Master Thesis The Analysis of Organisational Learning Possibilities for Organisational Learning in...

Master Thesis

The Analysis of Organisational Learning

Possibilities for Organisational Learning in State-Owned Companies

Ausra Kropaite Supervisor: Hans Bent Martinsen

MSc in Strategy, Organisation and Leadership

December 2009

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Abstract In this paper organisational learning possibilities in state-owned companies are examined. Conditions for learning are assessed through organisational characteristics facilitating and inhibiting learning. Most of them are found to disturb learning process at the second and third stage – information distribution and information interpretation respectively. Organisational characteristics are put into perspective of the organisation’s operational performance and relationship between employees and the company. In addition, state-owned company is found incapable of learning due to rigid nature, hierarchical structure and ultimately, bureaucracy and political interference. All these limiting factors lead to only possibility to bring learning opportunities in such company – through individuals, ordinary employees. They are the ones participating in learning, thus able to bring in changes. Therefore, the practices suggested can be considered as conditions for individuals to initiate learning.

Keywords: Organisational learning, State-owned company, Individual, Organisation, Environment

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TABLE OF CONTENTS 1. Introduction .............................................................................................................. 4

1.1 Problem statement ........................................................................................... 6 1.2 Structure of the paper ...................................................................................... 6

2. Methodology............................................................................................................. 7 2.1 Delimitations ................................................................................................... 9 2.2 Potential drawbacks of the methodology........................................................ 10

3. Learning.................................................................................................................. 11 3.1 Organisational learning.................................................................................. 12 3.2. Choice of organisational learning elements................................................... 18

4. Organisational environment .................................................................................... 20 4.1 Management.................................................................................................. 20 4.2 Human resource............................................................................................. 22 4.3 Organisational structure................................................................................. 25 4.4 Organisational culture.................................................................................... 27 4.5 Organisational characteristics and the learning process.................................. 30

5. Individual and environment..................................................................................... 32 5.1 Efficiency...................................................................................................... 32 5.2 Effectiveness ................................................................................................. 34 5.3 Compliance ................................................................................................... 36 5.4 Commitment.................................................................................................. 37

6. Mechanistic organisation......................................................................................... 39 6.1 Mechanistic companies in practice................................................................. 42 6.2 State ownership ............................................................................................. 43

7. Potential mechanisms.............................................................................................. 48 7.1 Focus of mechanisms..................................................................................... 50 7.2 Practices ........................................................................................................ 52 7.3 Challenges..................................................................................................... 58

8. Conclusion.............................................................................................................. 59 References .................................................................................................................. 62

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“Bureaucracy, like army, has its own passive obedience; it is a system, which burkes consciousness, changes human into nothing, and finally screws him into the machine of government.” - Honoré de Balzac, “Father Goriot”

1. Introduction

Relationship between organisational learning and state-owned companies has always

been problematic, if it ever existed at all. Since the appearance of the concept of

experiential learning in 1938, it has been hard to imagine it to be present in a state-

owned company (SOL, 2009). Firstly, it is so mainly because experiments and their

unexpected endings could hardly be allowed in such an organisation. Secondly, there

are certain procedures which have to be followed in order to fulfil the function of such

type of organisation. There are rules and procedures which are guiding the actions of

such organisations. Following the experiments would mean the rejection of these

procedures. So, as a result, no room is left for new experiences, thus learning.

Organisational learning has been of interest among researchers for years. Each

of them, having own perception of the concept, tended to modify it and portray a

different perspective of learning in organisations. Starting with the understanding of

organisational learning as a process of detection and correction of errors (Argyris &

Schön, 1978), continuing with it as knowledge about the interrelationships between the

organisation’s action and the environment (Daft & Weick, 1984), adding up the idea of

Meyer-Dohm (1992) that it is continuous testing and transformation of experience into

shared knowledge, which can be later accessed and used by the organisation to achieve

its core purposes, and ending the 20th century with the concept by Schwandt and

Marquardt (2000) calling organisational learning as a complex interrelationship between

people, their actions, symbols and processes within an organisations (Bontis et al,

2002). Not to forget, Senge (1990) brought in another perspective of learning

organisations as places for people to “grow” and develop, which help them to create

desired results, which nurture new thinking, where collective ideas flow freely and

people engage in continuous collective learning. From all these approaches it is well

seen, that organisational learning has been gaining deeper understanding among

researchers and, thus becoming of greater importance for organisations in terms of

application and practice. As Argyris and Schön (1978) called, organisational learning is

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the greatest competitive advantage a company can have. However, is it likely that any

company is capable of learning and thus able to gain this competitive advantage?

A state-owned company is a legal entity created by a government to undertake

commercial activities on behalf of the government (as the owner) and usually is

considered as an element of the state. Such a company is defined by a distinct legal

form and is established to operate in commercial affairs. (Columbia Electronic

Encyclopedia, 2007) However, in other words it can be simply called a bureaucratic

organisation regulated by political interference. Such companies tend to appear in the

crossroad between the business matters and government interests. Governments usually

have political concerns for keeping such companies under their own control. As a result,

this political interference limits freedom of the companies to operate, to change and

develop in the best economic way. There are certain rules imposed by the government

which have to be followed and goals which need to be attained. However, not

necessarily they match the ones which are the most beneficial for the companies. So it

turns out they have to do what is required and not necessarily what is needed. Even if

there are possibilities that they recognise different needs in the market, government is

the one to decide on the direction on the further company’s operations and actions. So

these companies have to follow all the rules they are told.

Once a person gets inside such a company he or she is expected to learn these

rules. But this is not the learning which is necessary for organisations to be able to

learn. The former learning in a way reminds the way of memorising things by heart,

while organisational learning involves more thinking – exploration, collection of

information on the subject, understanding, etc. So individually employees get stuck

inside the company within the boundaries of descriptions and formalised rules and

procedures. If there is no room left for the individual learning, then the organisational

learning cannot take place either. Such situation in a way resembles psychic prison

metaphor (Morgan, 2006). According to it, by following certain procedures, engaging

themselves in favoured ways of thinking and acting, people get trapped in an

organisation. As a result, they start knowing no other reality, except the one which they

work in. They tend to know and follow rules, but have no or just little understanding of

reasons behind them.

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1.1 Problem statement So it is quite clear that state ownership does not bring a lot of possibilities, if any, for

organisations as such to learn. People get stuck inside the companies and over the years

become as machines performing one or another function, without great considerations

how it should really work. Lack of motivation appears due to lack of opportunities for

learning and personal development, which are limited by the organisational design and

specifics. So the question arises whether this situation is so hopeless and there are no

chances for these organisations to learn?

The purpose of this thesis is to look at the nature of the state-owned companies

more closely and to find out which conditions facilitating or impeding organisational

learning exist there. Thus the main aim is to find out – what mechanisms should be

introduced to facilitate organisational learning in a state-owned company. Based on the

considerations of the findings in literature and specifics of the organisational types and

structures, potential mechanisms – sets of practices – which would bring learning

possibilities inside these organisations, are indicated, analysed and presented.

1.2 Structure of the paper The thesis is constructed in the following way. Section 2 introduces methodology,

delimitations for the analysis and potential drawbacks of the methods applied. Section 3

reviews learning and organisational learning related concepts. Section 4 presents the

organisational environment in terms of organisational characteristics which facilitate or

inhibit learning in organisations. Section 5 focuses on relationships between

organisation and individual, organisation and the environment, concerning four issues –

efficiency, effectiveness, compliance and commitment. Section 6 explains the nature of

mechanistic organisation taking state-owned company as a representative example.

Section 7 outlines potential mechanisms – practices to improve conditions for

organisational learning in state-owned companies – as well as challenges for

implementing them. Section 8 concludes the thesis.

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2. Methodology

Qualitative approach is chosen to address the problem of this thesis. In particular the

analysis is done based on the examination of various academic literature – books,

articles, reviews, etc. To keep the analysis closer to the real world, documented

individual experiences, websites and previous studies of public-owned organisations are

of great help. So as a result, this thesis is purely theoretical with the diverse literature

being as the main source of information. In a way it can be called as a review of

literature, but with some practical insights which can be tested in practice later on by

further studies.

To start with, learning and organisational learning is presented and discussed

from different perspectives. Generic schema of organisational learning (Argyris &

Schön, 1996) is the main model is applied to present organisational learning more

explicitly. This schema consists of learning process, a learner and learning product.

According to Huber (1991), learning process consists of four stages – knowledge

acquisition, information distribution, information interpretation and organisational

memory. Each of them is examined more attentively. A learner can be anyone to whom

learning can be attributed (Argyris & Schön, 1996). For discussion of learner the 4I

model by Crossan et al. (1999) is applied. It divides learning into three different levels –

individual, group and organisation. So, any of these three can be considered as a learner.

Finally, learning product can be any informational content obtained during the learning

process. Here the distinction between tacit and explicit knowledge is made.

Moreover, the elements which are of greatest importance for organisational

learning are chosen – individual, organisation and the environment (Fang et al., 2009).

Further analysis proceeds based on these three entities. Also the distinction between

single-loop and double-loop learning is made. Both of them are of importance for an

organisation, though the former is more likely to be present in an organisation while the

latter one can be more beneficial for it.

What is more, organisational environment is examined identifying

organisational characteristics which are facilitating and inhibiting organisational

learning. They are divided into four groups: management, human resource,

organisational structure and organisational culture. Later on, the inhibiting conditions

are related to the learning process in order to identify at which stage they tend to disturb

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it. It is important to find out the biggest triggers for learning, which tend to abandon

learning at an early stage, so that later on in the analysis they could be addressed and

potential improvements could be offered.

Furthermore, in order to relate both learning facilitating and inhibiting

organisational characteristics to individuals and the environment, they are analysed in

terms of four aspects – efficiency, effectiveness, compliance and commitment.

Efficiency and effectiveness defines operational performance of an organisation and can

be related to both, individuals within organisation and the environment: with individuals

in terms of the way they do the work and with the environment in terms of the work

results and outcomes which are usually forwarded for the evaluation of the

environment. However, compliance and commitment mostly defines individual

behaviour and relationship between individual and organisation. Each of the aspects is

examined closer in terms of importance and influence for organisations and learning.

What is more, the combination of learning inhibiting characteristics is quite

obvious to be present in mechanistic type of organisations, which could simply called

bureaucracies. As a real example of such organisation can be government apparatus,

public administration, state-owned companies, etc. However, in order to have closer to

practice approach, state-owned companies are chosen as a representative example of

mechanistic organisation. Since mechanistic type organisations are generally supposed

to be of low value for individuals and their development as employees, the question

appears, why such organisations are still existent. Therefore, short description and

analysis of state-owned companies are done to answer this question. In addition, the role

of individual and his or her relationship with such companies are examined closer. In

addition, learning possibilities are evaluated their.

