Thursday, September 01, 2011

A modern organization has institutional borders much as a cell has a cell wall

A business organization interacts with its environment through a number of institutions. It recruits staff through a labor market, it borrows money through a bond market or using market mechanisms to locate a lender, it raises capital through a stock market, and it finds facilities through a real estate market. It obtains intermediate goods and services through markets, and it sells its goods and service through markets.

A government organization will obtain its funds through institutionalized systems of taxes on sales, businesses, individuals, imports, etc, and though borrowing on bond markets (different than those used by businesses.) It will compete for staff via the same labor markets as businesses, but may also institutionalize civil service systems outside the job market to recruit career staff; some government organizations such as the Peace Corps obtain personnel as volunteers, institutionalizing mechanisms to recruit, evaluate and select people allowed to volunteer. A government organization may rent or buy facilities on the real estate market, or it may used institutionalized systems of expropriation to obtain facilities. Governments also institutionalize procurement systems to contract for intermediate goods and services used in the production of governmental goods and services; they institutionalize the systems link their services to the public through systems such as schools, public health facilities, extension services, etc. Note, that you can conceive of imprisonment as a government service, one which involves the criminal justice institutions to determine the people to be imprisoned. A government may institutionalize a draft to obtain people for its military services, or it may depend on an institutionalized system of recruitment of volunteers,

Civil Society organizations also obtain inputs and deliver outputs through institutionalized processes, some of which (such as labor markets) are common with organizations from other sectors, but some of which (such as those for obtaining donations of goods or services) are unique to civil society.

Compare this with hunter gatherer societies in which there are few if any business, government or civil society organizations, and people obtain food and fiber directly from their environment and build their own shelters. Or compare the institutions with the subsistence farms in which the majority of economic production activities take place in poor, traditional societies, in which farmers tend to have few institutions from which to draw resources nor institutions to allow trade of their products.

The main point I am making is that organizations of different kinds rely on different institutions to interact with people and other organizations in their periphery, and those institutions are as vital to modern organizational performance as is the cell wall to the functioning of the biological cell.

I was struck by how different are the institutions used at the peripheries of multinational organizations such as the United Nations or the World Bank than those used by domestic organizations. UNESCO for example has institutionalized a process by which governments may join or withdraw from its membership. It combines international civil services institutions with national quotas and sometimes with national vetting systems for recruits. It has a unique system for the nomination and election of its Director General. It participates in a number of specialized institutions for coordination with other multinational organizations and still others to partner with governments, firms and NGOs. It has institutionalized a variety of unique institutions to network with UNESCO category 2 centers (which it does not fund nor govern), with World Heritage sites, with bioreserves and geoparks, with UNESCO university chairs, etc.  Finally, it often participates in country specific organizations developed to coordinate foreign assistance, and has institutionalized a unique system of national commissions to interact with the intellectual communities in its member nations.

Note however, that the institutions that form the "skin" of a decentralized UN agency are different than those which form the "skin" of a program of the United Nations (such as the United Nations Development Program or the United Nations Environment Program) or those which are used by an international financial institution such as the World Bank. Indeed, even within a class of organizations such as the international financial institutions, there may be a significant variation in the ways skins are institutionalized.

If one is to understand UNESCO, one should understand the institutions that form its boundaries with the world in which it works. So too, it would be dangerous to assume that understanding UNESCO's skin would easily generalize to understanding that of the UNDP or the World Bank.

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