cultural theory and contemporary management organization

Cultural Theory and ContemporaryManagement Organization

John Hendry1,2

Mary Douglas’s cultural theory of grid and group provides a framework for the

description of three distinct cultural types corresponding to three logics for the

legitimation of collectivity and collective coercion. Each type is distinguished by

characteristic structures of classification, power, and moral order operating at

the individual cognitive level. In this paper, the theory is used to illuminate

some of the major developments in the structuring of business organizations in

the late twentieth century, including the introduction of matrix, project and

network organizations, the focus on de-layering, downsizing and outsourcing,

and the emergence of concerns with cultural control, organizational learning,

and core competence. The problems arising from these developments are

discussed in terms of an unresolved conflict between the cognitive frameworks

of two of Douglas’s cultural types, market, and hierarchy.

KEY WORDS: culture; cultural theory; management; markets; hierarchies.

INTRODUCTION

Despite the substantial attention devoted by manageme nt and organi-

zation scholars in recent years to questions of organizational culture , there

have been very few attempts to carry over the cultural theories of socialanthropology into the manage ment arena. In one respect, this is not sur-

prising. Although the concept of organizational culture is generally derived

from its anthropological equivalent (e.g., Alvesson, 1993; Frost et al., 1985;Martin, 1992; Smircich, 1983), the context of an organization is very dif-

ferent from that of the societies with which anthropologists and social theo-

rists are typically concerned. Organizations are bounded, purposive andintentionally structured in ways that societies are not (Heracelous, 1996),

Human Relations, Vol. 52, No. 5, 1999

557

0018-7267/99/0500-0557$16.00/1 Ó 1999 The Tavistock Institute

1The Judge Institute of Manage ment Studies, Cambridge CB2 1AG, United Kingdom.2Requests for reprints should be addressed to John Hendry, The Judge Institute of Manage-ment Studies, Trumpington Street, Cambridge CB2 1AG, United Kingdom. (e-mail: [email protected])

and whereas societies embrace their members’ lives, organizations, like

other institutions, are directly concerned with only parts of those lives. Or-

ganizational culture cannot, in general, be isolated from the cultures of the

societies in which organizations operate (Hofstede, 1980). Nor can these

large and complex societies be treated as if they had the homogene ity of

a primitive tribal culture .

In these circumstances, any attempt to apply anthropologically-de rived

theories to contemporary organizations must be conducte d with extreme

caution, but that does not mean that such attempts should necessarily be

ruled out. In this paper, we shall argue that a careful consideration of one

cultural theory, that of Mary Douglas, can shed significant light on some

of the major issues facing contemporary Western societies, and especially

on the responses of large business organizations to the changing nature of

competition over the last 25 years. These responses include: the move away

from traditional bureaucratic to more innovative structural forms which has

characte rized the whole of this period; the 1980s concern with corporate

culture as a controlling and enabling mechanism; the subsequent fashion

for outsourcing and downsizing and the rise of interest in the network or-

ganization; the parallel but contrasting concern with ideas of organizational

learning and core competence; changing approache s to corporate govern-

ance; and changes in the patterns of career structure s and career expecta-

tions. The theory can also help us to understand some of the limitations

of these responses and to focus attention on the conflicts underlying the

key organizational problems which have resulted.

THE CULTURAL THEORY OF GRID AND GROUP

Mary Douglas’s cultural theory, often referred to as grid-group theory,

was introduce d in the first edition of her book Natural Symbols (Douglas,

1970) and expounde d more fully, with some revisions, in a second edition

3 years later (Douglas, 1973/1996). The theory was later simplified and re-

worked as a theory of ideal types (Douglas, 1978, 1982), and in this form

provided the basis for a number of subsequent variations (Douglas, 1992a;

Gross & Rayner, 1985; Hampton, 1982; Thompson, 1982; Thompson, 1982;

Thompson & Wildavsky, 1991). Most of the existing applications, including

all of those to organizational and economic subjects, have been based on

the later (1978, 1982) version of the theory. In our view, however, it is the

1973 version that offers the greatest insights to social and organizational

life, and it on this version that we shall focus here.

Douglas’s early research and fieldwork had been concerned with thesocial anthropology of religion in primitive African tribes, and her cultural

theory built on Durkhe im’s thesis on the social construction of religious

558 Hendry

knowledge in primitive societies (Durkheim, 1915). She modified this thesis

in two ways, however. First, she extended it to cover all forms of knowledge

and to all societies and social organizations. Whether in primitive or mod-

ern societies, the observed variations in religious practice and symbolism,

belief systems, moral codes and classification schemes in general, including

those underlying scientific knowledge, were all to be explained as conse-

quences of social structure . Second, to capture the distinctions she had ob-

served in her comparative studies, she replaced Durkhe im’s dichotomies

of the sacred and profane and of mechanical and organic solidarity with

new categories of classification and control derived from Bernstein’s work

on speech systems (Bernstein, 1964, 1970). Importantly, these categories,

which she called grid and group, were applied not to a society per se but

to the social context of an individual.