Finally, based on all previous analysis of organisational characteristics and other

related issues, potential mechanisms – sets of practices - which could improve

conditions for organisational learning in state-owned companies are proposed. They are

presented and briefly described. Besides that potential challenges which could be faced

by organisations trying to implement these changes, are listed.

Furthermore, this type of qualitative study in a way follows the epistemological

approach towards the knowledge of the subject. Attempts to examine organisational

characteristics as conditions and limits for organisational learning, reminds the

epistemological study of learning (Stanford Encyclopedia of Philosphy, 2005).

Moreover, the way analysis is done and the subject is approached resembles

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constructivist theories, as the attempt if this thesis is to create a new knowledge – find

out mechanisms facilitating organisational learning – based on the existing knowledge

(academic literature) (Tracey & Morrow, 2006). More particularly, the constructivist

model for learning applies in this situation, as the scope, design of the analysis and the

analysis itself come out based on author’s own thinking and understanding. Thus the

outcome of this thesis is a construction of new knowledge based on author’s own

understanding, knowledge and experience in combination with literature and other

sources of information. The methods and the proposed outcome of the thesis fit the

underlying fundamental beliefs of the constructivist model for learning (North Central

Regional Educational Laboratory, 2009):

1. All knowledge is constructed through a process of reflective abstraction.

2. Cognitive structures within the learner facilitate the process of learning.

3. The cognitive structures in individuals are in a process of constant development.

4. If the notion of constructivist learning is accepted, then the methods of learning

must agree.

2.1 Delimitations

The scope of this thesis is purely theoretical. There is no actual research done in a real

company. All analysis, considerations and suggestions are made based under diverse

academic literature. However, some real examples are provided in order to show a

different perspective on the subject or just as a supplement for the explanation of

theories and models.

State-owned companies are chosen as representatives of mechanistic

organisation. They are of particular interest for the author due to their status among

other companies and the conflict of interest between ownership and free market laws. In

addition, choice of one kind of mechanistic organisation makes the study more specific

and gives the opportunity to come up with more precise results.

Furthermore, both kinds of organisational learning, single-loop and double-loop,

are taken into consideration. Usually, companies tend to engage in single-loop learning

which is easier to perform, but in the longer run makes them stuck in an old mindset and

unable to change. (Argyris & Schön, 1978) In order to unlock from this position,

double-loop learning is necessary. However, it is not widely practiced by organisations,

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as it is much more difficult to enhance. Even though it would be important and

beneficial to create conditions for double-loop learning to appear inside the company,

considering the reality of state-owned companies, this idea sounds quite utopian.

Nevertheless, as it is still worth trying, while in the proposition of mechanisms the main

underlying focus is on the double-loop learning.

2.2 Potential drawbacks of the methodology

The author is well aware that theoretical approach might contain certain drawbacks.

First, the analysis might be biased due to the choice of literature. If the study is

based too much on theories by one or very few authors, so the results of the thesis can

be biased towards the findings of their previous researches as well. In order to keep

potential bias to the minimum, theories are selected under careful examination and

objective evaluation. Therefore, studies of as many authors as possible are considered

and relationships between them are examined in order to come up with as objective

results as possible.

Second, doing this study of organisational learning in a real company would be

more advantageous. The practical application of the concept in reality would let us see

its viability in practice. Nevertheless, in order to do such type of study in practice

certain factors have to be taken into consideration: a company willing to cooperate is

needed (however, results obtained in one company could hardly be approximated to

other companies), theories to be tested, framework of the analysis to be applied and also

the analysis itself. Since companies willing to cooperate were not found, refused their

agreement or their viability for the study of organisational learning was threatened by

the global economic crisis, theoretical analysis instead of practical is chosen.

Third, there is a huge variety of studies done on the organisational learning, but

there is not so many analyses done about state-owned companies, especially double-

loop learning there, as well as there is a lack of theoretical frameworks to be applied and

tested in such cases. So there is a necessity to have broad literature systemised and

focused particularly around learning possibilities in state companies. Therefore, in a

way thesis turns to be a review of literature, but also provides insights of a thorough

examination – potential mechanisms for the facilitation of learning in public companies.

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Fourth, proposed mechanisms might contain subjectivity depending on the

author’s understanding and thinking. Being the outcomes of a single author conscious

and insightful thinking, they might contain less meaning for the reader having different

opinion and knowledge on the subject. Due to this reason, the outcomes of this thesis

should be considered as insights and suggestions, not all-side grounded statement.

To conclude, cautious approach to the potential drawbacks of the chosen

methodology for this thesis helps to keep the above mentioned biases to the minimum

and develop as close to reality picture of the organisational learning as possible.

3. Learning

According to general definition, learning can be described as “a cognitive and physical

activity giving rise to a relatively permanent change in knowledge, skill, or attitude”

(Fincham & Rhodes, 2005). In other words, learning is about gaining new knowledge

and understanding based on the past experiences as well as newly acquired information.

As a result, change in the mindset follows from the newly acquired knowledge. On one

hand, learning means memorising factual information, thus increasing knowledge of

facts (Fincham & Rhodes, 2005) while on the other hand, it can be learning new

procedures or gaining new knowledge about the familiar ones. The former type of

learning appears quite easy to assess, while learning processes is more complicated.

This kind of learning is about getting to know the way people do things: how they react,

change their behaviour in one case or another. However, normally learning involves a

combination of both types.

Moreover, learning is an ongoing process itself. It emerges from individual

cognition and behaviour. By active participation in personal interaction, practical

application and seeking for written information and help individuals improve their

learning skills and acquire new knowledge. Thus as a result they get involved in the

learning process themselves. (Fincham & Rhodes, 2005)

In addition, learning process can be positively or negatively reinforced by

reward and punishment system. According to Fincham and Rhodes (2005), reward and

punishment is closely related to stimulus-response theory, when after receiving a certain

stimulus, individual gives certain response. Reward and punishment system shapes

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individual behaviour by making individuals choose response preferable for themselves

in a particular situation. However:

Operant theorists believe that reward is more powerful method of shaping than

punishment. Reward has the virtue of indicating what behaviour is required,

while punishment only indicates what response an individual should withhold.

<…> Aversive stimuli can also lead to avoidance learning. The individual can

learn to avoid somebody or to perform the undesired response out of their range.

(Fincham & Rhodes, 2005, p. 29)

In practice, learning is mostly reinforced by reward rather than punishment. However, it

is important to distinguish what kind of learning it encourages – factual of certain facts,

rules and procedures or procedural which makes people get involved and use their own

thinking.

3.1 Organisational learning

Organisational learning is “the process of improving actions through better knowledge

and understanding” (Hong, 1999). Everything starts with the perception about the

environment. Unless it possesses something of interest, no one (neither an individual,

nor organisation) will start to learn (De Geus, 1999) by acquiring information of any

kind and by using all available means (Argyris and Schön, 1996). Information here is

meant in a broad sense: knowledge, understanding, know-how, techniques and practices

fall under this category. So it turns out that the three most important entities for the

organisational learning are individual, organisation and the environment, i.e. the

external reality (Fang et al., 2009). This approach towards the three entities is applied in

further analysis of organisational learning possibilities in state-owned companies.

According to generic schema of organisational learning, it consists of learning

process, learner and learning product (Argyris & Schön, 1996).

3.1.1. Learning process

Firstly, as already mentioned before, learning is a continuously ongoing process. It

consists of four stages (Huber, 1991):

1. knowledge acquisition – collection of information from both internal (e.g.

organisation itself) and external sources (e.g. industry);

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2. information distribution – message routing, delay and distortion;

3. information interpretation – giving meaning for the collected information;

4. organisational memory – preserving certain behaviours, mental maps, norms and

values over time. (Hong, 1999; Argyris and Schön, 1978)

At the first stage, information and knowledge can be acquired both from inside and

outside of an organisation. Inside the organisation, employees can get to know new

things from their colleagues while outside the organisation is mainly industry

experiences which can be taken as source of information. Inside an organisation

knowledge can be acquired from individual employees, simply by socialising. However,

they can be old employees, working in a company already for some time, and can be

new employees, just recently hired. Here applies the model of mutual learning (March,

1991). According to it, every organisation has a code – a set of organisational

languages, beliefs and practices. When a new employee enters the organisation, he or

she is trying to get to know and learn this code. However, until this happens old

employees have a chance to learn from their new colleague – gain knowledge on his or

her experiences, different opinions, practices, etc. For the organisation more beneficial

is learning from the newcomer, however, as soon he or she gets socialised into the

organisation and starts acting according to the code, the organisation loses this

advantage. Therefore, it is important for the company to slow down the socialisation

process, though definitely not abandon it, in order to keep this benefit of gaining

knowledge from this new individual as long as possible. Such diversity of knowledge

could be maintained either by having employees with different speed of learning or by

turnover of employees. Nevertheless, it is behind the scope of this thesis to discuss the

model of mutual learning in more detail. On the other hand, any information coming

from outside the organisation can be called external or industry experience. It can also

be obtained through socialisation, observation, reading of different sources, e.g.

newspapers, magazines, newsletters, annual reports, etc. or applying certain methods,

e.g. conducting a survey, a market research.

At the second stage obtained information and knowledge has to be distributed,

so that whole organisation would benefit from it. However, here the problem appears

between the centre and receiver. Usually both of them either operate in different

contexts or are on different stand depending on the knowledge they have. The one

having new information might feel having more power in terms of possessed knowledge

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and decision power. By the decision power, possibility to decide, with whom new

information can be shared, is meant. So as a result, the information distribution problem

appears, concerning the censorship and delivery of the informational content. Who

should know about what? The centre might collect and transfer all the information to

the final receiver. But it is very rare that all the information is useful and all of it is

going to be read and used. For example, in real world all the reviews, reports, even long

e-mails are very rarely read from the beginning till the end. On the contrary, they are

usually ignored and left aside never to be read, even if they might contain some relevant

material. Therefore, usually summaries, brief letters, notes are preferred instead. They

are short, concise and taking less time for reading, thus understanding and

remembering. But then those summaries are prepared by the “centre” which can be held

responsible for the content of the provided information. Making a summary the centre is

censoring the news. As a result, the centre is deciding and including the most important

facts while keeping the rest of the information away. But here the problems arise – if

both the centre and the receiver are operating in different contexts, how can the centre

know what is necessary and important for the receiver. So, not having precise

knowledge about the ‘needs’ of the receiver, the centre might sort out the relevant facts

and the needed information might never reach the receiver. On the contrary, if the

receiver had the chance to get all the available information he would be able to sort out

what is needed in one or another situation. Probably the best way would be making all

the information available for all employees, by placing it in such form and place that it

could be accessed whenever needed. Just as Nonaka and Takeuchi (1995) propose, it is

beneficial for learning to have redundancy of information, as this helps to understand

and evaluate situations better. Thus provide organisations with self-control mechanism

– keep the organisation heading in a certain direction. As already mentioned, to avoid

the problem of information overload (which in turn can detract from effective

interpretation (Huber, 1991)) just make it available any time by storing at a certain

place, e.g. organisation’s intranet.

