Routines or Practices?

8 July 2007 at 11:02 am 14 comments

| Nicolai Foss |

I am growing increasingly skeptical of the extremely popular and influential  notion of routines, a central construct in large parts of management, notably organization and strategic management, and in evolutionary economics. My problems with the construct are these (among others):

1) There are still no clean definitions around of “routine.” Proponents of the routine notion sometimes delight in pointing out that it took transaction cost economics almost 4 decades to arrive at its unit of analysis, dimensionalize it, etc. However, with respect to TCE  it was only when the unit was finally decided on, defined and dimensionalized that real progress beyond Coase (1937) began to take place. Those who work with routines have not been so patient, and have not hesitated to introduce all sorts of derived concepts. Thus, capabilities are often defined in terms of routines, so that something undefined is defined in terms of something badly defined.

2) Although no clean definitions seem to exist, different views of routines are proffered in the literature. Indeed, there has a notable drift in the dominant conception of routines, from the standard operating procedures of Cyert and March to the emergent/undesigned, collectively held, largely tacit routines of Nelson and Winter.  

3) Routines are (partly because of 1)) too often used as a catch-all category that aims at capturing everything (at any level of analysis) about an organization that has some degree of stability/permanence. For example, the much cited “organizational learning” paper by Levitt and March (it has a whopping 1,655 hits on Google scholar) includes everything from individual-level heuristics (“rules of thumb”) to corporate strategy under the routine heading.

4) There are, at least in management, no good stories of how routines emerge and change as a result of individual action and interaction, as Teppo Felin and I have argued in a number of papers, e.g., this one. (Here is an evol econ paper that tries to tell a story of emergence).

5) Routines seem to bring us back to the economist’s charicature of sociological man, that is, somebody who mindlessly follows rigid rules (see also Michael Cohen’s recent semi-skeptical essay), making it difficult to account for creativity and indeed the change of routines (except in terms of meta-routines).

Yet there is, of course, something to the notion of coordinated, recurrent action patterns in organizations, and it would be silly to argue that all such patterns had been rationally designed a priori (although advocates of the routine construct seems to me to badly under-estimate the extent to which routines (or more properly, standard operating procedures) are actually designed in organizations). 

It seems to me that if advocates of the routine concept really want to theorize those organizational elements that are semi-rigid, a property of the social system defined by the firm, largely tacit, etc., they wouldn’t do too badly by linking up with the practice stream in strategic management, exemplified by such writers as Paul Duguid, John Seely Brown, JC Spender, Richard Whittington, and others (e.g., this paper). 

I disagree with much in this literature, but it has the advantage relative to the routines literature of taking micro-foundations serious and of thinking seriously about micro-macro links. It has also has substantial backing in sociology, notably in the work of Pierre Bourdieu which — somewhat to my  surprise — I have recently found to be a much more interesting source of inspiration when it comes to the understanding of organizational practices than the contemporary management stuff on routines and capabilities (please, no jokes about pomo periscopes) (here is the wiki on B.). For example, the extreme behavioral rigidity implied by the routine notion gives way in Bourdieu’s work to a much more subtle understanding of the interaction of action, dispositions, and social structure. Indeed, in Outline of a Theory of Practice Bourdieu explicitly challenges the view that much behavior is rule-governed, and offers instead his own notion of “habitus,” that is, “the durably installed generative principle of regulated improvisations.” This notion can accommodate both constraints in the form of institutions, culture, habits of thought, etc., and rational action — which the notion of routine seems incapable of.

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14 Comments Add your own

  • 1. Chihmao Hsieh  |  8 July 2007 at 2:59 pm

    Nicolai, I don’t understand this post. I think that’s because it uses the words ‘capabilities’ and ‘routines’ too many times.

  • 2. Nicolai Foss  |  8 July 2007 at 3:01 pm

    What is it you don’t understand?

  • 3. Chihmao Hsieh  |  8 July 2007 at 3:08 pm

    Dear me! I was joking around, going for some irony with my 2nd sentence.

    To add to the impenetrableness of ‘capabilities’ and ‘routines,’ I add the term ‘dynamic capabilities.’

  • 4. Joseph Mahoney  |  8 July 2007 at 3:48 pm

    Nelson and Winter (1982) provide a routine as a general term for all regular and predictable behavioral patterns of firms. Consider franchising as a context: The ability to achieve control and replication through routines has been well documented by Linda Argote (Carnegie Mellon University). That the franchise system’s capabilities are largely defined by their routines (standard operating procedures) seems warranted. Further, Linda Argote shows how the franchise LEARNS over time. This LEARNING/Change over time is the essence of “dynamic capabilities.”

