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The Corporate Conundrum: Making a Profit Isn’t as Easy — or as Simple — as it Sounds
Sociologists — working in collaboration with economists and other organizational analysts, for example those at business schools — want to understand how organizations work, and that means acknowledging the reality that people in organizations are facing complicated choices and great uncertainty, and that they’re working with limited time and information. Sometimes that means that they hit on brilliant insights, but sometimes it means that they crash and burn. Most organizations do some of each. For-profit corporations want to make profits, which seems like a pretty simple and straightforward task, but companies tie themselves in knots trying to accomplish it. New products, new advertising campaigns, mergers, acquisitions, executive retreats and skit nights…sometimes it seems like companies are running
to stand still, or running and still managing to move backwards. “Making a profit” turns out to be a lot less simple than it sounds.
Take Starbucks, for example. The company’s official mission statement is “to inspire and nurture the human spirit — one person, one cup, and one neighborhood at a time.” Could they be any more ambitious? What’s wrong with just selling coffee?
There’s nothing wrong with just selling coffee — but corporate life is rarely that simple. Imagine that you founded a competing company; one that did not aspire to “nurture the human spirit,” but just to sell coffee at a reasonable profit. Seems straightforward . . . until you try to do it.
Where are you going to sell your coffee? Are you going to operate stores, or are you going to have a mail-order operation, or both? Are you going to
sell brewed coffee, or just the beans? If you’re selling brewed coffee, are you also going to sell espresso drinks? Will you stock flavored syrups and three kinds of milk? What about hot chocolate? Tea? Snacks? You could reasonably extend your product line into all of these areas:
Frozen drinks
To-go drinks
Drinks sold through grocery stores
Coffee-flavored ice cream
Coffee mugs
Coffeemakers
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Stuffed animals wearing your corporate logo
Music to listen to while drinking coffee
Board games to play while drinking coffee
In fact, Starbucks sells all those things — and if you don’t, your customers may wonder why not.
Then, after you’ve decided on a product line and an expansion strategy, you need to put into place a team to manage your employees. At a basic level, you need to manage payroll and benefits; beyond that, you need to worry about hiring, firing, and promotion. And what about training? Then there’s the question of your corporate culture; you want to make your employees happy. Should you hold holiday parties or summer picnics? Maybe organize volunteer outings to help build playgrounds and clean up parks?
When you get that far, you’re going to be looking at questions of optimal organization and product flow. Are you going to own your stores, or franchise them out? From whom are you going to buy your coffee, and how are you going to make sure they keep up with your demand at a price you can afford? Are you going to manufacture your own paper coffee cups, or are you going to hire another company to do that? If you’re facing competition from a smaller coffee company, should you try to buy that company?
At every level of organization, there are many, many difficult choices — and the bigger your organization gets, the more choices and possibilities you have. Starbucks’s mission statement does mention a “cup,” but fundamentally it allows the company to do anything that might be considered “nurturing the human spirit,” so long as that spirit nurturing turns a profit. That gives the company a lot of options, and potentially a lot of frustrations.
To begin understanding the sociological approach to organizations, in the next section I describe Max Weber’s classic theory of bureaucracy.
Weber’s Big Idea About Organizations
The great sociologist Max Weber, as I explain in Chapter 3, believed that over time, society has become more and more rational — that is, that society has become increasingly based on formal rules that are carefully planned and documented, are rigorously followed, and that apply to everyone regardless of who they are, where they come from, or what they believe.
Sound familiar? It might sound to you like the way things work at your school or workplace, where there are a million confusing rules and forms upon forms to fill out, and where it may seem like things would be so much
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easier if people would just focus on solving problems instead of nit-picking about every little thing. In one form or another, your school or workplace is a bureaucracy — and Weber believed that bureaucratic organization is one of the hallmarks of contemporary society.