In addition to the discussion of information distribution, it matters if there is a

direct link between the centre and the receiver or there are several intermediaries in

between. In case of one or few intermediaries, information might get distorted. For

example, if information is distributed while socialising or retelling some facts and

stories, the final receiver might get quite a different message comparing with the initial

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one. It is mostly because individuals tend to perceive and interpret the same initial

messages differently, based on their own knowledge and experience.

Moreover, problems with information distribution affect the third stage of the

learning process – information interpretation. As mentioned before, the information

forwarded from the centre to the receiver might be read, read just partly or completely

left aside by the receiver without taking a look due to lack of time or other human

related problems. In all of the cases, created meaning from the available information

might be biased. In case information is read, it depends whether all available

information was submitted or it was sorted out before. Only if all information is

available or it is sorted out according to the precise needs of the receiver and used for

interpretation, the right meaning can be created, otherwise information interpretation

might turn to contain serious biases (depending on the context).

Furthermore, the chain effect goes further to the last stage of the learning

process – organisational memory. This concept refers to the information which is stored

throughout the years inside the organisation and can be used for the present decisions

(Walsh and Ungson, 1991; Morrison and Olfman, 1998). Even if individuals are the

ones acquiring information, there are many more organisational facilities which can

store this information. This means that previously gained knowledge can be embedded

in the organisational structure, culture, ecology as well as maintained in the heads of

employees and external archives. Whenever there is a need for decision making all these

“storage places” are reconsidered and past experiences can be applied for the presence.

(12 Manage, 2009) However, there comes a problem, if the previously gained

knowledge was biased due to triggers at the information distribution and interpretation

stages, the past experiences might lack objectivity. As a result, this might cause some

problems while willing to make appropriate decision. In addition to this, there were

quite many practices in the real world, where past practices applied to the new problems

did not work and led companies to failure. So there comes a question whether besides

learning ore just memorising things, an organisation is able to unlearn them. This is

especially important for the mechanistic type of organisation, where employees are used

to learning rules and new things and sticking to the old procedures which they get used

to over the years. According to Huber (1991), unlearning might involve different

practices, such as changing dominant cultures, encouraging continuous experimentation,

setting up a good information access, increase or decrease in the range of potential

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behaviours, or in the ultimate case, even discharge of employees (usually managers who

are incapable of change in terms of their management styles and practices.

3.1.2 Learner

A learner is an ‘agent’ who is participating in the learning process. According to

constructivism theories, learner is described as an active, natural builder of knowledge

(Tracey and Morrow, 2006). Learner can also be a source of information – just a person

having unique knowledge and experience. According to 4I model (Crossan et al., 1999),

there are three levels, which learning can take place. These levels are individual, group

and an organisation. However, they can also be perceived as participants in learning,

thus learners. An individual is the smallest unit in an organisation which can participate

in the learning process. Individuals are learning by reflecting and adequately responding

to past experiences by modifying their practices, actions, and images (Senge, 1999).

They are the most important since they constitute teams, groups and ultimately

organisations. Therefore, individual learning is a necessary condition for organisation to

learn, even though it is not sufficient (Argyris & Schön, 1978). Some researchers

assume that organisations are collections of individuals (Argyris & Schön, 1978), thus

logically organisational learning turns out to be accumulated individual experiences

(Levinthal & March, 1993). However, for organisational learning to appear these

individual experiences have to be embedded in the organisational memory and shared

within an organisation. Otherwise, learning is taking place only at the individual, but

not an organisational level.

Secondly, groups are collections of individuals, similarly as organisations.

Usually individuals are pooling and combining their own experiences together with the

knowledge and experiences from others. Groups can be called learners as people are

communicating, interacting and in this way sharing their understanding. Sometimes this

sharing can be focused, i.e. related to some certain kind of a matter, while in other cases

it can just remain at the levels of sharing of common understanding. This common

understanding is also called tacit knowledge, gained by experience. Thus by doing

things together people learn from each other and in this way share their knowledge.

Tacit knowledge can hardly be transformed into explicit, unless embedded in some

concepts (Nonaka & Takeuchi, 1995). So the only way sharing it is by working together

in groups. In addition, learning together in groups people are developing collective

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memory specific to this group. Because knowledge and information which they shared

during the process, also the way they have been working as well as the results they have

achieved remain at the memory of that particular group consisting of the same

combination of individuals. And each of these individuals is an agent (a part of) holding

this collective memory. And only they together are keeping this memory. So a group is

a learner, since it holds collective memory, which cannot be assigned to one individual

– member of the group.

Organisation comes as the ultimate level at which learning can take place

(Crossan & Berdrow, 2003). Usually it is a place, but it can hold memory and can

participate in learning process represented by individuals, learner’s role can also be

assigned to it. Organisation in a very simplistic way can be described as a collection of

individuals. However, these individuals are present in an organisation not only for the

sake of being, but they also interact under a certain set of assumptions. Their interaction

is predetermined by the organisational design, structure, culture, etc. As a result,

organisation is more likely to appear as a system. So in terms of learning it can be

summarised that learning at the organisational level means the sum of individual

experiences which are accumulated with the help of rules, procedures and practices

(Argyris & Schön, 1978). Despite that organisational learning is also about the

distribution of knowledge: how this accumulated knowledge can be spread throughout

the organisation.

3.1.3 Learning product

Thirdly, learning product is informational content involved in learning. All kinds of

information (experiences, knowledge, data, etc.) collected at the beginning of the

learning process are transformed into commonly shared messages and processes at the

end of the process. However, it depends what individuals are learning. Under the

organisational learning definition fall learning from own and others’ experiences and

working towards making some changes, while learning rules and procedures of the

company by a new employee might also be called learning. Even if both processes can

be called learning, but they do not provide the same learning product. The former

learning produces improved, changed, adjusted knowledge and procedures as a product,

while the latter kind of learning gives no precise learning products. Learning rules in the

simplistic manner means memorising factual information, but not producing any

changes, thus not giving any learning products.

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The main learning product – knowledge- can be divided into two types: tacit and

explicit knowledge. According to Nonaka and Takeuchi (1995), tacit is subjective

knowledge, which can be described as experience, created “here and now” in a specific

practical context and can be shared by socialisation and simultaneous practice creating

an analogue result. Explicit is objective knowledge, which can be described as holding

explicit rational knowledge on past event and objects. Usually it can be related to any

theories without requirement of any specific context. The best option when both kinds

of knowledge can be combined and spread to others. However, the only way of

spreading tacit knowledge is by socialisation and interaction, as it can be hardly

documented. But it is the opposite case with explicit knowledge which does not require

much of interaction as all theories and concepts are usually explicitly available.

Nevertheless, for organisations to learn the combination of both kinds of knowledge are

necessary. Tacit knowledge sometimes is considered as more valuable, since it is

assigned to individual experiences, thus is unique and hard to copy. The only best way

is sharing or “teaching” others by personal example.

3.2. Choice of organisational learning elements

After examining organisational learning based on the generic schema, it is quite obvious

that all the concepts cannot be incorporated in further analysis. Therefore, three main

entities are chosen for further analysis. They are an individual, organisation and the

environment. This choice is based on the model used by Fang et al. (2009), who

perceived organisational learning similarly to the idea of this thesis – as “a process by

which individuals within an organisation interact to exchange and jointly create

knowledge”(p.13).

Individuals are the ones who are said to be learning in the same way as they can

think, reason and hold opinions. Organisational learning occurs when individual

members based on their experience can indicate a problem and inquire into it on behalf

of the organisation. (Argyris & Schön, 1996). So it turns out that individuals are

learning first themselves and then constituting their knowledge into the organisation.

Moreover, besides individual learning as a required attribute, organisational

learning should be thought of in terms of organisations as environment for individual

thinking and action (Argyris & Schön, 1996):

19

“Organisations have been conceived as behavioural settings for human

interaction, fields for the exercise of power, systems of institutionalised incentives

that govern individual behaviour, or socio-cultural contexts in which individuals

engage in symbolic interaction”. (Argyris & Schön, 1996)

Thus, organisation is of great importance as without it the concept of organisational

learning would lose its sense.

Furthermore, environment or the external reality in which an organisation exists

also matters. As organisation provides context for individual action, similarly

environment provides context for organisational action. Since earlier before,

organisational learning was called as a competitive advantage of a firm, the

environment is the factor which can judge this – whether organisation is capable of

learning or nor. In addition, environment has an ability to place an organisation among

others and allow to understand its qualities and skills better.

What is more, before moving further, a more explicit distinction between single-

loop and double-loop learning needs to be made. Single-loop learning can be simply

understood as a quick fix – detection and correction of an error – by a change of action

strategies or the assumptions behind these strategies (Argyris & Schön, 1978, 1996).

However, no further big changes are done in the organisation. Double-loop learning is

concerned about the change in values related to theories-in-use (Argyris & Schön,

1996), thus requires people to reflect on the way they think (Argyris, 1991). Sometimes

both types of learning can take place, though it is more often that single-loop learning

present. Besides that, not necessarily single-loop learning is a prerequisite for the

double-loop learning – double-loop learning alone can also take place. Just as it can be

the case with single-loop learning: not always the single-loop learning can (and need to)

be followed by the double-loop learning. As mentioned before, here the main focus is

on double-loop learning, but also without ignorance of single-loop.

In addition to that, single-loop and double-loop learning can be related to the

focus on the short-term and long-term respectively. Without major changes and

adjustments of organisational activities, they might lead to ill operations at the

company, which ultimately leads to the corporate failure. So, even a successful

organisation in a long run might face hard times. Therefore, it is important to be

cautious about the focus of the company and its intentions. The problem with learning,

called myopia of learning, can be appear when an organisation sacrifices long run for

the small success in the short run. Such trade-off is also called temporal myopia.

20

(Levinthal & March, 1993) However, the concept of myopia of learning, being broad

and required separate close examination, is out of scope of the analysis of this thesis. It

might be brought up later in, if needed to explain or support some arguments.

4. Organisational environment Each organisation has its own unique features. More precisely, these characteristics are

defining the organisations in the way they appear for the people working there, i.e.

define the environment in which employees are operating (Paajanen et al., 2004).

Four groups of organisational attributes being the most common for any organisation –

management, human resource, organisational structure and organisational culture – are

distinguished. These four groups cover and at the same time summarise all more

detailed organisational features. Under each group conditions, facilitating and inhibiting

learning, are described and can be found in the following paragraphs.

