizations and broader social contexts (Apelt et al., 2017; Tacke, 2019). Understanding this relationship is essential in order to explain how organizations react to crises and (co)shape societal transformation processes.
Following Luhmann’s systems theory, modern society is primarily differentiated into a series of functional systems. Each of these link specific elements of communication and have different structures. Economy, science, politics, education, and so on have each taken on a different function (Luhmann, 2013 [1997]: 65–107). These functions are assumed to be socially relevant and not interchangeable with each other. For example, science is based on scientific arguments and produces knowledge building on available theories and methods. The function of science cannot be replaced by politics or economy. Even if money and political support are relevant prerequisites for science, scientific truth cannot be arrived at by economic payments or political statements themselves. In a complex society, there are, of course, further system differentiations (like disciplines in science or states in world politics) and even other structural entities besides organizations (like networks, markets, fields, professions). However, organizations—and the relation between functional systems and organizations—are of particular concern to systems theory because of their decision-making capabilities.
Applying systems theory, the role of organizations in modern world society can be traced along several dimensions. In order to prepare further arguments, we stress four important aspects: 10 (1) organizations specify and concretize functional possibilities and even implement functional systems (Luhmann, 2013 [1997]: 150–151: 166; Luhmann, 2018 [2000]), (2) they recombine and reconcile different systems’ requests (Besio and Meyer, 2015, 2022; Lieckweg, 2001), (3) they irritate functional systems with their specific ways of tackling complexity (Baecker, 2001; Besio, 2009; Besio and Meyer, 2015), and (4) they are capable of doing this as single organizations and/or in exchange with other organizations (Luhmann, 2013 [1997]: 141–153; Luhmann, 2018 [2000]: 321–326). To be sure, in all these respects, the role of organizations in society depends on the described specificity of organizations as autonomous decision systems:
Empirically, it is easy to see that a variety of organizations operate within the framework of each functional system. Even within systems like science, which fulfill a function that is difficult to organize, numerous organizations grow and flourish. The same applies to the religious sphere with its churches, organized religious communities and charitable welfare organizations. As described above, both organizations and functional systems are operationally closed systems. In order to explain their relationship, Luhmann emphasizes that organizations give the loose media of the functional systems a well-contoured form. They even ‘implement’ the respective functions (Luhmann, 2013 [1997]: 150). With this concept, Luhmann seems to suggest that organizations exactly transpose the respective functions. However, organizations are autonomous systems that, as such, never take over social expectations unchanged from systems in their environments. They refer to their environments selectively, thereby interpreting and translating expectations. Conceptually, the relation of organizations to functional systems can best be described as ‘respecification’ (Luhmann, 2002: 142ff.). This term captures how organizations make the abstract and general expectations of functional systems applicable to their own decision-making processes (Besio and Meyer, 2015). Concretizing and transforming external expectations, decisions become possible. Thus, schools and school authorities give educational intentions the form of more or less well-defined school curricula (Drepper and Tacke, 2023; Luhmann, 2002: 143–147), and firms form the loosely coupled medium of money by deciding on specific investments, budgeted positions, and so on (Luhmann, 1994: 302–323). The way an organization re-specifies functional possibilities is dependent on its structures as well as its decision-making dynamics. The substitutability of structures, denoted here, suggests observing and comparing how, for example, an educational intention or the imperative of sustainability is handled and implemented differently by different organizations.