Weber’s definition of a bureaucracy is in many ways the starting point for today’s sociology of organizations. According to Weber, bureaucracies have several key characteristics:
A bureaucracy is an organization defined by written rules. A bureaucratic organization may have many different parts, but the relationships among those parts are defined in the rules — which also define the limits of the organization.
Each person who works in a bureaucracy has a given set of responsibilities, which they are expected to fulfill within prescribed limits.
Positions in a bureaucracy are organized in a hierarchy, where it’s clear who has authority over whom.
Bureaucracies hire and promote on the basis of formal credentials (like school degrees or professional certificates), training, and job performance — not on the basis of personal preference or affinity.
Everything a person in a bureaucracy needs to perform their job is supplied to them by the organization — which, then, owns those supplies.
What this adds up to is that in a bureaucracy, a position is separated from the person in that position. The people in bureaucracies are essentially parts in a machine — and if a part in a machine breaks, it gets replaced by another part that’s going to do the exact same thing.
By contrast, think about a group of friends. A group of friends is a social organization, with members working together to achieve goals (throw a party, go out on the town, share information about other groups) — but it’s an informal organization, where who you are is intimately tied to what you do in that organization. Maybe you have an awesome home entertainment system for your friends to enjoy, but if for some reason you leave your group of friends, they don’t get to keep the entertainment system. You don’t leave an empty “position” in your group of friends; they may or may not bring in someone new, and if they do, that new person will have different possessions and qualities to bring to the group.
At a corporation, on the other hand, if you quit you don’t get to take your computer and your desk — those belong to the company, and they’ll be used by the person they hire to replace you, who will do more or less exactly the same thing you did. A company is a bureaucracy: a permanent, formal organization that follows a set of rules.
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Getting a leg up on bureaucracy
For my niece Madeline’s second birthday, my mom gave her a small table and chairs that came in a box sealed from the factory. When they opened the box to assemble the table, though, my mom and my sister discovered that the table had only three legs — clearly, there had been an error on the packing line and not all the parts had been included. Mom called the company and asked if they would please send a replacement leg so that the table would stand properly. No, she was told, she would need to pack the table back up and return the whole thing to the store, where it would be replaced with a complete table.
But, my mom said, it would be incredibly inconvenient to do that — and anyway, she’d already thrown all the packing material away. Didn’t the company have a factory with thousands of little table legs? Couldn’t they just grab one and send it to her? No, she was told; that would be a “special order” that would take several weeks to fulfill and would cost almost as much as buying an entirely new table-and-chairs set.
Mom tried again: What if the company opened a box with a complete table and chairs, took a leg out of the box, and sent it to Mom? The result would be the exact same as if Mom returned her set: The factory would have a table without a leg, and Madeline would have a table with four legs. Nope, Mom was told. They couldn’t do that.
In the end, the company recognized how frustrated Mom was getting — and sent her an entirely new table and chairs, without making her return the one she had. Because of the company’s bureaucratic organization, it was easier for them to do that than to break the rules and open a sealed box or take a table leg off the assembly line. Sometimes, when sticking to their own rules, bureaucracies end up acting in a paradoxical, wasteful manner. Many companies consider it better to be a little wasteful than to allow employees to break any rules and risk the resulting disorganization and confusion.
Because they’re so impersonal, bureaucracies can seem unfair, unkind, and bizarrely ineffective. (See sidebar, “Getting a leg up on bureaucracy.”) You may need something from a bureaucracy that seems simple and straightforward, but if the bureaucracy isn’t set up to do that, it’s not going to happen. Banks may refuse loans to good, reliable people because they don’t have any credit history; bars may refuse to admit a grey-haired senior citizen who doesn’t have a driver’s license to prove he’s over 21; and an ATM machine may eat your card because you accidentally mistype your security code.
There is, though, a reason that companies continue to organize themselves bureaucratically. Even if bureaucracies seem to be acting in an absurd manner, it may collectively benefit the entire company to set up firm rules and expectations from which employees are not allowed to deviate.