4.1 Management

Management is related with decision making, coordination and control of the activities

at the lower levels of a company. This position requires certain individual skills and

capabilities, understanding and personal attitudes towards the organisation (with all the

related attributes). (Slatter & Lovett, 1999) All these characteristics are very important

in daily life, though sometimes might not be used resulting in the problematic

management. For example, it is crucial to have the right knowledge on a particular issue

or situation in order to make the right decision. So it means that all the necessary

information has to be collected before. As learning in a way is a process of knowledge

creation based on past experiences and available information, it is an important

prerequisite for the decision making. It is quite natural that learning is taking place

before the decision making and building the necessary basis for further actions. (De

Geus, 1999)

4.1.1 Inhibiting characteristics

Firstly, hierarchy (division of power very common and also typically very complex in

bureaucracies (Fincham & Rhodes, 2005)) is a system of individuals ranked one above

another in a company (Dictionary, 2009): with the lowest levels doing the most of the

work and the top management taking most of the responsibility for the decisions made

21

regarding the organisation. Top-down division of labour not only shows the difference

in seriousness of responsibilities and decisions, but also depicts one-way

communication within a company. Since the lowest levels are mostly engaged in the

operations inside the company, they know most about the performance of the

organisation. Thus communication should be taking place both ways top-down and

bottom-up; however, the upward communication is usually very rare, especially in hard

times for a company (Argyris, 1990). Nevertheless, upward communication can take

place only in case of exception. Fayol in his administrative theory (Babson College

Faculty, 2009) explains that management is only disturbed in case of exceptional

situations, which do not go along together with the predetermined ones. Since

employees in mechanistic kinds of organisation are used to applying learnt procedures

and working according to them, they are contacting managers only in case of something

exceptional, unusual, uncommon, so that the new procedures were determined to deal

with that particular case and transferred down to the company.

Secondly, close and tight management leaves little space for individual

employee initiatives. Managers controlling their every step, on one hand help to ensure

that employees are following their duties and performing in the way they are expected,

but on the other hand, they are too tied to fulfilment of duties than questioning and

examination of things themselves.

Thirdly, the tried and proven ways of doing things dominate organisational life

(Argyris, 1990). In other words, organisations, especially successful ones, tend to

remember and repeat the same routines; follow the same procedures, which brought

them into success. However, times are changing, so are the environment and conditions,

thus not necessarily previously successful practices can bring success again. Blind

engagement into such repetitive behaviour without additional attention to related issues

puts an organisation into organisational inertia. (Slatter & Lovett, 1999) At that time

usually no new ideas are expected, nor initiated – why to change anything if everything

is working “perfectly”? As a result, new ideas get killed by organisational inertia even

before they are born. Such inert behaviour happens to be also the fault of management.

4.1.2 Enhancing characteristics

Management, which is sensitive to both the external and internal environment of an

organisation, is the one to make company prosperous in the long run (De Geus, 1999;

Argyris, 1990). External sensitivity means attention and responsiveness to the world in

22

which they live while internal is more about the close cooperation with the rest of the

company. Collaborative style of management encourages all way communication

throughout the company and in some cases more interaction among employees. All way

communication means continuous dialogue with the lower levels of organisation,

constant discussions of issues an organisation is facing, reflection of the past decisions

and implemented changes as well as feedback provision on new ideas and previously

taken actions. Of course, there is a certain degree of communication going on among

employees, but it is very important for the benefit of the company that all the

discussions would reach the management. Thus all way communication and idea

sharing across organisation, encouraged by the collaborative management, is a good

way to enhance learning possibilities.

Moreover, management must be capable of admitting their own mistakes and

tolerating mistakes made by others. Reflecting on own mistakes and learning from them

is often treated as the best way to gain new perspectives and knowledge on the same

things (Plompen, 2005). Otherwise, organisational activities might become

counterproductive and non-discussable (Argyris, 1990). Managers who are not afraid of

trial and failure are open for learning and, as a result, try to maintain the organisational

environment full of learning opportunities.

4.2 Human resource

Employees are the most valuable resource for a company. Organisations can hardly be

imagined without people. Individuals in an organisation are doing all thinking, decision

making and make most of the work happen. All this has to do with human resource

issues. Good care has to be taken of individuals to ensure their ability to continue

working for a company. In addition, learning possibilities is not an exception – people

need to be given opportunities to learn and thus be able to constitute their new

knowledge for the benefit of organisation (organisational learning) and, last but not the

least, people are the ones learning at the first place. But for an organisation to gain that

individual knowledge, there have to be certain conditions created inside it.


Ignorance and complacency are the biggest problems which are covering many smaller

ones. They are big because organisations start limiting themselves. If the internal

23

environment is not encouraging openness and discussions, problems are sinking down

inside an organisation until there is no way out of all of them. The increasing amount of

hidden and not solved problems is the most harmful for the organisation when it reaches

the critical – no way out – point. When employees are hiding the problems, no one is

analysing them and they remain unsolved. Also there are no chances for others to learn

from the mistakes of others or just to compare and see if there is anyone else having the

same problem. Absolutely no learning can take place if problems are kept unsolved and,

even worse, are hidden.

However, this is closely related with the reward-punishment theory. People

engage themselves into behaviours which they are rewarded for and try to avoid doing

things, which they might be punished for. As a result, problems which they might be

held responsible for most likely will be kept in secret, thus no chances to learn from

them will appear. Other employees in the future might encounter the same troubles, so

they will just continue repeating them in the same way, until there will be some

practices showed on how to deal with them. So the organisation will remain at the same

level as before the occurrence of the same problem last time, just summing up all the

newly appearing problems.

If neither the rules nor management nor organisational environment are

encouraging openness, discussions and analysis of all the situations, any learning can

hardly take place in there. For example, denial of any existent problems, blame put on

others in case any of the problems are identified. Similar to the denial is problem

externalisation. It can take place at the individual level, when one employee might put

the blame on his colleagues or on the actions of other departments as well as department

itself or ultimately an organisation can forward their own fault onto others working with

the same issues (blame put on others or the system for poor decisions (Argyris, 1990)).

This is closely related with the avoidance to accept responsibility. There can be two

kinds of responsibility – individual and on behalf of the organisation. The former one

making employees feeling responsible for their duties while the latter making

employees feeling individually responsible for the welfare of the organisation in

general. The sense and acceptance of responsibility is quite related to the governance of

a company. It depends whether employees are encouraged to obey or rather they are

expected to take their own initiatives on behalf of a company for its own sake.

Managerial management style is exactly the one encouraging obedience, while

24

leadership-based style rely more on inspirational nature, making employees think and

work for the benefit of the whole organisation.

Moreover, related to the above mentioned denial, problem externalisation and

the acceptance of responsibility, there is a problem of impression management. People

are highly aware about the impression they tend to make in the eyes of others. Instead of

behaving in the way they would be able to perform their best, they are trying to find out

how they are expected to appear in the eyes of a manager – do what a manager expects

to be done, report what the manager is pleased to hear about, etc. Such impression

management behaviour can be influenced by a very strict organisational culture, where,

for example, disclosure of mistakes or some rather big failures would be loss of a job.

Employees fearing such result and not willing to take responsibility of their actions,

preferably choose to create a good picture of them by hiding everything.

As a result, all the characteristics are very harmful indeed for the organisational

learning. The rigidity of behaviour, which is encouraged by all of them, makes

employees stuck in the positions which might be suitable for them for a certain period,

though lead to quite big problems in the longer term. There have been quite a few

examples of companies which had their organisational power associated with past

successes and unfortunately ended up as quite big bankruptcy disasters (Levinthal &

March, 1993). Especially in the financial industry: Barings bank, Bradford & Bingley,

Northern Rock, etc.


Professional skills are of interest while talking about the organisational learning. Once

people develop their professional skills, they stop questioning things and mostly

concentrate on the detection and correction of errors, thus engage themselves in single-

loop learning. A very good example of this is presented by Argyris (1991), when a

manager tries to discuss the failure of the project together with other employees.

Besides the problems of miscommunication, ignorance, denial and problem

externalisation, there was no individual thinking taking place on the side of the

professionals. They were responding to the comments of the manager, but in the manner

which they saw was the right one to protect their image, avoid any responsibility for the

results of their previous decisions. Behaviour of the professionals involved many of the

characteristics which are described as the learning inhibiting conditions. So it could be

stated that the professionals were not able to learn at all. (Argyris, 1991)

25

However, it depends which kind of organisational learning is considered. They

faced the problem and they solved it as they saw it should have been solved. So this

resembles the single-loop learning, when error correction process does not involve any

additional changes of the related assumptions, rules and conditions. But it turned out

that the solution was not the best and still caused some additional problems. So the

manager was encouraging the discussion which would make professionals to reflect on

their previous ideas and action as well as would help to change their way of thinking

and probably would make them adjust certain organisational assumptions or settings.

Nevertheless, all the attempts were in vain. Professionals did not understand. To make

the long story short, professionals and their skills are considered as suitable only for

single-loop learning (Argyris, 1991). Professional skills make professionals think in the

box limited by their education and obtained knowledge barriers. Thus at the same time

make it hard for them to step out of that box and look at the same problems for another

angle.

To conclude, professional skills could be called as the inhibiting conditions for

the double-loop learning where own thinking and questioning of the issues is important,

though could be also called as the enhancing ones, helping the professionals to detect

and correct errors.

4.3 Organisational structure

Organisation is a system of individuals who are working within a given context. This

context is created by a set of certain decision rules (Fincham & Rhodes, 2005). The way

organisations are structured is of great influence for the organisational learning. It is so

mainly because the structure tells about the possibilities for information flow, which is

already first criteria for learning to appear.


Bureaucratic structure makes specific organisational functions controllable and easily

predictable. High levels of formalisation, specialisation, centralisation and

standardisation of work processes makes bureaucratic structure beneficial while striving

for efficiency in routine work. (Nonaka & Takeuchi, 1995) In a way this structure is

very helpful to control large companies which are working in stable environments.

However, in case unexpected rapid changes occur in the environment, bureaucratic

26

organisations might face trouble. The main problem with the bureaucracy is that it

teaches individuals to act according detailed rules and procedures without much

individual thinking on their part. This prevents individual initiatives at work and thus

hinders employees’ motivation (Nonaka & Takeuchi, 1995).

Moreover, in addition to bureaucracy all the organisational structures which

encourage socialisation and rapid rule-learning reduce the possibilities for individuals

“to learn from individual deviance” (Levinthal & March, 1993). In socialisation there

are processes going on simultaneously: the code of the existent knowledge within an

organisation is learning from individual experiences and beliefs and “individuals are

learning the code” (Levinthal & March, 1993). In case of this mutual learning, quite

often individual gets ahead by learning the code comparing to the code which is

supposed to learn from individuals deviating in a good way from the code. As soon as

the code is completely learnt, deviations from it appear very rarely. (Levinthal & March,

1993) Remembering punishment-reward theory, individuals tend to learn and do what

they are rewarded for. So in bureaucracies which are created for the benefit of high

predictability, stability and possibility of easy control individuals are expected to learn

all the codes and behave accordingly and are rewarded for that. One might say that

doing so is unavoidable in a bureaucratic organisation, but it is possible to prolong this

process of individual learning for the benefit of an organisation by slowing down the

socialisation. (Levinthal & March, 1993)

Furthermore, departmentalisation is a division of labour into different

organisational units (departments). Each of them is assigned certain duties to carry.