Most organizations prioritize specific functions, thus orienting their reproduction primarily toward a particular functional system. The difference between and even the naming of important types of organizations along the scheme of functional differentiation (Tacke, 2001)—as businesses, political parties, research institutes, governments, courts, art academies, schools, hospitals, churches (Apelt and Tacke, 2023)—underscores this. While Luhmann mostly emphasized primacy in the relation of organization and single functional systems, subsequent work in systems theory denotes that organizations are multi-referential (Wehrsig and Tacke, 1992: 229–231), polyphonic (Andersen, 2003), or multifunctional (Valentinov et al., 2019; Will et al., 2018). That is, they refer to expectations formulated in different systems. For example, legal requirements must be observed and taken into account not only by courts but also by economic organizations, schools, and churches. Economic concerns affect not only corporations but also public authorities, universities, and NGOs. In addition, political and moral requirements are imposed by different groups on a variety of organizations: due to this, organizations are expected to be employee-friendly, compliant, diverse, sustainable, digitalized, and so on. Yet, organizations are not passively exposed to these multiple expectations. Rather, on the basis of their own specific mode of reproduction, they can recombine expectations (Besio and Meyer, 2015, 2022). If expectations compete, respecification implies to relate heterogeneous expectations to each other. In order to do this, organizations can, for example, modulate loose coupling (by keeping some expectations a façade or, at least for a while, limit their relevance to parts of the system), create interfaces or boundary objects that open up different connections (like funding programs that are both economically and scientifically relevant), or translate one logic into another (e.g. humanitarian aid can consist of economic support, as in the case of microcredit) (Besio and Meyer, 2015, 2022). Available organizational structures strongly influence the way in which expectations become recombined, that is, related to one another.
Organizational activities of respecification and recombination have an effect on functional systems. Looking at the individual functional system, we can assume that the implementation realized by one or more organizations is then available for the further processing of the functional system. For example, companies respecify economic expectations, among other things, through specific investments, which are then available to the economy again, as far as customers and competitors have to cope with a new market situation (Baecker, 2001). In other words, organizations deal with the complexity of the functional systems in their own way and logic, making results available to the functional systems again. But no economic organization can control how the markets will react. This is because organizational respecifications are, in turn, specifically processed by the receiving systems—in this case, the market. Effects on functional systems do not only occur by way of respecification but also when different expectations are recombined. Organizational recombinations of different societal expectations, such as, for example, green technology, which links economic and ecological goals, can trigger reactions in functional systems. And recombinations can be copied, adapted, discussed, discredited, or the like, in different systems. In this sense, organizations can mediate between different expectations (Lieckweg, 2001): for example, ecological expectations can enter the economic sphere through green technologies. Where specific forms of recombinations occur frequently or even regularly, organizations may structure respective relationships between functional systems permanently, that is to say, these systems become ‘structurally coupled’ to each other through organizations (Lieckweg, 2001; Luhmann, 2018 [2000]: 328–331). For example, universities contribute to both scientific dynamics and educational processes; their dual aim of education and research has been institutionalized (Luhmann, 2013 [1997]: 113–114). Trade unions and business associations, too, are organizations realizing structural coupling, constantly mediating between the economic and the political system. However, the mediation is limited. Starting from organizational processing, the inherent logic of different functional systems sets in again, so that organizations cannot determine the fate of their recombinations. Only under certain circumstances do organizations try to promote certain respecifications, respectively recombinations, and/or create the conditions that certain solutions are taken up. Lobbying, consultation, and, more general, ‘institutional work’ (Lawrence et al., 2009) are examples here. With these active, reflective, and highly strategic attempts, organizations can give particular emphasis to certain respecifications and recombinations. However, even this does not guarantee uptake in the sense of the initiators.
So far, we have focused on individual organizations. From a systems theory perspective, however, we can also grasp the interplay of different organizations. The most relevant starting point for this is that, comparing organizations to functional systems and to other social entities such as social networks, Luhmann denotes that organizations are the only social systems capable of communicating to the outside world on their own behalf, and thus with each other (Luhmann, 2018 [2000]: 321–324). Organizational representatives, for example, in boundary-spanning positions, can bring the perspective of the organization to the outside world and meet with representatives from other organizations (Luhmann, 1964). The exchange can take place between heterogeneous organizations, in different forms, and over long or short periods of time. These ‘contact systems’ may condense into structures called ‘interorganizational networks’ (Powell, 1990), ‘meta-organizations’ (Ahrne and Brunsson, 2005), or ‘organizational fields’ (DiMaggio and Powell, 1983). In this way, organizations find further opportunities to recombine different expectations, to give them emphasis, and to disseminate them.
