We all know that organizations consist of people, or at least that has been the case before the emergence of AI agents. While we know that individuals make decisions about what to do, when to do it, how to do it, and why, it sometimes seems like organizations have a will of their own.
This is not a new idea. In the 1940s, Herbert Simon at Carnegie Mellon University (CMU, then Carnegie Institute of Technology) studied decision-making processes in organizations. He looked at organizations as information-processing machines that had bounded capacity for reasoning. This was referred to as bounded rationality. It should not be understood as an attack on reason, but simply an acknowledgment that there is often a limit to the time and resources available. This applied not merely to individuals, but by extension to the organization as a whole. The classic reference for this is Simon’s book Administrative Behavior: A Study of Decision-Making Processes in Administrative Organizations [1].
Richard M. Cyert and James G. March, close colleagues of Simon, focused on firms as a coalition of participants (managers, employees, owners, customers, and suppliers). In order to make decisions on an ongoing basis, firms have to develop standard operating procedures as well as organizational learning procedures. They also set goals. Cyert and March viewed the firm as a learning system, incorporating insights from organizational psychology and economics. Simon wrote the foreword for their 1963 book, A Behavioral Theory of the Firm [2].
In the ensuing years, Karl Weick, a social psychologist then at Cornell University, began looking at how organizations determine and act on the meaning of the information they obtain from the inside as well as from their own operations. Instead of viewing organizational learning as an optimization problem driven by data and predefined rules, Weick believed there was an extra step involved. The organization had to conceptualize and interpret what the data actually meant. It had to engage in sense-making. Weick described this as organizational cognition. His 1969 text, The Social Psychology of Organizing, broke new ground by showing how organizations are social systems engaged in a continuous effort to understand and affect the world around them, but often the understanding lags behind the actions performed [3].
At the University of Bielefeld in Germany, Niklas Luhmann attempted to provide a theoretical grounding for the idea of organizations as self-steering, cognitive, semi-autonomous entities. He saw the central function of organizations as reducing environmental complexity through rule-governed selection. Luhmann viewed organizations as autonomous actors; they perceive meaning selectively, construct their own internal environments, and maintain identity through self-produced expectations. His 1984 text Soziale Systeme is available in an English translation [4].
Last, but not least, we should mention the contribution of Charles Hampden-Turner, a British-born management thinker trained at Cambridge University. While completing his DBA at Harvard in the late 1970s, he published The Organizational Mind [5]. Hampden-Turner claimed that organizations develop shared systems of values and meaning — internal cognitive structures that guide collective action and persist beyond individual members.
So can firms have a mind of their own? Not in the sense of a human mind, but organizations have had to evolve processes that are far more numerous and more complex than what a single individual could handle. These processes have enabled participants in organizations to set goals, solve problems, make decisions, and pursue objectives that go beyond those of a single individual. This is also a big part of the reason why organizations are so difficult to change.
When we think about an Autonomous Organization, we are really looking at multiple AI agents in collaboration, with and without humans. These agents will create emergent behaviors which mirror what we have discussed so far. They will also be able to evolve the organization much faster than we are used to seeing — large organizations as well as small ones.
References
1. H. A. Simon, Administrative Behavior: A Study of Decision-Making Processes in Administrative Organizations. New York, NY: Macmillan, 1947.
2. R. M. Cyert and J. G. March, A Behavioral Theory of the Firm. Englewood Cliffs, NJ: Prentice-Hall, 1963.
3. K. E. Weick, The Social Psychology of Organizing. Reading, MA: Addison-Wesley, 1969.
4. N. Luhmann, Social Systems, J. Bednarz Jr. and D. Baecker, Transl. Stanford, CA: Stanford Univ. Press, 1995. (Original work published 1984.)
5. C. Hampden-Turner, The Organizational Mind. New York, NY: Wiley, 1979.