The categorie s of grid and group are presented in Fig. 1. Both, in the

1973 version of the theory, refer to the socio-cognitive context in which an

individual finds herself. Grid describes the scope and coherence of a domi-

nant system of classification, structuring the individual’s world view. The

more an individual is constrained to think and act within a single tightly

structured system, the higher that individual is located on the grid dimen-

sion. As the constraints of the system weaken, through a lack of coherence

or the availability of alternative systems, so the location on the grid dimen-

sion moves down toward zero. Zero represents confusion, the lack of any

system, while below zero grid represents the dominance of increasingly

strong and coherent private systems of classification, the realm of creative

thought and, at the extreme, of madness. Group describes the control ex-

erted on the individual ego by the rest of the community. At the right hand

side (high group) the ego is totally dominated. At zero it is completely free

of pressure, either because of isolation or because different pressures cancel

each other out. To the left of zero the individual is free from group pres-

sures and exerts increasing pressure on others (Douglas, 1973/1996).

The theory in this form is both rich and dynamic. Any one individual

will move across the diagram through life, beginning with a childhood move

up the grid dimension (as the classification systems of society are absorbed

and internalized) and along the group dimension (as total dependence is

replaced by a measure of autonomy). Societies, which may embrace indi-

viduals of many kinds and in various stages of development, are represented

by scatter diagrams forming patterns which will themselves evolve over

time, rather than by fixed points on the chart. These patterns may them-

selves cluster into distinctive types, however, and Douglas drew on anthro-

pological evidence from African tribes to identify three such types.

In “high classification” societies (represented by the Tallensi) the in-

dividuals’ experience was overwhelmingly of high grid and high group (Fig.

Culture and Management Organization 559

2). In a highly structured society, the classification system itself dictated

the identity of the Tallensi ego, producing a routined piety toward authority

and its symbols and a strongly shared belief in a punishing but just, moral

universe. In “small group” societies (represented by the Ghana tribes

around Lake Nyasa) the experience was of low grid and high group. The

classification systems of these societies were relatively weak and contradic-

tory, and roles and identities were correspondingly flexible, but the pressure

exerted by the group was very strong. Values and beliefs focused on the

boundary, which defined good from evil in a dualistic cosmology. Finally,

Fig. 1. 1973 Theory (see Douglas, 1973/1996, p. 60).

Fig. 2. Societal types represented according to 1973 Theory.

560 Hendry

in “strong grid” societies (represented by various New Guinea tribes), two

separate groups could be identified. On the left, the “Big Men” who ex-

ploited the classification system for their own uses, and far to the right

(high group) the masses who were dominated by these leadership figures.

Here there was no single coherent system of religious beliefs, but a moral

pragmatism based on meeting the demands of competing Big Men com-

bined with a millennial belief in the possible escape from those demands.

For the Big Men themselves pragmatism also ruled, around an heroic ethic

of personal honor and shame.

In each case, Douglas argued, as well as in others on which the theory

was tested, the religious beliefs of the society and their associate d religious

and symbolic practices could be derived from the form of social structuring,

and this in turn could be derived from the circumstances with which the

society was faced in its formative or transformative years—the availability

of food sources, the types of husbandry which resulted, and the comings

and goings of colonial powers. Moreover, within more closely related so-

cieties, observed variations in religious practices and beliefs could also be

related to variations in the strength of grid and group pressures charac-

teristic of those societies.

In later versions of the theory, Douglas introduce d the terms markets,

hierarchies, and sects to describe the Big Men, High Classification, and

Strong Group societal types, and this has led to some confusion; for the

categories of market and hierarchy of cultural theory do not correspond to

those familiar from Williamson’s transaction cost theory in economics (Wil-

liamson, 1975, 1985, 1993). Specifically, Williamson’s markets and hierar-

chies are both forms of transacting within what is assumed to be, in the

language of cultural theory, a Big Man, or market society, with the indi-

vidualist ethics and market institutions characteristic of such a society. As

Ghoshal and Moran (1996) have noted in another context, the ethics and

institutions of hierarchical societies and organizations are completely alien

to the transaction cost perspective.3

The later version of the theory was also substantially simplified. The

negative dimensions of grid and group were omitted, the continuous two-

dimensional space was replaced by a discrete 2 ´ 2 matrix4 and the grid


3These differences can be illustrated by comparing the matrix typology of the later version ofDouglas’s theory (Douglas, 1983) with that given by Ouchi (1980) on the basis of transactioncost theory: whereas Douglas places markets and hierarchies in opposite quarters of her grid-group matrix, Ouchi place them in adjacent quarters, both being characterized by high goalincongruence. In Williamson’s matrix of types of labor organization, which is very closelyrelated to Ouchi’s typology, the quadrant corresponding to Ouchi’s “hierarchy” is actuallylabeled “obligational market” (Williamson, 1985, p. 247).

4In this respect, the later versions returned to the form of very first version of the theory(Douglas, 1970).

and group categories were re-defined so as to be more immediately de-

scriptive of the social structure rather than its impact upon the individual

(Douglas, 1978, 1982, 1992a). The effects of these simplifications were,

however, severe. Firstly, the theory became divorced from its empirical

roots. Secondly, with the move from a continuous space of individuals to

a continuous one of societies, the peculiarly dichotomous nature of “Big

Men” or “market” societies was lost. Thirdly, as a result of the same move,

the theory lost some of its ability to account for pluralism and change .