Each unit and individual is assigned detailed job description with the duties they are

supposed to carry. In addition to this, detailed rules on how the work should be done are

also distributed. So in a simplistic way, each employee is put in a certain box within

which he or she is working. Interaction among different departments is limited as well

as information flow is restricted. As a result, by restricting the flow of information

departmentalisation restricts the knowledge of opportunities and activities. (Levinthal &

March, 1993) Thus, there are very few if any learning possibilities left in such highly

departmentalised organisation.


Flat structure of organisation instead of vertical, specifically subdivided structure is

helpful for the increased interaction among employees. Employees have more freedom

27

to move around the organisation and interact with their colleagues. Sometimes this

movement can be intentional (reassignment of employees organised by the

management) or it can be unofficial (simple conversations with other employees).

Ability to move freely around the organisation increases levels of socialisation –

knowledge and experience sharing. However, it is important to remain cautious about

the intensity of socialisation as not necessarily it can have a completely positive effect.

As mentioned before, it can have a learning inhibiting effect by making employees learn

the organisational code faster and thus get used to the way work is done in that

particular organisation.

What is more, organisations with horizontal structure usually have a loose

division of work. Job positions are not likely to have strict definitions and descriptions

of duties. Thus it is easier to form and re-form the working groups of different

employees. Work in a group or teamwork is the best way of learning from each other

and bringing some addition value to the final outcome. By working in teams employees

are pooling their knowledge together and collectively striving for reaching the

predetermined goal. So this group work is beneficial both for individuals and for the

organisation. While individuals are learning themselves from each other, organisations

gain extra from this exchanged knowledge.

4.4 Organisational culture

Organisational culture is closely related to the organisational structure (Argyris, 1990).

In fact, the way organisations are structured highly depends on the culture at work. If

the culture encourages cooperation, tolerance, curiosity, etc. such an organisation will

be horizontally structured. However, if the culture tends to be the contrary – restrictive,

individualistic, precise – there is high likelihood of very formalised structure. Although

these are the very extremes of relationship between culture and structure, there are

several conditions worth examining on their influence for the organisations and

learning.


Routinisation is what makes all the things and procedures inside an organisation

familiar, stable, unquestionable. When new to a company, an employee sees everything

new and fascinating. He or she starts learning as soon as possible. However, this

28

learning has nothing to do with the organisational learning. An individual starts with

learning the code of the workplace, the rules and requirements he or she is supposed to

follow when working and many other formal procedures. Socialisation and observation

of others working are good ways for this kind of learning. Also individual efforts are

much more necessary. With the time, an individual gets used to all the procedures he or

she is supposed to follow and the requirements to be fulfilled or the actions he or she is

supposed to perform. All the work becomes a routine for that employee. With the start

of the work day till the end he or she knows what he or she will be doing. Performing

all the duties as a machine an employee is not thinking anymore what and how

something should be done. There is no individual thinking taking part on the

employee’s behalf, just automation. Only the clockwork remains with the clock in the

morning announcing the start of the workday and its end in the afternoon. The time in

between these hours becomes as if officially to be performed duty which an employee is

rewarded for.

Moreover, routinisation is a useful tool for “converting collective experience

into improved average performance” (Levinthal & March, 1993). It helps to “collect”

individual experiences transfer them to newer members of organisation. Certainly some

rules, procedures and practices are used for this matter. (Levinthal & March, 1993)

However, as mentioned before, all of them just make the work routinised.

Furthermore, defensive routines are “actions or policies that prevent individuals

or organisations from experiencing embarrassment or threat” (Argyris, 1990; Argyris,

2004). The main embarrassment and threat comes from the results of some inadequate

performance or negative outcomes of certain action. More particularly, mistakes are the

most avoidable matter as they might show the lack of competence of an employee,

inability to carry all the duties properly. Thus, instead of detecting and correcting these

errors, just as the organisational learning requires, employees tend to hide them (the

most embarrassing) due to few fundamental rules (Argyris, 1990):

1. to bypass the errors and act as if that were not being done;

2. to make the bypass undiscussable;,

3. to make its undiscussability undiscussable.

In this way, even if any errors exist, they are covered with many layers and left hidden

in the organisational past.

However, hiding of mistakes can also be influenced by the corporate culture as

well as by management, not only by the human nature to avoid embarrassment.

29

Remembering punishment reward system, people avoid uncovering everything what

they might be punished for. If the corporate culture is not tolerant to mistakes, then they

will remain unclarified. As a result, other employees might encounter the same mistakes

later on, but since they were not brought up and discussed previously, there would be no

knowledge on how to avoid them before they were coming. So from an organisational

perspective, unacceptance of errors is for large organisational as well as individual

disadvantage.

Furthermore, most of the organisations are not very fond of feedback or

criticism. Everyone wants to look nice in the eyes of others. Again people might be

avoiding showing their not so good performance in order to avoid criticism from others.

As a result, neither individuals, nor an organisation cannot hear other opinions on the

same subject and learn more about the things for the future.

As a result, people and their behaviour are highly influenced by the

organisational culture. Even if there is something in their best interest, they still do not

behave reasonably (Argyris, 1990). They tend to stick to the expectations from the

organisation (expressed in the form of rules, procedures and requirements) as well as the

things, which they are rewarded or punished for. So they are rational in terms of their

own benefit to stay in a safe position, but not in terms of facing all the things and taking

the consequences and learning from them.


On the contrary to the inhibiting characteristics, tolerance of mistakes without any

punishment probably is the best condition for learning. It is natural for people to make

mistakes; however, no one wants to be held responsible for them. Unfortunately, even if

hidden mistakes might depict a nice picture of an organisation, in the long run these

hidden mistakes might even lead to the corporate turn down. With the time, these

mistakes transform into deeply rooted, hardly solvable problems, which lead to the

worst in some cases. If the organisational culture was telling that all problems and errors

must be brought up for discussion, the real picture of organisational performance would

be seen. If any problems appear, it means that there are some issues which have to be

changed, that they would be solved, not avoided and left aside. Only if the problems are

dealt with, they can already be called as learned lessons.

A short example of hidden mistakes could be Barings bank. This British bank

had one chief securities trader, Nick Leeson, on the Asian market. After a short time, he

30

was appointed to this position, trading errors starting coming up. Instead of letting the

headquarters know about them, he used to write them in a special secret account. During

the time, all small errors accumulated into quite huge sums of money, which were

considered as losses. Since managers still were neither questioning nor checking how

his trading practices were going in Asia, he kept on hiding mistakes and asking for more

and more funds for investments. To make the story short, the outcome of this situation

was painful – bank went bankrupt and N. Leeson got into jail for fraudulent behaviour.

Despite the outcomes, it was management and corporate culture which encouraged this

trader to behave as he did. If manager were more conscious or more attentive to what

was going on, the worst outcomes would have been avoided. (Briggs, 2009)

To conclude, four groups of main organisational attributes have been discussed

– management, human resource, organisational structure and organisational culture.

Each of them turns to be equally important, however, highly interrelated and even

dependent on one another. For example, tolerance towards mistakes is pursued by

managers, though tolerant organisational culture is what managers are pursuing.

Another example, organisational structure determines the role of employees – the ways

managers are behaving as well as the rest of the employees are treated.

4.5 Organisational characteristics and the learning process

When organisational characteristics enhancing and inhibiting learning are already listed,

it is interesting to see how they affect the learning process. Naturally, the inhibiting

characteristics are disturbing learning process while enhancing ones are supposed to

facilitate it all the way through. Therefore, only the inhibiting characteristics are taken

into consideration and are analysed further on, assuming that the before mentioned

organisational characteristics, which are enhancing learning, are not affecting the

learning process negatively. In Table 1 the relationship between learning process and

learning inhibiting organisational characteristics can be seen. The effect for

organisational learning process is determined on the analysis already done, concerning

organisational characteristics inhibiting learning. Interestingly enough learning process

seems to be mostly disturbed at the information distribution and information

interpretation stages. Cultural factors are the most influential for the distribution while

both, human resource related and structural, affect information interpretation stages.

Therefore, when identifying mechanisms for learning, attention has to be paid to these

insights.

31

Table 1. An overview of the relationship between learning process and organisational characteristics, which are inhibiting learning. Compiled by the author

on the basis of analysis already done. Organisational characteristics

Knowledge acquisition

Information distribution

Information interpretation

Organisational memory

MANAGEMENT

Hierarchy Multiple levels of

organisation can cause message delay

Close and tight management

Influence in meaning creation

Organisational inertia

Preserving and following certain practices which no longer valid

HR

Ignorance and complacency

Lack of information about the problems

Denial Misinterpretation

of issues, often giving them false meaning

Impression management

Suppress information flow

Mislead the interpretation of actual situation

Rigidity of behaviour

Ignorance of new information

STRUCTURE

Bureaucracy Reflection and

insightful thinking is not very likely to be involved

Socialisation and rule learning

Understanding shaped by rules

Departmentalisation Limited information flow

CULTURE

Routinisation and clockwork

People start ignoring things

Employees can engage in the common practices too much and thus see no possible improvements

Defensive routines Restrict the flow

of embarrassing or threatening information

Hiding mistakes Preserving

certain information from the public eye

Avoidance of feedback and critique

Distorting the full information flow

32

5. Individual and environment

Four most important groups of organisational attributes are discussed further on. Having

examined the organizational characteristics and their influence for the learning process

it is interesting to see what effect they have for organizational performance. Therefore,

four organizational issues are considered, namely efficiency and effectiveness,

compliance and commitment. The former two are highly related with organizational

operational performance in relationship with the external environment while the latter

two are more concerned about employees, their behaviour and relationship within a

company. Despite of this, in general, everything is about people: commitment and

compliance come first from employees and then on behalf of an organization they are

striving for efficiency. However, whether performance is efficient or effective depends

on the management and its set goals. In the following part each concept is presented

more explicitly.

5.1 Efficiency

Efficiency is defined as the relationship between the values of means and ends (Library

of Economics and Liberty, 2008). Usually this relationship is projected towards

achieving greater ends with smaller means. Different resources can be considered as

means, such as financial, human, technology, while ends are usually the desired result,

an outcome to be achieved. In terms of learning, mostly human resources (people) are

interesting – individual’s interaction with other employees and his or her performance

of responsibilities. Besides that efficiency can also be considered in terms of the

performance – how well, how quickly it was done and what quality of the results was

accomplished.