Organizations and Transformation Processes
Some empirical studies inspired by systems theory that stress the relevance of organizations in transformation processes are already available, focusing on, for example, digitalization (Besio et al., 2022; Büchner and Dosdall, 2021), financial crises (Jöstingmeier, 2023; Kette, 2008), ecological transformation (Besio et al., 2022; Besio and Meyer, 2022), and the coronavirus pandemic (Mezes and Opitz, 2020). From a more general angle, we will show in the following that the potential of the theory is, however, far from exhausted.
In general, understanding organizations as specific social systems interacting with their environments prevents under- and overestimating the organization phenomenon in modern society. This implies two things. On the one hand, one has to consider that organizations are producers of crises. This is not only a matter of externalities typical of organizations—be they social, technological, or ecological. Rather, the systemic increases in complexity, which for decades have been described under the label ‘risk society’, would be inconceivable without the particular way of system building that has been set in motion with organizations and their decision-making capacities.
On the other hand, the reverse is also true: in transformations and crises, when uncertainties increase and common procedures are questioned (Boin et al., 2005: 3–4), only organizations can step in with their decision-making capacity. It is, first, often in their own interest to find solutions to those problems and answers to crisis developments that affect their purposes. Whether in regard to a pandemic, ecological concerns, or rapid digitalization, many organizations see themselves forced to react, even if this does not mean that all of them search for new rules and services, create new products, or launch new political initiatives for the benefit of all.
Second, political actors have long since discovered crisis regulation as the regulation of organizations. A striking example can be taken from the regulation of banks in order to prevent financial crises. Here, regulation was first confined to a logic of economic risk provision through norms of equity ratios (Basel I), new regulation turned to a cognitive mode of regulation and directly involved banks—as organizations—in dialogues and consultation procedures of risk prevention (Basel II) (Kette, 2008; Kussin and Kette, 2006). And even from a more general perspective, it seems that political measures and attempts to bring about solutions in crisis situations do not primarily rely on the individual behavior of millions of people but on the competence of organizations to regulate the behavior in their catchment area. During the corona crisis, for example, it was mainly organizations—schools, universities, enterprises, grocery stores, public administrations, hospitals, railway companies, and the like—which concretized general safety rules, implemented them, and monitored the respective behavior of members as well as clients.
As regards the plurality of organizations, they, of course, apply their decision-making capacity not in the same way. In particular, it is to be examined how different organizations, characterized by different structures, achieve different things. For example, small and flexible organizations structures can respond quickly and locally, while larger and tightly coupled organizations have prerequisites to consequently implement rules and scale up limited solutions. Energy cooperatives with strong participatory structures, for example, approach the issue of sustainability entirely different than integrated and centralized energy companies or municipal utilities anchored in local politics (Besio et al., 2022). While the energy cooperatives may operate innovative technologies at a community level, large energy companies have the capacity to scale up technologies, for example, by running huge offshore wind parks.
Moreover, it is particularly important that organizations are able to decide on their own structures. Rather than changing structures, which would not work immediately anyway, bureaucratic organizations may cope with crises by adding more flexible elements of structure. For example, some hospitals in the corona crisis set up emergency teams including precisely those competencies that were of critical relevance to the new situation (Pedersen and du Gay, 2021).
Moreover, situations of crisis and transformation may push organizations to recombine expectations from different functional origins. This is because significant crises are typically not confined to one area but tend to spill over into other contexts. A financial crisis can quickly become a political crisis as well. As a consequence, proven means of mediating different expectations and mechanisms of coupling different systems may be challenged or at least have to be readjusted. Comparative analyses may show how different organizations react due to specific structural settings and what consequences this entails. It is well known that some organizations confront new challenges by symbolic means, that is, by taking up respective expectations only as a façade. Instead, others look for new options and relations with their environments, for example, by creating new boundary-spanning units or by introducing new technologies. The need for new relations may not only strengthen particular actors but form new organizations or even new types of organizations. Regarding, for example, the process of energy transition in Germany, the implementation of sustainability goals, which has become a constantly growing topic on the political agenda, has increased the number and type of organizations active in the energy market. Energy cooperatives, energy villages, project agencies, municipal and regional plants, grid operators, and energy service providers now contribute to the production and distribution of energy besides the established large energy suppliers. The same case shows that organizations often manage to take multiple expectations into account by interacting with each other, for example, by establishing networks in order to achieve an energy mix that reconciles economic as well as ecological goals (Besio et al., 2022; Besio and Meyer, 2022).