Finally, with the shift of emphasis between the social and psychological,

the underlying causality was obscured.

Although Douglas’s theory has strong undertones of social determi-

nism, and has indeed been a significant influence upon the strong program

in the sociology of knowledge (e.g., Bloor, 1982, 1983; Barnes, 1979; Barnes

et al., 1996), it begins unambiguously—even in its later versions—with the

individual. Social structuring for Douglas is an intermediate , not a given

variable. The individual commitment to any collectivity has to be explained

as a response to particular sets of problems and opportunities (in the primi-

tive context, to problems of subsistence and co-existence), and each ob-

served type is seen as a politically negotiate d legitimation of collectivity

(Douglas, 1992a)—an empirical equivalent, as it were, of Hobbes’s social

contract in which the different social types correspond to the different ways

in which the coercion associated with a collectivity can be legitimated:

The political rhetoric reveals a minimal three types of legitimation, each sodistinctive that no speaker in one type can appeal to the justifying principles whichuphold another type without landing in contradiction. (Douglas, 1992a, p. 137)

In sects, the collectivity is legitimated by the need to stick together and the

corresponding fear of defection. The culture evolves around the importance

of the boundary and of conformity and equality within. To transgress is to

sin. In market cultures (to avoid confusion with Williamson we shall talk

of market and hierarchical cultures or societies rather than markets and

hierarchies), the collectivity is legitimated by the need to trade and ex-

change , and by the corresponding fear of subversion. The culture evolves

around institutions of contract, private property and the protection of in-

dividual freedom to negotiate . To behave morally is simply to observe these

institutions. In hierarchical cultures, the collectivity is legitimated by the

need to coordinate , and the fear of failure to perform. The culture is built

around hierarchical bonding and mutual dependence. To behave morally

is to behave responsibly and in the service of the common good.

Curiously, the possibility that these forms of legitimation might them-

selves be products of prior social structuring is not considered. Despite her

emphasis on the social construction of knowledge, Douglas appears to be

a rationalist, for whom individuals start out as self-interested rational be-

562 Hendry

ings, constructing their societies through rational discourse . Only sub-

sequently do they become trapped in the cultures they create as the dif-

ferent schemes of categorization and classification and different moral

bases of order associate d with the different forms of legitimation become

embodied in the language , power structure s and social and religious prac-

tices of the society, and provide the foundation for the construction of a

distinctive rationality. Once establishe d, the cultural type is self-reinforcing

in very much the same way as is described in Giddens’s theory of structu-

ration, as structures of power, legitimation, and domination are both con-

stituted by and, at the same time, constrain, the practices of individuals

(Douglas, 1992a; Giddens, 1979).

PROBLEMS OF PLURALISM AND CULTURAL CHANGE

Before Douglas’s cultural theory can be applied to the problems of

contemporary society and organizations, two questions arise: (1) Given the

self-reinforcing quality of the cultural types, how does the theory account

for and accommodate structural change?; and (2) What happens when dif-

ferent collectivities characte rized by different cultural types come into con-

tact and overlap in their memberships?

Cultural Change

Because of its deeply embedded nature any culture , societal, institu-

tional, or organizational, is resistant to change ; in most of her work,

Douglas is concerned with the stability of the cultural types rather than

with the dynamics of change . Because her theory works at the individual

level, however, it is well able to account for changes both within and be-

tween the types (Douglas, 1973, p. 60).

Changes within types occur when changing circumstance s and environ-ments lead to changes in the details of classification systems, either gradu-

ally at the unconscious level, across the whole society, or by creating

opportunitie s for individual action. Artists and creative thinkers respondto the changing environme nt by creating new structures of signification

which, as the artists move from right to left in the lower half of the 1973

diagram (Fig. 1) may subsequently exert influence and be absorbe d intothe society’s ways of thinking. Immigrants or returned travelers introducing

new language and practices can be similarly influential. Political or com-

mercial entrepreneurs can exploit emerging opportunities to challenge orsubvert the existing orders of signification, legitimation, and domination

(Giddens, 1979).


Changes between types also result from the exploitation of opportu-

nities created by environme ntal changes. In a stable hierarchical society,

resources are always redirected back to the center, but if, through exposure

to environmental changes, the classification systems become weakened, this

opens the way for groups of market-orie nted entrepreneurs to play the sys-

tem and capture the resources needed to create their own market subso-

ciety. Examples here might include the Catholic church of the Renaissance

period, the later Roman Empire or the fragmentation of any large but de-

caying hierarchical institution or organization, but the most obvious exam-

ple is the development of modern society. The process begins when those

holding powerful positions within the hierarchical culture begin to operate

in their own interests outside its rules, to the left of the grid-group space,

or when they license others to do so on their behalf. The emerging com-

munity of Big Men begin by using the classification structure s of their host

culture to control those they exploit, but if their numbers and influence

are allowed to grow sufficiently, the networks employed in their service

expand, and the classifications of the market culture gradually take over.