Every business feels the necessity for constantly increasing efficiency. Because

by increasing it, it is possible to improve operations and obtain higher profits. This

might be the result of fewer resources required to produce the same amount of output or

service the same number of clients. However, some of the forces which at the present

moment might be increasing efficiency in the longer term might decrease it. (Argyris,

1999) For example, one of the management’s concerns is to increase efficiency in an

organization often by increasing output and implementing efficient working routines

(Willner, 2000). However, once the efficient routines are implemented or the desired

33

amount of output obtained, managers tend to become slightly relaxed. They tend to rely

on the well-going procedures and expect successful continuation of operations in this

way. In other words, they become complacent. If the things used to go well before, they

are expected to continue in the same manner. Nevertheless, external environment, each

business is operating in, is constantly changing, thus it is crucial to be aware of these

changes and adjust to them respectively. This especially applies to the management who

needs to remain flexible in order to maintain the desired levels of efficiency in the

longer term. Therefore, the attention has to be paid to weakening all the forces which

have a tendency to decrease efficiency (Argyris, 1999).

However, poor management is recognised as one of the operational factors

causing large inefficiencies (Slatter & Lovett, 1999). So here it is important to pay

attention to managerial characteristics – individual capabilities, personal biases and

management styles. All these characteristics combined together determine the quality of

decision making in an organization. (Slatter & Lovett, 1999) Efficiency, as mentioned

before, is one of the main operational concerns thus is one of the most important

decisions to be made. If management is lacking any of the individual skills or practice

non-adequate management styles, then the quality of decisions might suffer and as a

result might affect the organization.

Other organisational characteristics together with managerial ones also affect the

quality of decisions. Organisational structure and culture are considered as other

influential organisational features. (Slatter & Lovett, 1999) Both of the issues are highly

interrelated with management. For instance, if an organization is structured

hierarchically, so naturally there is tight top-down management, thus there is only one

way communication between levels of hierarchy. Such setting in an organization is

useful for being able to control employees and increase efficiency in the short term.

Nevertheless, long term efficiency might suffer due to lack of information and thus poor

quality of decisions made by management. Lack of information appears because of one

way communication as well as long paths, created by hierarchy, for information to

travel. When the right information cannot reach management or people whom this

information is meant to be for, the right decisions might not be made. The quality of

decisions might suffer as well. In addition, as described in the previous section, if the

information flow is not smooth, then the learning process is already disturbed after the

first stage – the right people are prevented from acquiring the right knowledge.

34

Thus, it seems that efficiency does not play a significant role in organizational

learning. On the contrary, being concerned about the values of inputs and outputs,

management introduces all rules and procedures for doing things better, quicker, take up

tight control for making sure that these rules and procedures are learnt and followed, so

there is no space left for neither individual thinking nor initiative inside the

organization. What is needed and expected is the operation like machine. The only

factor which can loosen the control and give more space for employees is organizational

culture. It can shape management towards a looser and less efficient system, thus with

some opportunities for learning available.

5.2 Effectiveness Effectiveness is a “fundamental objective of human and organisational performance”

(Argyris, 2004). Naturally, every employee working in an organization engages himself

in a relationship with an organization. However, what their relationship is like can be

determined by different factors and values. For example, for human relationship within

an organization to be effective, three basic requirements have to be fulfilled, such as

“getting the job done, being rational and logical, and communicating clearly with the

rest of organization” (Argyris, 1999). It is admitted that as long as individual keeps own

emotions to the minimum level, performance effectiveness is at the highest level, but

when individual behaviour starts to become more emotional, effectiveness starts

decreasing. (Argyris, 1999) So it turns out that rational behaviour corresponds to

effectiveness.

Assuming that individuals are rational, their behaviour can be influenced by the

punishment-reward system. According to Argyris (1999), the best work performance

tends to be “under carefully defined direction, authority and control, governed by

appropriate rewards and penalties”. So firstly, there has to be clearly defined job

responsibilities and requirements to be fulfilled, i.e. work division defined by the

departmentalization. Then comes the controlling body in the form of management. So

management is the one to make sure that individual employees are behaving in the

pursuit of organisational objectives, afterwards evaluate and reward this behaviour on

the basis of punishment–reward system. Naturally, the expected and compliant

performance is rewarded by positive rewards while the contrary behaviour brings

punishment.

35

Moreover, it turns out that similarly as efficiency, effectiveness is mainly a

question of managerial concern (Fincham & Rhodes, 2005). However, efficiency should

be considered in terms of action consistency with initial intention and its persistence

over the time without additional harm to the performance of the rest of the organization

(Argyris, 2004) while effectiveness comes as a result of the flexible and adaptive

management (Slatter & Lovett, 1999). It is important that management does the right

job – manages, not just administers things in an organisation. Assuming that an

organisation already possesses a certain level of effectiveness given any point of time,

the right management can increase this level or reduce it (Argyris, 1999). But then what

is the right management? Since things inside and outside the company are constantly

changing, management needs to pay attention to all the movements in the environment

and react accordingly. Unless they agree with this notion and perform accordingly,

business might face a decline. And this will happen mainly because of lack of attention

and flexibility.

Similarly to the management, just at the higher level of organisation, there is

board of directors. Their duties carry even bigger responsibilities – planning, resource

allocation and control decisions. If the duties are fulfilled poorly and it is hard to align

objectives across the business, this results in board ineffectiveness. (Slatter & Lovett,

1999)

Organisational structure also has an impact for the level of effectiveness. For

example, previously mentioned bureaucracy is recognised as an ineffective form of an

organisation. With all the rules, regulations, tight control and requirement for

compliance, bureaucracy creates a bureaucratic personality which is supposed to behave

rationally, without any surprises, just as one expects it. However, according to Merton’s

classic study, a bureaucratic personality is a threat for human freedom and for the

organisational effectiveness (Fincham & Rhodes, 2005). Effectiveness suffers due to

organisation’s inflexibility which is built in by a bureaucratic structure. As a result,

organisational goals might remain unachieved due to organisational inability adjust

itself according to changes in the environment.

In sum both efficiency and effectiveness are of high concern to management. However,

effectiveness is more dependent on the management performance while efficiency is

more related to the results brought by the management performance. In addition, both

concepts are closely related to the environment, telling that management needs to be

36

attentive and responsive to its changes. Ignorance of environment might lead an

organisation to failure of operational goals.

5.3 Compliance

Compliance means acting according to discipline, which people are introduced to. It is

assumed that if once individuals are introduced to new concepts in an organisation, they

start learning them and developing necessary skills to produce these concepts. If

everything goes in this way, then, as a result, individuals act accordingly to the learnt

concepts and create expected results. (Argyris, 1999) However, it should be mentioned

that it is willing compliance, meaning that individuals are justly rewarded for

performing in the way they are required or expected to (Argyris, 1999).

Hierarchical organisations, where power and authority belongs to a few at the

top, have a tendency to demand compliance from the majority of the rest of employees.

Management and directors at the top of the organisation are responsible for the

decision-making while the rest of the organisation become dependent on these

decisions. (Senge, 1999) As a result, such organisations build dependency on

management and decision-making, but more interdependency between departments and

local units. In this way, they encourage top-down one-way communication, which was

earlier indicated as a limiting factor.

Moreover, bureaucracy tends to require high levels of compliance too (Fincham

& Rhodes, 2005). Once people get into a bureaucratic organisation, they are introduced

to all the rules and procedures there. The only way to stay in this kind of organisation is

to obey all the procedures and start behaving as required. When individuals start

following all “bureaucratic patterns, they start behaving ritualistic, complying with

formal rules no matter how inappropriate those might be in given circumstances”

(Fincham & Rhodes, 2005, p. 451). As a reward, for the obedient behaviour, employees

get promises of successful long-term career opportunities in this organisation. The

contrary behaviour is threatened by the cancellation of rewards. (Fincham & Rhodes,

2005) However, the worst is that employees tend to follow and obey only the rules and

start ignoring the customers they are serving. The bureaucratic system makes them pay

attention only to what is required by rewarding them adequately. The arrogant

behaviour which becomes developed under such system makes harm to the clients of

37

such company and then make them look for other alternatives of the same service.

(Simon & March, 1967)

One more thing related to compliance is people individual perception about

themselves. When they are continuously being asked for assistance or just fulfilment of

some tasks, they have a tendency not to refuse. As it is cited by Argyris (1999), Bem

(1972) claims that individuals tend to observe their behaviour and tend to see

themselves as cooperative individuals when they agree to help others even with minor

tasks. In addition, once they helped, it is very likely that they will not refuse helping

when asked another time, even for a greater task. So such practices tend to increase and

even encourage compliance. (Argyris, 1999)

5.4 Commitment

The concept of commitment is quite related to compliance, though on the opposite

terms due to different underlying assumptions. Commitment became quite popular term

recently, assuming that committed workforce is more productive and also because it

sounds better from the manager’s perspective. Sadly, most of the managers want

compliance from the employees to the procedures which they have designed and which

employees are expected to follow. If there is only top-down communication present at

the organisation and all decisions and processes are management driven, then there is no

requirement for commitment. As just said before, compliance is just enough. (Senge,

1999)

However, “committed workforce is a key factor to success” (Slatter & Lovett,

1999). So it is important for a company to make sure that it has employees who work

not just for pay, but who also feel responsible for what is happening inside or for the

firm. However, people commitment can only be brought in, if they feel that it is

something meaningful and worth their individual effort (Plompen, 2005). So it is

important that the company is able to show and guarantee that it is worthy devotion of

employees’ individual efforts. According to Plompen (2005), there are three main ways

how an organization can bring in to show and to guarantee a meaningful picture of

itself. All is about the environment organization is operating in, individuals and

relations between them. In order to expect initiatives, creativity as a result of

commitment, an organization needs to introduce employees to where and on what

38

business is operating, bring in trust upon people, so that tight control was avoided and

more creativity as well as individual initiatives were encouraged.

What is more, unfortunately, it is not very likely to have high commitment from

all the employees right at once. In a way it depends on when employees join the

organization, how many of them, in what state of being the company is at that moment.

Since there are many different influential factors, thus initially commitment is limited to

a small group of people (Senge, 1999). However, by bringing others’ interest or asking

for their certain knowledge or expertise or just including them in a formal team, the less

committed employees can possibly join the group of more committed employees and

contribute their efforts. (Senge, 1999) So it means that everything needs to be brought

by a good will. Only when employees feel like a real part of an organization and

freedom for their own performance and actions within the preset organizational

framework, they are able to show their commitment.

Last, but not the least, commitment is about individual freedom. Any work has

an impact on individual’s life. So also the commitment they show for the company

should be evaluated from a different point – personal perspective. Levels of efficiency

and effectiveness are not the criteria to look at when evaluating the individual

performance. For example, employee might be highly committed to the company, and

thus put all the available energy and ideas into the work. However, there are other issues

such as family, personal life, community which are necessary for a full-fledged life.

