When the environments change, the organization must eventually respond, and today this must occur at a rate and in ways never before seen or imagined. Organizations that are not able to adapt quickly enough to maintain their legitimacy or the resources they need to survive either cease to exist or become assimilated into other organizations.
Perhaps the most noteworthy change in the environment for business organizations has been the dramatic shift in the developed world from an industrial to an information economy. In 1991, for the first time ever, companies spent more money on computing and communications gear than on industrial, mining, farm, and construction equipment combined. In the 1960s, approximately half of the workers in industrialized countries were involved in making things; by the year 2000, it is estimated that no developed country will have more than one-eighth of its workforce in the traditional roles of making and moving goods (Drucker, 1993). But this is only the most obvious of the trends that are redefining the nature of contemporary organizations.
Population ecology, as its name implies, focuses on the changing nature of populations of organizations (Hannan and Freeman, 1977; Hannan and Carroll, 1992). Institutional theory focuses on the need for organizations to maintain legitimacy with societal norms and values, often embodied in governments, professions, and trade associations (Meyer and Rowan, 1977; Powell and DiMaggio, 1991; Scott, 1987, 1995; Zucker, 1977). Both of these perspectives are fruitful. They tend, however, to deemphasize the influences of management action and leadership in organizational change (but see Hannan and Freeman, 1984; Suchman, 1995). In this chapter, in contrast, we emphasize the role of managers as interpreters and even manipulators of their organization's environment. We emphasize in particular the idea that managers change and redesign their organizations primarily in order to adapt them to changes in the environment, but also to adjust them to changes in the managers' own aspirations and perceptions, or to unintended or unmanaged changes within the organization. Thus, whereas organizational environments and processes are often sources of change, we adopt the strategic choice point of view (Child, 1972), the idea that organizations vary in their choice of responses, the timing of their responses, and the means and effectiveness of executing their responses, and that these phenomena are managerially determined to a great extent.
Some of the most powerful forces identified by the business press and organizational literature that are motivating managers to redesign their organizations are the increase in scientific knowledge, changes in professional roles, the technology explosion, and the changing demographics of the American workforce.