This change can take place without the majority of the community moving

very far through the grid-group space: all that happens is that they substi-

tute one form of grid and group control for another.

A weakening of classification systems may also allow space for groups

of oppressed individuals to band together and seal themselves off from a

dominant hierarchical culture in egalitarian sects. Such are the origins of

religious sects such as the Plymouth Brethren or the early, pre-hierarchical

Christian church in the declining Roman Empire. Another example is pro-

vided by Douglas’s discussion of the British and Swedish Trades Union

movements. Whereas the Swedish movement evolved within the cohesive

and structure d hierarchy of Swedish industry the British movement, faced

with a weaker and more fragmented industrial structure, exploited the free-

dom this gave it to develop its own counterculture . The consequence, how-

ever, was its emergence as an isolated sect, with its own structure and

culture independent of, and so lacking influence on, the hierarchical insti-

tutions of British society (Douglas, 1992c).

If history shows us sects emerging from hierarchical cultures, contem-

porary observation suggests that they may also form within the oppressed

communitie s of a Big Men market system. For their victims these are in

many ways like oppressive hierarchical societies, but without the certainty

and consistency that hierarchical culture affords. Though the systems of

classification may be weaker than in the hierarchical case, the group pres-

sures can be just as powerful. Both, however, are fragmente d by competi-

tion and the uncertainty produced by this fragmentation provides a perfect

breeding ground for sects.

564 Hendry

According to Douglas, the dominant logic of the sect, the logic of in-

clusion̄ exclusion, is a response to the risk of defection, the fear of losing

members. For a small, threatened community, this is of paramount impor-

tance, but once a sect grows its boundary becomes both less important and

more difficult to sustain. At the same time, its structure affords no means

of coordinating its ever more complex affairs. The result is that successful

sects either negotiate (from their strengthe ned position) a return to the

main market or hierarchical culture , or develop their own hierarchical

structures.

Finally, in the face of a severe crisis affecting the whole of the com-

munity, it is possible that a market society might also revert to hierarchical

form. Whereas the threat to hierarchical societies comes from the blinkers

imposed by their strong classification systems, which prevent them from

seeing the risk of change , the threat to market societies comes from their

individualism, which make them insensitive to communal risks (Douglas,

1992b). When war becomes an opportunity for profiteering rather than a

risk to be averted, societies are put at risk and can respond effectively to

the ensuing crisis, if at all, only by reverting to a strict hierarchical structure .

Cultural Pluralism

One of the consequences of the above analysis is that in large or com-

plex societies the different types are likely to co-exist, and in its 1973 form

grid-group theory has no difficulty accommodating such pluralism. A plu-

ralist society can be represented as a combination of groupings occupying

different regions of the grid-group space and linked together by a greater

or lesser degree of classificatory consistency. Douglas herself does not, how-

ever, explore the nature of these linkages, or the situation that arises when

the groupings overlap, so that the same individual is a member of multiple

collectivities—for example, a business organization, a social grouping, a

church and a society. When exploring the culture of contemporary society,

she simply uses her cultural typology to characterize organizations or social

groupings rather than society as a whole, and focuses on the responses of

these organizations or groupings, treated as discrete entities, to specific is-

sues and concerns. Thus organizations are categorized according to their

treatments of risk (Douglas, 1992b) or social groupings according to their

attitudes to issues such as AIDS (Douglas, 1992d).

These applications are illuminating, but they mask the fact that in prac-

tice, in contemporary society, people’s lives cannot be so neatly partitioned.

Membership of multiple collectivities is the norm, and it is very commonfor these to be of different cultural types. A man may well live within a

predominantly hierarchical society, work within a competitive marketplace


and worship as a member of an egalitarian Protestant sect. From the per-

spective of Douglas’s theory, in which cognition is socially constructe d, this

raises some interesting problems.5 To some extent, an individual may be

able to compartme ntalize her life into different social activities charac-

terized by different social structure s, different schemes of classification and

different moral orders. She may, for example, be able to adopt the social

and ethical norms of the market at work, while retaining the traditional

values of a hierarchical culture at home and in her private life. But this is

only possible so long as there is no significant interaction between the social

contexts, and even then it is limited by the psychological need of the in-

dividual for cognitive consistency (Festinger, 1959). At some point, people

may need to choose between the alternative legitimation logics with which

they are presented.

When this point is reached, the results can be traumatic not only for

the individual but also for the collectivities of which she is a member. The

individual may continue to participate in collectivities governed by different

logics from the one she has chosen—indeed, she may have no choice but

to do so. But without the cognitive commitment appropriate to full mem-

bership her participation becomes inherently destabilizing. An example

would be the presence of members of religious sects as conscripts in the

armed forces or as workers in hierarchical organizations. Rejecting the

authority structure of the hierarchy their commitment to its processes can-

not be relied upon, and their presence makes the system vulnerable to mal-

function, as well as open to the intrusion of subversive ideas. Similarly in

a market society, the presence of sect members, for whom allegiance to

the sect is paramount, can subvert the principles of open markets and free

bargaining on which the society depends. The nature of sects is such that

their growth and their interactions with other cultures are self-limiting, and

for contemporary societies and organizations these problems are a marginal

nuisance rather than a central concern. As we shall see in the next section,

however, the interactions between market and hierarchical cultures can be

equally problematic.