    To be sure measuring “routines” and changes in routines (learning) are empirically challenging. However, why should we queston that a firm’s routines, capabilites, and dynamic capablities exist any more than we would question that individuals have habits, skills and learn over time (“dynamic skills”)?

  • 5. Jed Harris  |  8 July 2007 at 5:55 pm

    I agree with much of this though I’m not familiar with many of these strands in the literature.

    I find most treatments (including Bourdieu, John Seely Brown, etc.) suggestive but lacking in the analytic tools to get a grip on the phenomena and move us toward something as strong as the Coasian framework.

    H. Peyton Young has analytic tools that are applicable here, though I’m not sure if they are quite strong enough. Of course a huge amount of work is required to build an adequate bridge between the qualitative accounts (Bourdieu etc.) and the more analytic models.

    However the basic concept required for good analysis is easily stated. People act based on their expectations of others actions. Over time, people converge on expectations that are relatively stable, given everyone else’s expectations. These relatively stable and self-sustaining expectations ground routines, practices, dynamic capabilities, etc.

    Rules are typically a codification of the expectations in given cases. They may be useful in guiding analysis, and may play a constitutive role in shaping behavior, but they always have to be understood in terms a much richer ground of expectations about interpretation, enforcement, etc. An approach based on rules that are literal and “self-implementing” is absurd.

    Note that this approach works fine with both symmetric and asymmetric roles, and even different populations with radically different expectations or “models”. It handles convergence on new practices, stability, drift, and the collapse of practices. I think it lets us develop analytic accounts for all of Bourdieu’s ideas. Etc.

    I’ve written more about this a long time ago in the context of Turner’s critique of “practice talk” at my blog. This was before I discovered Young.

  • 6. Tony  |  8 July 2007 at 10:51 pm

    i’d question if rules codify expectations in any (generalizable, representative) sense. inertia doesn’t need rules. the effort of designing, enforcing, and maintaining rules is costly. changes must threaten an inertia, if decisions to incur the cost are made. inertial expectations which are not in a perceived state of being under threat won’t become rules. and a rule emerges at a given moment in time, so an event history of rules matters many rules may be out of date relative to expectations, but adhered to by a budgeted enforcing group. finally, corruption can cause “ironic” rules to be added to support it.

    taking all that into account, should one characterize rules as really codifying expectations, when the expectations being codified are
    ones threatened by change and unlikely to be stable when rules emerge? whether a rule represents an expectation long after it has emerged seems to me accidental or just a deflection of later external threats, rather a reflection. even a restatement of a rule may be a timely action, not a stable description.

    my critique doesn’t apply to rules as teachings. but i’d decouple a teaching from a rule.

  • 7. Tony  |  8 July 2007 at 10:56 pm

    sorry, to correct some typos in the above:

    “an event history of rules matters” should be ended with a period. the word ‘matters’ is a verb.

    “rather a reflection” should be “rather THAN a reflection”, i.e., not a reflection of an internal status.

  • 8. Jed Harris  |  8 July 2007 at 11:55 pm

    Regarding whether rules codify expectations:

    Arguments about policy and law turn on whether they support or undermine a “predictable environment” for decision making. Critiques of decisions sometime put a great deal of weight on that law not getting ahead of the political process. The formation of common law is essentially a process of distilling and codifying current (legal) practice in resolving disputes. Etc.

    To be sure, rules can establish a new equilibrium by establishing a stable coordination point (in Schelling’s sense), or in some cases can move a situation from one equilibrium to another. So I agree that simply saying rules codify existing practices is too limited — they can form the context for new or altered practices.

    Expectations are not inertial, because they coordinate action, and action is the opposite of inert. They are constantly violated by error, testing, seeking advantage, etc. and must be constantly rebuilt. Their relative stability is evidence of a strong equilibrium in the interactions.

    Even when expectations are stable and not threatened, publicly codifying the expectations can greatly reduce coordination costs, because rules can make it much easier to maintain the equilibrium.

    Conversely, however, if an organization tries to establish and enforce rules far from any self-sustaining equilibrium, the effort will be very costly and unsuccessful.

  • 9. Nicolai Foss  |  9 July 2007 at 1:18 am

    Joe, I don’t necessarily question that the routine construct may capture something real in organizations. I explicitly say so. The argument is rather that there may other constructs, such as “practices”, that for a number of reasons may be superior to the routine constructs.

  • 10. Peter  |  9 July 2007 at 8:51 am

    I’m not certain of the ‘there’, as in ‘from here to there’ that you are finding lacking in the concept of routines. Are you saying that routines are not a part of organizations, or that routines are not a useful point of departure for analysis. The former, I’d suggest, is empirically false, and the latter, well, I’m not so sure.