Therefore, extremely high commitment to the organisation cannot be required nor

expected from any individual person. On the contrary, individual should be encouraged

by the organizational culture to have own private life. Then by possessing balance he or

she can easily feel the level of commitment he or she would be able to give for the

company. (Senge, 1999)

So in total what matters for the commitment to appear from the employee side is

the space for their own freedom to exist and self-expose in the performance. Unless it is

limited, employees are able to come up with their own initiatives and to decide upon

how much they would like to be committed to the company. Unfortunately, neither

hierarchies nor bureaucracies with close management are able to give this freedom,

therefore are less likely to have highly committed employees.

To conclude, the first two concepts – efficiency and effectiveness – mainly describe the

way management operates and take into consideration other features which enable

39

management to make all the procedures more efficient. However, the last two –

compliance and commitment – are closer related to how people behave and what is their

relationship with the organisation. It is seen that most of the organisational

characteristics, which are conditional for learning are also affecting these four

organisational issues. Especially the learning inhibiting features are of high importance,

though in most cases they have only negative effect. So it turns out that previously

discovered organisational characteristics matter not only for organisational learning, but

also already affect other issues of high organisational concern. Therefore, it is

interesting to see what kind of organisation has most of the listed organisational

features.

6. Mechanistic organisation

Mechanistic organisation is one of the organisational archetypes – the opposite for the

organic organisation. The best term to describe this kind of organisation is bureaucracy,

which puts an emphasis on “precision, clarity, regularity, reliability, division of tasks,

hierarchical supervision and detailed rules and regulations” (Morgan, 2006).

Terms mechanistic organisation and bureaucracy are usually used

interchangeably. This kind of organisation can easily be described performing job of a

machine. Precision is highly demanded in this job. So there are certain requirements and

procedures which must be followed in order to produce what is expected. Therefore, the

first and most important requirement for employees is to learn all the specified rules and

then apply them in every situation respectively. However, not all the situations might be

foreseen in advance, thus not for each of them the rules and procedures can be created

in advance. In that case rule of exception exists there (from the Administrative theory

by Fayol) (Babson College Faculty, 2009). Normally people in a bureaucratic

organisation keep performing their duties in an ordinary manner until something

unforeseen appears. Only in such cases management is asked to take an action. In other

words, subordinates are doing all the job leaving superiors to deal with the exceptional

cases. (Babson College Faculty, 2009)

To illustrate the situation better Merton model suits quite well (for graphical

depiction of the model see Figure 1 on p. 40). In general it is about the demand for

control via emphasis of the rules (March & Simon, 1967). As a result, rules are highly

important to ensure reliability in an organisation. There management can be sure that

40

the predetermined procedures will be followed and wished actions performed. However,

emphasis on the rules and predictable nature of employee behaviour are things which

result in rigid behaviour of employees (March & Simon, 1967). Even if there is a lack

of personalised relationships, the extent to which goals are perceived as common is

increased.

Intended behaviour Unintended behaviour

Figure 1. The simplified Merton model. Reproduced from Simon and March (1967), p.41

Thus having common goals, interests and character makes members of an

organisation to defend each other from the outside pressures. Clearly enough this

strengthens the rigidity of behaviour even more.

According to Merton’s model, there are three main consequences from the rigid

behaviour, as claimed by March and Simon (1967). Firstly, it ensures that demand for

reliability is satisfied. When rigidity is mainly brought up by learning and follow up of

the rules, managers can feel safely. The control which they impose and have over the

Demand for control

Emphasis on reliability

Defensibility of individual

action

Rigidity of behaviour and organizational

defense of status

Felt need for defensibility of

individual action

Amount of difficulty with

clients

41

company, makes them easier to ensure that all employees obey to the requirements and

do whatever is needed and expected. Secondly, individuals tend to defend their actions

more intensively, meaning that everything they do is right, required and reliable. In

order to achieve this, individuals engage themselves into rule learning process even

more. So that there would be no doubts of incompliant behaviour for the managers, they

defend themselves in this manner. Thirdly, an organisation might face difficulties with

the clients and make their satisfaction more complicated. All this is due to rigidity of

employee behaviour, because they are only concerned about their own behaviour and

performance while fulfilling orders and following the procedures – being compliant. In

a way this resembles image formation in the eyes of the superiors, not really

performance of a job (external commitment). So a result, the increasing rigidity of

behaviour increases the defensibility of the individuals inside the organisation. It has

nothing to do with the client satisfaction since the negative feedback from the client side

is mostly ignored even by a higher degree of defence. To make matters worse,

dissatisfaction of clients rarely reach superiors since subordinates in contact with the

clients are very unlikely to report them about this. If they reported about client

dissatisfaction, most likely they would be treated as performing their job inadequately.

Instead subordinates engage themselves in procedure learning behaviour to protect

themselves against the superiors and their doubtful opinion about them. (March &

Simon, 1967)

Moreover, seeing an organisation as a machine implies that it is static and fixed

(Senge, 1999). The rigidity of behaviour strengthens this image even more since

employees keep performing the same actions as they are predetermined. Such

organisational setting implies that changes are unlikely there, unless, someone from

above changes it. Changes can be only implemented by the change of rules, structure,

procedures and other predetermined activities for employees. So only those who have

the necessary power to change these rules can change the organisation. Such kind of

organisation exists only in the sense which is given to it by its builders (Senge, 1999).

By providing all the rules, builders of such organisations can control them.

Machine type organisations are learning only as a sum of learning individuals

(Senge, 1999). There are no shared views, no discussion on common issues for further

improvement. People are doing what they are told to do and thus learning only for

themselves. Usually there are no conditions for information and individual views to be

shared among all the employees and throughout an organisation. All insights remain in

42

each individual’s head. As a result, there is no benefit for an organisation since the

learned things are not spread throughout the organisation.

What is more, the principal-agent problem appears in the context. Employees

(agents) are mostly hired to carry the predetermined duties. In other words an agent is

supposed to pursue the interest of the principal, e.g. manager, in the best possible

manner. An agent is supposed to use his/her best specialised knowledge and skills.

While working on behalf of principal. However, not necessarily their interests are the

same. The problem arises due to the differences in the context where both the principal

and the agent work and differences in information accessible for both of them. The

agent working and facing all the problems might have a different view than the principal

initially had and still hopes for it. However, the agent is encouraged to behave in the

expected way with the help of incentive schemes, i.e. incentive schemes help to enforce

the wished behaviour. As a result, the same schemes limit individual initiatives and

require obedience, i.e. are tightly related with the reward system.

Mechanistic organisation works on the principle of routinised clockwork. Even

more, bureaucracy tends to mechanise and routinise all the aspects of human life.

Precision is highly demanded on the routinised clockwork. Employees are introduced to

the time when they are expected to come to work, when to leave, take a lunch break.

Everything goes around the clock, always in a repeated manner. (Morgan, 2006)

So in general mechanistic organisation can easily be described as a collection of

learning inhibiting characteristics, which have been listed earlier before. It makes a

perfect sense calling such organisations as bureaucracies. Bureaucracy already itself

being a learning limiting condition contains other organisational characteristics which

inhibit organisational learning even more.

6.1 Mechanistic companies in practice

Mechanistic kind of organisation has been described more in general; however, it is

interesting to see it as an example in the real world. Best examples of bureaucracies are

public institutions, public administration offices and state-owned companies, which can

also be called state-owned enterprises. All of them are related with the regulations

coming from the state as the main stakeholder, legislator and regulator. Besides them,

large monopolies, old companies in stable industries can also fall under the category of

mechanistic organisation. However, main focus of this thesis is on state-owned

43

companies. They are of particular interest because they seem to always face the conflict

of interests between the state and management, between politics and economics,

between fulfilment of orders and following of economic market movements. In addition

to this, since the main topic is organisational learning it is particularly interesting to see

how many of the previously mentioned organisational characteristics can be found in

there and what influence they have for learning opportunities.

So far it has been recognised that in mechanistic type of organisation mostly one

type of learning is taking place – rule learning. Unfortunately, possibilities for

organisational learning are very unlikely to be present there. Nevertheless,

organisational learning is important for bureaucracies just as for any other organisation,

since all of them are participants of the market. Presence in the market demands

flexibility and constant changes with respect to the market environment. Therefore, it is

interesting to see whether state-owned companies are capable of that as well as of

learning and if not, what could be done to improve these capabilities.

However, before starting examination of possibilities for organisational learning

in state-owned companies, it could be beneficial to see what is so specific about them:

why they exist, what role individuals have there as well as evaluate their opportunities

for organisational learning.

6.2 State ownership

State-owned companies or enterprises usually are large monopolies operating under

regulation and protection of the government. Mostly these are companies from

telecommunications, television, post, railway, airline, power, petroleum and few other

similar industries. What characterizes such companies the best are bureaucratic structure

and political interference. Being a part of the state bureaucratic apparatus, they adapt the

structure which is the best in case of tight control and regulation. Political interference

means that operational decisions made are not based on free market rules, but instead on

the political decisions by the government. Even being market players, they are less

concerned about the economic measures, namely profitability, and tend to focus more

on the benefits for society, meaning social service in terms of provision of sufficient

output and work places for people. This can be explained by the absence of competition

44

in the monopolistic market and “the government-imposed rules on prices and output”

(Shirley & Walsh, 2001).

Competition vs. public ownership has always been a topic of discussions

(Shirley & Walsh, 2001). As found in Gersbach and Keil (2001), Stigliz (1993) argues

that due to wish to use state-owned companies for political purposes, encouragement of

competition is highly avoided. Similarly cited Nellis (1994) suggests that politicians

wish to avoid some of the conditions enhancing efficient operations. In particular, these

conditions are competitive markets and autonomous, profit maximizing managers. Such

political wishes can be interpreted as willingness to maintain control over these

companies in order to be able to utilize them later on as instruments of public policy

(Bauer, 2003). Also the fear of autonomous and profit maximizing managers can be

overcome by appointing a politician as a manager, who would be indifferent to the

reputation of poor management (Bauer, 2003). As a result, negation of competition fact

turned to influence the political interference and the inherent difficulties in

management, which can possibly appear together (Shirley & Walsh, 2001). Due to such

arguments state-owned company remains trapped in between the two powers –

economic and political.

Due to the same fact of political interference, Shleifer and Vishny (1994) and

Boycko, Shleifer and Vishny (1996) argue that competition vs. ownership question can

be answered depending on the motivation of politicians (Shirley & Walsh, 2001). In

particular, political motivation stands for pursuit of political goals, but can be also

characterized by the self-interest of politicians in obtaining own benefits (Perotti, 2004).

If this is true and politicians tend to have private interest, they will try to pursue it at any

expense; most likely, by using common good for maximization of their own utility.

Therefore, inefficient practices might be promoted for politicians to be able to reap

benefits. (Perotti, 2004)

However, the state ownership and this political interference tend to have some

good incentives for the society and for the business, even though in the long run they

turn to be more harmful than beneficial. For example, state-owned companies have the

power to change the environment which they are operating in instead of adapting to it.