ECONOMICS, CULTURE, AND CONTEMPORARY SOCIETY

From the viewpoint of cultural theory, the most striking feature of con-temporary Western societies is the extent to which market and hierarchical

elements are increasingly intertwined. These societies were traditionally hi-

erarchical cultures, in which any market elements were tightly containedso as to serve the interests of the hierarchical authorities. Since the begin-

566 Hendry

5The social basis of cognition is stressed throughout Douglas’s writings, but is explored espe-cially in Douglas (1987).

ning of modernity, we have experienced a gradual erosion of the forces of

tradition and of the hierarchical institutions in which they were embedded,

and a corresponding shift in emphasis from hierarchical to market-based

structures. The institutions of market culture are now pervasive throughout

society and are arguably more powerful than those of the older hierarchical

order. But the transition is far from complete and it is only in the last few

decades that we have begun to experience the full force of the conflict to

which it has given rise.

The hierarchical institutions of religion, law, and public life may have

been seriously eroded and may well become more so as their structure s of

legitimation are undermined by the pervasion of market ideas, but they

still represent powerful forces in our society and, especially, in our thinking.

Contemporary Western societies are still structure d around centralized po-

litical authorities, accumulating and redistributing resources in the form of

taxation and welfare payments. For many, probably for most people, the

hierarchical ideas of order and authority, fairness, duty, care, and respon-

sibility are still desperately important, and the rhetoric of economic rea-

soning and the market society still largely meaningless.

Even so far as we do live in a market society, moreover, the charac-

teristic logic of that society is fully espoused only by the community of Big

Men who inhabit the left hand side of the grid-group space—the entrepre-

neurs, business leaders, and others able to fully exploit its freedoms. In the

transition between the 1973 and 1978 versions of Douglas’s theory, the op-

pressed majority of the Big Men society (to the right of the space) somehow

got lost, and in the political rhetoric of late twentieth century America and

Britain they seem to have got lost too. Because the market culture is one

in which everyone can in principle participate, and because the terms of

the culture are dictated by those who do participate successfully, it is easy

to lose sight of the failures. To a considerable degree, the victims of market

oppression are still accommodated by the hierarchical elements of society,

receiving welfare from the State and finding meaning in religion. Increas-

ingly they come to accept that economic might is right and that redemption

comes from consumption, but the transition is not an entirely happy one.

Millennial hopes are kept alive by an addiction to consumer-based televi-

sion (cf. Marcuse, 1991); feelings of impotency in the face of an impersonal

market system are subdued by drugs; and where the lawful economy is

inaccessible the alternative market of crime takes its place.

The result is a pluralistic society in which the logics of market and

hierarchy, backed up by their respective institutions, both represent pow-

erful and pervasive forces from which individuals cannot easily escape. In

this context, the logic of legitimation of a collectivity can no longer be taken


for granted, but must constantly be negotiate d afresh (Deetz, 1992). The

effects of cognitive dissonance are omnipresent.

BUSINESS ORGANIZATION IN THE LATE TWENTIETH

CENTURY

The effects of this cultural pluralism are particularly evident in busi-

ness organizations. Although the financiers and entrepreneurs who create

them inhabit a Big Men market culture , business organizations themselves

have always been characte rized by predominantly hierarchical cultures. This

is partly a reflection of the hierarchical nature of the traditional societies

whose classification systems and structures the entrepreneurs have ex-

ploited and turned to their own benefit. But it is also a consequence of

the need of business organizations, at a certain stage of their evolution, to

perform the very task for which hierarchy is best suited, namely the coor-

dination of labor on a large scale (Jaques, 1990). The result is that both

the creation of business organizations and their stability and survival have

relied upon a cognitive espousal of the logic of legitimation appropriate to

the hierarchical culture. Thus, the very organizations that make up and

sustain the market culture , with its values of individualism and opportun-

ism, are themselves organized—or were until recently organize d—according

to a quite different belief and value system in which the authority of the

collectivity rules and the individual is subservient to the whole.6

So long as there was a clear demarcation between the forces of capital

and labor, this does not appear to have been problematic. The worker or

manage r, living in a hierarchically dominated world, was not greatly af-

fected by questions of profit. The hierarchical structure of the business in

which he worked tied in with that of the society in which he lived. He

fulfilled the tasks allotted him by the business and was in turn looked after

by it, with a stable employment contract and an identifiable role in society.

For the market-oriented investor or entrepreneur, on the other hand, the

hierarchical classification structure s of society and organization were legiti-

mate resources to be co-opted to his own ends. Within the last quarte r of

a century, however, the changing environme nt has threatened the stability

of business hierarchies and opened them up to the influence of market-

based ideas.

