Options for Organisations to Control and Influence their Environment

Introduction

“There are things in your life you can control - and there are variables you can't. The more diligent you are at controlling what you can, the more influence you'll have over your destiny. You just have to figure out which are which.“ Carlton Young

Himself being director of the University of Alabama and thereby head of a large organisation, Carlton Young says very clearly that it is important to control as much as you can to ensure a safe destiny – transferred to organisation theory this means that organisations have to control their environment and other organisations as much as they can to secure development and safety.

But which tools are at hand for the organisations to execute control over other entities and how did organisations use them in the past? This essay shows ten possibilities of modifying, manipulating or controlling other organisations and gives case studies to each of them.

The options can be divided up into two broad categories (Daft, 2001, p.149): Firstly we will gain an insight into possibilities to establish inter-organisational linkages to other organisations, afterwards we will look into the options to control an organisation’s environmental domain.

Establish Inter-Organisational Linkages

Daft names 5 options for establishing inter-organisational linkages: Ownership, Contracts & Joint Ventures, Cooptation, Executive Recruitment and Advertising & Public Relations.

For executing control through Ownership, companies can buy a part or a controlling interest in the company to control. Depending on the size of the share, the acquiring company gains control and access to information, technology and other resources of the controlled company, possibly limited by the controlling company’s share. The mother company can also merge with the acquired company if control or integration beyond fully ownership as a subsidiary is necessary. After the merger, the two organisations form a new entity. The merger between Daimler-Benz AG and Chrysler Corp. in 1998 is a good example for a merger: Both single companies exchanged shares and ceased to exist, forming the new legal entity of DaimlerChrysler AG.

A perfect example for control through acquisition is the actual HDW-deal (Howaldswerke Deutsche Werft AG) between the vendor Babcock-Borsig (Germany) and One Equity Partners (USA). HDW produces technologically world-leading non- nuclear military submarines in Germany. The deal is probably going to be authorised by the German government although it is feared that One Equity Partners will pass its share majority to General Dynamics (GD), mother company of OEP. This would enable GD to sell non-nuclear submarines to Taiwan, after Germany had denied this sale to Taiwan due to political reasons (Der Spiegel, 15/06/2002)

Forming strategic alliances or joint ventures is another option: Usually companies in the same market having complementary characteristics form strategic alliances. The STAR ALLIANCE between 14 international airlines can offer a world-wide network of flight connections between 729 airports with the same Frequent Flyer program and wide-spread lounge facilities to their customers, outstripping the possibilities of each separate airline by far. The airlines don’t compete on the same connections, but every airline gains more customers due to the increased service offered (Star Alliance, 2002).

In 1970 Aerospatiale de France and Deutsche Aerospace formed the joint venture “Airbus”. It was foreseeable that each single European aircraft manufacturer wouldn’t be able to compete against the overwhelming market power of Boeing in the wide- body aircraft market. By this, the risk of engaging into competition with Boeing was distributed on the partners and the necessary funds could be raised.

Control over and insight into other organisations can also be gained by Cooptation, meaning that executives or directors of one company hold offices in other organisations (“interlocking” according to Daft, 2001). It is important to mention that Cooptation can be a bi-directional way of establishing a linkage, if e.g. the directors of one company give advice from their experience from being executive in another company at the same time. The Brisbane based software company collab.net has a board of directors mainly consisting of members of the executive board of main share holders, as well as Marc Andreessen, founder of Netscape Communications and former CTO¹ of America Onlince, Inc. (Collab.Net, 2002).

If no relationship between the organisations is permitted or wanted (e.g. between competitors), Executive Recruitment is an option: Executives from one organisation switch to a job in another organisation, taking their knowledge and their contacts in their former organisation with them. This can provide competitive advantages against competitors, especially if the customers are governmental institutions which are less price sensitive than business customers. Daft (2001, p. 150) mentions the recruitment of former generals from the U.S. Department of Defence being recruited by companies in the defence sector to get an insight into future projects and gain orders through personal contacts.

Advertising is used by nearly every organisation. Organisations try to influence other people through commercials, adverts and other means of communication. Since an organisation itself can’t think, e.g. B2B-Advertising is aimed on influencing other organisations indirectly by affecting their members decisions. E.g. Microsoft advertises in Apple Mac-related magazines for its new Office-for-Mac-product, trying to make individuals and company purchaser to decide for their product instead of

Apple products². Public Relations are a rather indirect way of influence: Microsoft tries to recruit high potential graduates through sponsoring several public events such as the JADE-Meeting in July 2002 in Berlin with hundreds of European future graduates taking part in.³ n addition to the options of inter-organisational linkages named by Daft, Zeffane (1994, p.28) also mentions the “Networking” option: An inter-organisational network can be defined as a cluster of business units held together, in network fashion, by market mechanisms. Participants gain information through the network concerning potential business partners, outsourcing possibilities and other aid for further growth. The Bund Deutscher Studentischer Unternehmensberatungen (Federation of German Student Management Consultants) is a network operating successfully since 1992, with 24 Consultancies from across Germany joining and contributing. Several conventions per year and internet-backed communication enable co-working and

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¹ CTO = Chief Technology Officer

² www.microsoft.com

³ http://www.jadenet.org/berlin/