Systems theory moreover suggests to observe relations between organizations and functional systems in view of developments in time, wondering, for example, whether organizations, which had been more or less clearly bound to a single functional system in the past, tend to increase the number of system references as a consequence of growing societal complexity, turbulence, and vulnerability to crises. This has been shown in the case of the Danish public sector. Whereas public organizations were confined to a single functional context during the 20th century, they tend to refer to ever more functional systems today (Andersen, 2020; Andersen and Pors, 2022). Similarly, hospitals have been described as increasingly becoming ‘chameleons’ (Stevens, 1999) as owners, insurers, regulators, and patient organizations communicate expectations besides the medical standards (Dorn, 2021; Knudsen and Anderson, 2015).
Admittedly, describing how organizations react to environments and cope with expectations is not unique to systems theory. In particular, neo-institutionalism denotes that institutional environments urge organizations to adapt to institutional norms, values, and action models (Meyer and Rowan, 1977). In order to provide legitimacy and resources, organizations follow institutional expectations of rationality by adopting prescribed formulas, though only on the surface of their formal structures (thus being ‘rational myth’ only). Since institutional models and generalized rationality standards do not meet the necessities of practical action, it is assumed that activity structures are decoupled from the institutional context. Remarkably, also Luhmann (1964) in his book on functions and consequences of formal organization had already devoted an entire chapter to the ‘demonstration of the system to non-members’. 11 In fact, neo-institutionalism and systems theory argue similarly here. Unlike in neo-institutionalism, however, systems theory describes the demonstrative or legitimizing function as only one among many functions that formal structures fulfill. And even more important, there seems to be no reason why the demonstrative function should be the most important. It was present in Luhmann’s organization theory early on but without ever becoming its core.
With our rough distinction of the two theoretical approaches, we do not want to ignore that neo-institutionalism has also dealt with organizational responses to institutional complexity in recent work (e.g. Battilana and Dorado, 2010; Kraatz and Block, 2008; Pache and Santos, 2010). These works, above all, focus on conflicts between institutional logics within specific organizations, called ‘hybrids’ then. Even concerning this topic, Luhmann’s approach seems to offer more. Besides considering conflicts between basically different expectations, it suggests to search for possible conditions of viable recombinations of institutional, respectively functional, expectations (see above). This is to ask how specific responses to societal expectations and even crises are related to specific organizational structures and dynamics.
Regarding the societal consequences of organizational respecification and recombination, interrelationships between organizations, and even organizational networks, fields, and populations, should be focused on besides individual organizations. As a first aspect, ‘interdependence breaks’ (Luhmann, 2018 [2000]: 326–329) should be observed. Regarding crises, they are advantageous in order to interrupt cause-effect-chains, thus preventing problems from immediately being transferred from one organization to the next. Breaking interdependence has, however, a flip-side: exchanges between organizations are often especially needed in transformation processes. The role of organizations in innovation processes may be an example here. While the role of organizations is mostly seen only in the invention and development of innovations, they are in fact also indispensable for diffusion (Besio and Jungmann, 2013). Looking again at the energy sector, energy cooperatives, for example, play a crucial role in diffusion by making use of technical innovations invented elsewhere. Their success depends, on the one hand, on their participatory structures, which are capable of bringing together committed individuals and groups, and, on the other hand, on the smart business models they apply, for example, leasing roof surfaces of schools, enterprises, or municipal buildings in order to install photovoltaic systems. However, only by networking with others do they enhance chances to successfully diffuse technologies. Through networks, best practices can be shared quickly, services can be offered in bundles, joint regional and supra-regional projects can be launched, and so on (Besio et al., 2022).