Twenty-five years ago, the characteristic form of large business organi-

zation was the multidivisional hierarchy or bureaucracy. As documented by

Chandler, the business hierarchy had evolved in response to the opportu-nities created by technological developments in transportation, communi-

568 Hendry

6For a different but consonant perspective on the role of hierarchies in modern industrialenterprise see Lazonick (1991).

cations, and mass production in the nineteenth century and had quickly

acquired the self-reinforcing characteristics of a cultural system (Chandler,

1977). The multidivisional form of hierarchy had then evolved between the

two world wars, in response to the opportunitie s created by changing popu-

lation and income levels and further waves of technological innovation

(Chandler, 1962). Just as technological innovation created and sustained

the business hierarchy, however, it also threatened its existence. In the

1970s, advances in information technology began to erode the economies

of scale experienced by the large firms and open up the competitive envi-

ronment to entrepreneurial newcomers. With increasingly rapid and volu-

minous communications, competitive cycles shortened dramatically and the

proprie tary knowledge bases of the established firms, built up over many

years of substantial investment, were duplicated rapidly by leaner, more

agile, and more innovative rivals.

Based as they are on very detailed and specific classification systems,

hierarchical collectivities are uniquely ill-adapte d to change. Their natural

tendency is to respond to threats by reasserting control and strengthening

the authority structure (Douglas, 1992b), and the first response of busi-

nesses to the new competitive threats was to try and build the linkages

needed for rapid and successful innovation into the hierarchical structure

through the adoption of increasingly complex and sophisticated matrix or-

ganizations.

It was Peters and Waterman who pointed out, in In Search of Excel-

lence, that the formal matrix structure was precisely the wrong way to en-

courage innovation; that far from strengthening and elaborating the grid

classification, what was needed was a loosening of grid, to create the space

in which innovation could flourish (Peters & Waterman, 1982). If that had

been all they had said, however, their message would never have been as

influential as it was, for the picture they painted of the innovative organi-

zation, with its skunk works and entrepreneurs, its ambiguity and informal-

ity, its relaxation of social controls on appearance and behavior, and its

toleration of failure, containe d everything that, on Douglas’s account, a hi-

erarchical collectivity most fears (Douglas, 1973).7 That their book was so

influential seems to have rested on two factors. One was the evocation of

market rhetoric at a time when the profitability of the firm, which had

traditionally been taken for granted, was emerging as a real concern. The

other was the offer of something to replace the control that would be lost


7In the 1973 edition of Natural Symbols, Douglas wrote of the emergence from this kind offragmenting hierarchy of shaggy long-haired prophets into leadership roles, a process thatwas vividly illustrated by the appointment of John Harvey-Jones to the chairmanship of ICIin 1982.

by a weakening of detailed grid classifications, in the form of an increasing

attention to corporate culture.

In Peters and Waterman’s recipe, corporate culture played two distinct

roles. On one hand, in terms of its content, it was described as enabling:

an ideal culture should support and encourage innovation and risk-taking.

On the other hand, in terms of its function, it was described as constraining.

A strong corporate culture would compensate for the loss of detailed grid

classification by reinforcing the organization’s underlying classification

scheme and strengthening the power of group control. With group alle-

giance secured and a strengthened grid foundation, individual freedom

need no longer be perceived as a threat.

It is tempting to argue that any recipe which promises to combine

freedom and control must have a flaw in it somewhere, and while the idea

of culture as control took hold quickly and effective ly (Hope & Hendry,

1995; Pascale, 1985; Posner et al., 1985; Weick, 1987; Willmott, 1993) the

idea of an innovative culture proved to be a seductive but elusive chimera.

For many large companies, performance did not improve sufficiently to

maintain competitive position, and by the 1990s further, more drastic meas-

ures were needed. By this time, a focus on innovation was no longer suf-

ficient. Costs had to be cut, through the now familiar tactics of downsizing,

delayering and outsourcing.

This new set of changes was again justified by the rhetoric, and rein-

forced by the necessity, of the market culture , and it threatened even more

strongly than before the hierarchical legitimacy of the organization. The

logic of hierarchy does not lend itself to the rejection of any members of

the collectivity, even those at the bottom of the pile. Each has a role in

the hierarchical scheme and a legitimate expectation of continuing to fill

that role. The logic is certainly not consistent with the rejection of those

in the responsible , middle ranks of the hierarchy, who are the guardians

of its classification structure s. To make matters worse, the hierarchies that

were now rejecting their members were the very same ones that were de-

manding allegiance from them, through the strong group control of strong

corporate cultures.

Closely linked with these developments was the emergence of the first

serious threat to one of the fundamental principles of hierarchical legiti-

mation, namely that those at the top of the hierarchy must be seen to be

the servants of the community as a whole (Douglas, 1992a). This equation

of leadership with service has on the whole survive d within the hierarchical

structures of society at large. It is also a prominent feature of the corporate

hierarchies of Germany, Scandinavia and Japan, and was long implicit in

those of America and Britain. So long as profitability was not seriously at

risk and redundancy was not an issue, the top manage rs of large corpora-

570 Hendry

tions were seen by their employees as servants of the corporation. Even

where they were also the owners, the model of ownership was the pater-

nalistic one of the caring and responsible parent. With financial difficulties

and the emergence of a market for corporate control within the 1980s po-

litical ideology of popular market capitalism, all this changed dramatically.