    There is a really nice and poignant story of organizational routines (not practices, mind you, routines) in Michael Lewis’ experience in a children’s ward of a Berkeley hospital. I guess I don’t know what you are aiming at (i.e., the ‘real progress’ you attribute to TCE).

    My other impulse, perhaps not surprisingly, is to say that with respect to routines changing (point 4, maybe 5 as well), individual actors are overrated. Routines change because of shifts in legislative environments (make it illegal to ask about whether a job candidate has kids/is married and you’ll change at least to some degree who gets hired); they shift because of individual activism; they change when changes in technology, broadly speaking, make possible new routines or obsolete old ones (Yuval Millo tells interesting stories about how routines around margin requirements in clearing houses shifted with incorporation of language of Black-Scholes-Merton).

    So I guess I’m a little puzzled at the lack of utility you’re talking about. Is it the lack of a tightly cohesive theoretical agenda? Lack of agreement about outcome variables? That there is heterogeneity in empirical object and approach? All of the above?

  • 11. Nicolai Foss  |  9 July 2007 at 10:48 am

    Peter, Some of your questions are addressed in this paper:
    http://papers.ssrn.com/sol3/papers.cfm?abstract_id=982823
    Also take a look at the Felin and Foss paper linked in the post. And perhaps read the post again…

  • 12. Peter  |  10 July 2007 at 8:49 am

    Ok, read the paper, re-read the post (and the subsequent one). I’ll skip the part where the person with the idea is more important than the idea (he’s someone to be listened to…as opposed to..), because it makes you sound like someone you are most likely not.

    In my initial jottings on the paper, I wrote the following:
    Seems to me that there are three (well, 2 1/2) fundamental assumptions, but don’t know that I agree with them: 1) that micro-foundation means that the level of analysis should be the individual, and that individual behavior aggregates up to organizational outcomes; 2) that the aim is ultimately to explain macro-outcomes – so routines as DV is helpful only insofar as it gets us to routines as IV and macro-outcomes as DV; 2.5) this outcome is really not ‘macro-outcome’ but performance in the interest of competitive advantage.

    I guess I’m saying that I flagged the MI as part of the issue as well. I also think there is more than performance at stake, though this is the main outcome variable of interest in Strategic Management (incidentally, this is a key distinction between SM and Sociology more broadly).

    When I see routines, I don’t see habit versus decisions, or routines vs. capabilities (broadly) in your way of putting it. I see routines as something more like crystallized actions – Berger and Luckmann would say sedimented action.

    That said, many really good analyses have played off of this distinction, to the benefit of understanding culture, for example. Ann Swidler wrote about culture’s use during ‘settled’ and ‘unsettled’ moments. And Barley’s work on routines-as-scripts, which are altered by technologies and then potentially rebuilt to accommodate or change relations of authority in workplaces, this is another pivot on the same idea.

    My initial bit of snark maybe was about the fact that you seemed to engage with a pretty narrow set of needs for understanding routines (must have micro-foundation in order to build macro-foundation) – this is a metaphor, theory is not really a house. And second, there seemed to be a primacy given to micro-foundation as being equivalent to individual motivation and action, which I still find not totally helpful.

    Of course, I take your point that I should actually have engaged with your argument as made and actually have followed up on the papers before being so dismissive.

  • 13. Rajiv Krishnan KOZHIKODE  |  27 July 2007 at 1:12 am

    Although routines are not easy to observe, the proximal antecedents and outcomes of routines could be observed. If one could operationalize the antecedents and outcomes of routines more precisely and rule out other explanations that might explain the causal chain from these antecedents to outcomes, then what remain in the middle of the linkage are more certainly organizational routines. There is this good article “Competitive Implications of Interfirm Mobility” by Wezel et al. (2006) in organization science, which speaks about the failure of firms resulting from TMT turnover. The article reports that the failure of the focal firm is faster when the TMT move as a group (rather than as individuals) to form a new firm (rather than entering another incumbent organization) in the same locality as the focal firm (rather than at a farther geographical locale). In this article the authors neatly use the idea that higher order routines are collectively controlled by the top management and that routines are realizations of shared mental modes. They control for a bunch of alternate explanations like loss of social capital and human capital to establish neatly that the residual variance in the failure of the focal firms, over and above the bunch of controls, is explained by the meta routines that the TMT take away with them to the new firm.

  • [...] may be more appropriate here – implying a degree of flexibility and adaptability. See this post by Nikolai Foss for more on organizational routines versus organizational [...]

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