Organizations can achieve effects beyond their own boundaries not only by way of concrete activities but also through discursive strategies. They can actively try to shape societal expectations by intensifying pertinent topics communication and forming relevant alliances. Associations, scientific organizations, and other intermediaries representing the interests of several organizations tend to become more relevant in crisis situations and transformation processes. Putting ‘digital work’ on the agenda, trade unions in Germany, for example, have made a major contribution to enriching the digitalization discourse, which was hitherto strongly focused on industry. They succeeded by involving ministries, authorities, foundations, and other organizations (Besio and Meyer, 2022).
Processes like these are not alien to neo-institutionalism either. In particular, the concepts of ‘institutional work’ (Lawrence et al., 2009) and ‘institutional entrepreneurship’ (DiMaggio, 1988) describe how organizations shape institutions. However, scholars from neo-institutionalism only consider active attempts to create or to change institutions, and ascribe discursive influence only to organizations with great symbolic power. With a systems-theoretical approach, it is possible to take these discursive attempts as well as an operational influence into consideration and to analyze their interplay.
Last but not least, it is of interest how organizations monitor the dynamics of functional systems, for example, in order to increase the likelihood that topics are taken up. For example, when it comes to gaining the attention of politicians, it may be beneficial to consider political times such as election cycles, as well as synchronizing organizational speech with the rhythms of mass media, which strongly influence the political agenda (Mölders and Schrape, 2019). Monitoring activities and the attempt to adapt to the dynamics of other systems may increase the chance of having an impact beyond organizational borders. However, systems theory asserts that organizations can try more or less actively to push their solutions, initiatives, or ideas forward, and hereby strategically take social dynamics beyond their boundaries into consideration. Yet they cannot control how their attempts are observed, interpreted, adapted, or discredited from other organizations or in functional systems.
Conclusion
The described advantages of the concept of organization as systems of decisions as well as the conceptualization of organizations as systems in society, on the one hand, opens up the way for analyses on the impact of risks, crises, or—more general—of grand challenges on different forms of organizations. In these situations, several societal contexts direct heterogeneous expectations to organizations, which are considered powerful actors able to make decisions, reflect and handle complex problems. Organizations with different structures, old and new forms of organizing, established and alternative organizations perceive, translate, respecify, and recombine external requirements in different ways while having a strong decision capability in common. On the other hand, it is possible to analyze how the organizational processing, translating, and transforming of these phenomena imply chances to affect society beyond organizational boundaries. Concerning effects, the complexity of organizational ways of affecting society can be taken into consideration: organizations actively try to intervene in crises in some cases and introduce new technologies or shape societal norms and standards in others. Their decisions and actions may transform society also in a more silent and unreflective way. In any case, even big and powerful organizations cannot steer the final result of their own respecifications and recombinations.
In a nutshell, in transformation processes, organizations do not bluntly work through social expectations but react to them with diverse strategies, thereby helping to shape such expectations, shifting problems, translating them, and even posing and exacerbating these. As a consequence, an analysis of the role of organizations is essential in order to grasp societal transformations. In crises and transformation processes, established bureaucratic organizations as well as a variety of new and more flexible organizational forms play a crucial role. A systems-theoretical approach allows us to consider the potentials and the shortcomings of organizations with different structures as well as their interplay. Moreover, as this theory explicitly regards the relationship between organizations and society, and in particular the relationship between organizations and different functional systems, this approach allows us to analyze how organizations perceive, prioritize, concretize, recombine, and even (co)shape expectations from different societal spheres. In this article, we hope to have shown with the help of some examples the potential of a systems-theoretical approach when it comes to analyzing the role of organizations in relevant social phenomena such as transformation processes. To be sure, the potential of this approach for empirical analyses is not exploited yet, but we hope to have shown how it encourages empirical research which considers different types of organizations and their diverse responses as well as their development in time. This analysis can also serve as a basis for comparing and critically questioning different organizations and their formal as well as informal structures (Kette and Tacke, 2015).
This focus on organizations does not exclude but welcomes additional analyses on the role of other social entities at the meso-level, such as networks or organizational fields in transformation processes. In order to understand their role, however, the specificity of these constructs should be elaborated, and the question should be asked to what extent they can complement, supplement, or replace the specificity of organizations, which is precisely their decision-making capacity.