Top management now professed public allegiance to their shareholders

rather than to their corporate communitie s, and were increasingly remu-

nerated according to the rules of the market rather than those of a hier-

archical culture. As this trend continued through the downsizing of the

1990s, the credibility of top manage ment as the servant-stewards of hier-

archical collectivities was strained to breaking point and the integrity of

the corporate hierarchy as a cultural system was severely damaged.

With these developments, the logics of market and hierarchical cul-

tures have come into open conflict, not only in the world of business or-

ganizations but also in that of public sector services, the very existence of

which is legitimated by reference to the moral norms of hierarchical culture

but the structuring of which is, like that of business organizations, increas-

ingly governed by the norms of the market.8 Whether in the private or the

public sector, most business organizations now find themselves torn be-

tween the two sets of cultural norms, and it is no accident that the paths

being advocated for the future may be divided into those which advance

still further the market ideology and those which seek to restore some of

the legitimacy of hierarchical culture.

On the side of market culture , we find the movement labeled as “the

end of careers” (Bridges, 1995; Goffee & Scase, 1992; Hiltrop, 1995). This

takes the view that the damage done to the corporate hierarchy is terminal,

that large businesses can no longer use the legitimacy of the hierarchy to

control their employees, and that employees can no longer rely on that

legitimacy for their security. There is a vestigial rhetoric of responsibility

according to which corporations offer to replace security of employment

with security of employability, but this is not reflected in training and the

reality is that of an open market relationship in which each party seeks to

advance its own interests.

The organizational form that is advocate d for this new world is the

network organization, in which individuals or small groups use networks of

personal contacts and contractual relationships to bring together the re-

sources needed for each venture (Handy, 1990; Miles & Snow, 1986). It is

not, perhaps, as novel as its proponents would have us believe, for it is


8The political significance of this conflict has been noted by du Gay (1994) and Mintzberg(1996). From the perspective of a market culture, the changes to the public sector are bothmorally and politically quite valid, but they are valid as a way of undermining the hierarchicalinstitutions concerned and not of improving them.

essentially the same type of organization as may be found among the tribes

of uncolonized New Guinea (Douglas, 1973), the merchant entrepreneurs

of fifteenth and sixteenth century Europe, the traditional manufactures of

Northern Italy, or the organized crime of almost any place and period. It

is, indeed, the classic form of market organization, allowing resources to

be put together quickly when an opportunity for profit presents itself and

dispersed when a venture is completed.

On the other side of the debate, we find the propone nts of core com-

petence and strategic intent, defenders of the value of traditional hierar-

chical organizational cultures who draw atte ntion to the distinctive

competencies of structured organizations and to what they can do that mar-

ket structures cannot. The market rhetoric is not totally absent here. The

language of interpersonal relationships is preferred to that of hierarchies,

and economic competition provides the driving force. But the emphasis is

on the dangers of too much organizational fragmentation, the responsibili-

ties of senior manage rs for the collective, and the importance of organize d

coordination for building and maintaining long-te rm competitive success

(Hamel & Prahalad, 1994; Bartlett & Ghoshal, 1994).

In a world that is caught between the rival value systems of market

and hierarchical cultures, both sets of arguments are appealing. For those

entrepreneurs and business leaders who embrace the culture of the market,

the hierarchies of organization and the hierarchical instincts and loyalties

of employees are attractive as symbols of power and as resources to be

exploited. For those who profit from it, a large business organization able

to exploit the values of a hierarchical culture is a more attractive prospect

than the fragmentation into a host of independent ventures that would re-

sult from a true market society. To endure and be effective, large business

organizations need both the coordinating structure s of hierarchy (Jaques,

1990) and the legitimation structures that support a hierarchical culture .

The hierarchical organization is a powerful form. It constrains, but it can

also enable and empower (Adler & Borys, 1996), providing the stability,

support, and psychological security to relieve people of their immediate

concerns and open the way for experiment and long-term change (Schein,

1993). This power derives, however, from the distinctive moral order of

the cultural type, in which individualism is subsumed to the collective good

(Ghoshal & Moran, 1996).

For those manage rs for whom the culture of hierarchy is still powerful,

on the other hand, the market-based recipes provide a necessary survival

guide in an increasingly hostile world. To insist without compromise on the

values of hierarchical culture is to accept exploitation by those who are

prepared to work to different ethical rules.

572 Hendry

The result is that many large businesses are now operating as hybrid

cultures, embracing both market and hierarchical structures and values, and

the question that arises is: can this work? Can such a cultural pluralism at

the organizational level be sustained?

The implication of Douglas’s cultural theory would seem to be that it

cannot, that the two cultures represent not merely different but conflicting

political bargains, logics of legitimation and moral codes that make their

coexistence in a single collectivity both politically and cognitively unsus-

tainable. According to this view, as soon as the organization begins sepa-

rating its leaders from its employees, treating its manage rs’ careers and

livelihoods according to market principles, recruiting people who share

those principles and rewarding their market-base d networking behavior

over and above the traditional values of duty and loyalty, the moral code

of hierarchy is inevitably eroded and replaced by that of self-interest. This

process may take some time, and in the short term it may be accompanied

by positive economic benefits. Individuals do not easily switch their ways

of thinking and the business is able to exploit and benefit from their loy-

alties for some time after is ceases to give anything in return. Marke t free-

dom plus hierarchical dedication lead to supernormal profits. Gradually,

however, the benefits of hierarchical culture will become harder and harder

to secure. Eventually, the organization pursuing this path must lose any

advantage s it may have had qua organization and be forced to turn into a

pure market network.

For this process to be halted, one of two things would have to happen.

Either the market and hierarchical elements of the organization would have

to be kept sufficiently separate to prevent the erosion of the latter by the

former. Or the elements of hierarchical structure would have to be legiti-

mized according to market culture: cooperative behavior justified on the

grounds of self-interest. The converse, which corresponds to the traditional

rhetoric of free-market politics in a hierarchical culture , is inherently con-

tradictory, for while the hierarchical culture requires, as part of its political

contract, that the losers are looked after, the market culture depends es-

sentially on their exploitation. Not everybody can be a Big Man: if there

was no-one on the right of the grid-group space to be exploited, there

would be no gains for those on the left.

The first of the two possibilities, the separation of cultural elements,

can be related to Charles Handy’s conception of the “inverted doughnut”

organization: a central core of people related through the bonds of a hi-

erarchical organization, and surrounded by a network of market relation-

ships (Handy, 1994). In a large, complex, and pluralist society populated

by both hierarchical and market institutions, there seems no reason why

such an organizational form should not work. From a cultural perspective,


however, the boundary between core and periphery would need to be very

clearly drawn, and there is little sign of this happening. With the recent

fashion for outsourcing, many organizations have distinguishe d between a

core and periphery on the basis of employment vs. market contracting, but

they have tended to apply the logic and rhetoric of the market to the core

as well as to the periphery. The boundaries represent provisional, short-

term economic calculations and not sustainable cultural distinctions.

The second possibility may be related to ideas of corporate “vision,”

which can be traced back to Peters and Waterman’s recipe for excellence

in the 1980s (Peters & Waterman, 1982). Peters and Waterman’s suggestion

that a tight culture could be used to promote innovation may not have

worked out, but the idea of culture as a form of control has had an en-

during attraction. In the turn of millennium context, this is expressed in

the notion that if we can sell a vision of the corporation and its future to

which the employees can subscribe , they will then take that vision as their

goal and work cooperatively and unselfishly toward it, even if we treat them

according to the rules of the market. In a sense, it is a form of organiza-

tional brainwashing: in the terms of cultural theory, an attempt to create

artificially the strong group characte ristics of the sect, but in the service of

rather than in opposition to a dominant market culture .

The vision approach works because, in today’s world of collapsing hi-

erarchies, most people do not have a vision of their own. For the mana-

gerial classes, especially, the traditional authority of church and state have

been weakened and the goal of prosperity—the vision that fired the Ameri-

can dream—has been achieved. What is left is not a personal vision of

what a good life might be like, but a personal fear of what might happen

if the prosperity should be lost. The corporate vision provides a way of

subsuming this fear, as by identifying with the vision of her corporation,

the employee can forget the precariousness of her market position. It also

provides a welcome sense of direction in a world in which the old signposts

no longer make sense. From the outside, to the critics of corporate power,

it may look like brainwashing and exploitation, but it is entered into will-

ingly and even enthusiastically. The vision is part of the appeal of the

job—a substitute , in the market world, for the job security of the hierarchy.

Dreams are fragile affairs, and whether the vision approach will prove

sustainable is difficult to judge. At the moment, most large corporations

are still benefitting from the vestiges of hierarchical thinking in the minds

of their employees and reinforcing this with vision, rather than relying on

vision alone—and in the short term they are reaping the rewards. In the

longer term, one can envisage people committing to the vision of a glam-

orous or exceptionally high profile international brand (Coca-Cola or Nike,

574 Hendry

say) or an exceptionally charismatic leader, but it is unclear how many cor-

porations will be able to provide this kind of attraction.

The solutions are still unclear, but if Douglas is right about the fun-

damental cognitive conflict between the legitimating logics and moral or-

de rs of he r diffe rent cultural type s, the n the success of busine ss

organizations in the early twenty-first century will depend critically on their

ability to manage this conflict. This in turn will depend on the way in which

that conflict has evolved in different societies. Market thinking has pene-

trated more deeply into American and British societies than elsewhere, and

large corporations rooted in these societies will face different challenges

from those rooted in the more structured, hierarchical societies of conti-

nental Europe and, especially, the Asia Pacific region. Indeed, those cor-

porations which have most enthusiastically embraced the culture of market

competition may well be the most vulnerable to the effects of that com-

petition, vulnerable not only to the tactical sniping of small market-based

network organizations, unburde ned by their needs for hierarchical coordi-

nation, but also to strategic competition from functioning hierarchies which

have retained the ability to derive value from a hierarchical culture.

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BIOGRAPHICAL NOTE

JOHN HENDRY is a University Lecturer in The Judge Institute of Management Studies anda Fellow of Girton College, both at the University of Cambridge . He was previously on thefaculties of University College London, the London Business School and Cranfie ld School ofManagement and has published widely in the history, philosophy and sociology of science,technology and management. His current research interests are in strategic change processes,ethics and corporate governance.


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