An organization can create the environment which would be of advantage for it and then

build and plan all things around that (Willner, 2000). Even if in the short run this might

seem beneficial, in the long run, there is a threat to get into trap of power. As was

acknowledged by Levinthal and March (1993), “in the long run the use of power to

45

impose environment is likely to result in atrophy of capabilities to respond to change”.

Capabilities of being flexible and adaptive to changes are likely to remain undeveloped.

In addition, every state-owned company has a social aspect, meaning that these

companies are job and product providers for the society. Thus, there is a tendency that

state-owned enterprises employ beyond the optimal level of employment (Shirley &

Walsh, 2001) as well as expand level of output beyond commercially optimal amount

(Willner, 2000). As a result, this helps to serve the society bringing job security and

amount of output sufficient for all customers, even if this produces operational

inefficiencies.

Nevertheless, all benefits tend to be only short term and produce not very

pleasing results in longer term. Job security provided by the state-owned company (life-

time employment guarantees just with limited career perspectives (Gersbach & Keil,

2001)) makes employees complacent (Shirley & Walsh, 2001), their behaviour becomes

more rigid and with the years spent in the company, they are more likely to involve

themselves into defensive routines protecting their image. Knowing that they are

unlikely to be fired, employees have less incentive to perform well and put additional

effort into action (Shirley and Walsh, 2001). In addition, low turnover means that not

many new employees are entering the organisation. Since new people to the company

earlier were described as sources of knowledge of information, state-owned companies

do not get a change to gain additional knowledge from new colleague experience.

Besides that, overmanning might easily appear due to more people employed

than needed (Willner, 2000). As a result, the working routines become less efficient and

the output produced might not be adequate – finally turning out into highly inefficient

practices and overproduction. As the practice shows, it was noted that state companies

tend to be examples of record failure and waste (Gersbach & Keil, 2001). As waste

comes naturally due to efficiency problems, the failure in performance might be

assigned for the management of such companies.

What is more, reward system has to be compliant with the civil service system,

so can be defined as quite rigid and related to seniority. As found in Hooijberg and Choi

(2001), pay system has to “have more specialized and invariant job designs, have

stricter reporting relationships, higher levels of accountability, more rules and

regulations, more constraints, weaker linkages between political leaders and career-

level leaders, and an absence of market incentives” (Robertson & Seneviratne, 1995).

Even if work coordination is already carried through precise job descriptions, the

46

requirement for the reward systems, just give more proof for the strength of bureaucratic

system in the state-owned company.

Furthermore, state-owned company usually has efficiency problems. However,

this is no surprise having in mind all the settings within which such company has to

operate. For instance, Perotti (2004) claims that lower productive efficiency might

appear due to general lack of accountability. As a result, this leads to „a lack of

managerial and employee incentives to efficiency and problems of competence or

corruption by state authorities“. As in the same paper Boardman and Vining (1992) are

found to state, state-owned companies may ignore the existence of private competitors,

what makes them behave more free, undermining any potential threats from the market.

This ignorance might be related with the ability to define environment. However,

accepted or not private competition has its impact. For illustration, railway operating

company can be taken. Of course, in most cases there is only one railway carrier in each

country, so companies in this industry should feel pretty safe. Nevertheless, other

companies providing bus and coach services, logistics, freight carrying, as well as

airlines and railway service providers in neighbouring countries should not be

underestimated. There is competition coming up from all of them and if ignored, makes

state-owned company just one more failing and highly inefficient company (Graudins,

2007).

What is more, efficiency is mostly an issue of managerial concern, though of

importance for the whole organisation. Political interference, bureaucracy with tight

division of labour, rigidity of behaviour, everything is harmful for efficiency. However,

management is one who can raise efficiency level by applying adequate practices.

Firstly, ownership affects efficiency the most due to the fact that state-owned companies

operate not in fully competitive markets. There is a notion that ownership cannot have

effect for efficiency, if markets tend to be fully competitive (Gersbach & Keil, 2001).

Secondly, there are employees with weak incentives to take initiatives, come up with

innovative ideas. The job security and rigid reward system seem to be having a great

influence for employees to support low levels of efficiency. Managers are also

employees at this company, so they might be just as the rest of staff, having weak

incentives for initiatives or might be appointees of government, who do not really care

about the quality of management and true operational success of a company. One might

wonder how manager could be encouraged to take up more initiatives. According to

Gersbach & Keil (2001), the problem is that in a state company it is hard to measure the

47

manager’s performance. Naturally, competition in the market provides information on

costs and manager effort to owners. Having this information, owners would be able to

judge on the managerial efforts more precisely. As a result, an adequate incentive

scheme could be designed by owners to better align performance with the reward.

Another thing could be “latitude of action” proposed by Hambrick and Finkelstein

(1987) (cited by Hooijberg & Choi, 2001) and which can be defined by organizational

characteristics such as job descriptions, definitions of duties, authority and

accountability, pay raises in relation to recommendations and control over both financial

and non-financial resources (Hooijberg & Choi, 2001). If all of them turn to be strictly

defined and limited, then management discretionary power is very little. As a result,

there is little what management can do on his/her own.

However, there might be managerial advantages for a state owned company as

well. For example, most of them have non-profit oriented managers. Since profit is not

of the primary importance and not the main business concern in a state company,

management can pay more attention to other issues. For example, higher quality of

output instead of profitability sometimes makes it easier for companies to perform.

One more management problem is information asymmetry problem. There are

unavoidable differences in possessed information between owners and managers,

between managers and the rest of the employees, and so on. Since government is always

the last one to make the final decision, lack of information makes it hard to find the

right solutions and make the right decisions. The problem is that all of the parties have

too different interests, thus possess different information. Pitifully, there is little done to

reduce these differences as well as there are limitations to tie „management salaries and

staff wages to performance“. (Grünfeld et al., 2005)

6.2.1 Example of TV2

For the practical illustration of the state-ownership and the issues just discussed, Danish

television channel TV2 is a good example. It is especially good for showing the conflict

of interest between the channel and the state. Information stated here is based on the

personal interview with deputy head of Sports department at TV2, John Jäger (2009).

TV2 has a unique position – being owned and controlled by the government,

namely Ministry of Culture, but financed by commercials. The channel faces a great

dilemma, between the requirements from the state and competition laws. State regulates

time assigned for programs of different content, has specific requirements for showing

48

commercials – only between programs and only of particular approved content, does not

allow big economic (expansionary) moves. Such regulation limits sources of financing,

which are necessary for the organisation to survive. Even though there is huge

competition going on in the television industry, TV2 is not able to respond to it

adequately, mainly because of the regulation coming from the state. Due to imposed

limits, it has no advantage over others.

However, there are some benefits which state-ownership brings. For example,

there are no requirements to be profitable. So it does not matter for the state, whether at

the end of the year the channel earns zero profit, a slight loss or even a small profit.

Employees do not need to focus on creating the content which sells and which helps to

generate additional income. On the contrary, they are able to concentrate on doing

things of higher quality, which would be interesting, entertaining and educating for the

viewers and which would be worth creating for people working there. Imagining private

ownership, they would need to become more commercial and provide content which

would be most popular and watchable among the viewers.

It could be very interesting to discuss organisational learning possibilities at the

TV channel, though it is behind the scope of this thesis. However, this organisation

could be used as an object for deeper analysis and examination of learning in a separate

thesis.

7. Potential mechanisms

After examining quite many organisational characteristics related to learning, it can be

seen that organisational learning is very unlikely to take place in a state-owned

company. The biggest problems identified there are related to structure, ownership and

management. Bureaucracy is simply an indestructible domination system (Argyris,

2004). Bureaucratic structure already containing most of the learning inhibiting

characteristics already makes it hard for other facilitating conditions to outweigh them.

Ownership problem can hardly be solved, unless the company was privatised. But this is

out of question and behind the scope of this thesis. Thirdly, there is management, which

can do quite a lot for the company despite its ownership. Therefore, the main focus of

the analysis is on the organisational setting and management changes trying to find out

49

which mechanisms could be introduced to build a capability of learning into state-

owned companies.

Single-loop learning in brief is detection and correction of errors facing a

company. According to Argyris and Schön (1996), error appears when there is a

mismatch between expectations and actual results. Then with a single-feedback loop

these errors are related to the organisational strategies and their underlying assumptions.

As a result, these assumptions and strategies are modified to improve organisational

performance, but keep the organisational values and norms unchanged.

Double-loop learning is a change of everything – strategies, assumptions, values

and norms of an organisation. Double loop stands for two feedback loops which relate

the observed error to the organisational strategies and the organisational values served

by them. Strategies and assumptions might be changed simultaneously with the change

in values, but also can be modified as the result of the changed values at the first place.

Double-loop learning can be carried by individuals and by organisations with

individuals acting on its behalf. In the former case, individuals place an inquiry towards

changes of values in their own theories-in-use, while in the latter one, individuals are

placing inquires towards the changes of values in organisational theory-in-use. (Argyris

& Schön, 1996)

However, the distinction of both kinds of learning in an organisational context is

quite complicated. It is important to define the relationship between learning products

and processes. Products of organisational inquiry have already been defined in the

definitions of single- and double-loop learning. But the processes of organisational

inquiry are something governed by the values and norms. They are of critical

importance for the organisational capability to improve its performance and

reconsidering the values which define improvement. Double-loop learning requires

additional steps. For example, “it turns the question back to the questioner, exploring

not only the objective facts surrounding and instance of inefficiency, but also the

reasons and motives behind those facts”. (Argyris and Schön, 1996) Therefore, an

organisation must be capable of questioning things and ensuring information flow all

ways around the organisation.

According to Argyris and Schön (1978), most of the organisations prefer people

staying with the single-loop learning. Especially in state-owned company case, it makes

easier to achieve and maintain some of the most important organisational

characteristics, such as stability, consistency and continuity. However, organisational

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design tends to be incomplete and imperfect, thus it requires constant reflection and

improvements. This means that organisations should be concerned with the opposite

issues – instability, inconsistency, discontinuity and, of course, changes. As a result, this

requires double-loop learning, which seems still being not very widely accepted and

developed in most of the organisations, nor even practiced by people to great extent.

Moreover, talking about learning does not make the full picture. In a way both

single-loop and double-loop learning can be called as experiential learning. First there

comes an error – the company identifies and then corrects it. By correcting, an

organisation revises related issues, capabilities, conditions, so that this error was

avoided another time. Thus the environment plays an important role, where people are

working at. This environment not only creates the conditions for learning, but also

places conditions for error. According to Argyris and Schön (1996), the list of

conditions for error could consist of: vagueness, ambiguity, untestability, scattered

information, information withheld, undiscussability, uncertainty,

inconsistency/incompatibility. However, the authors also display corrective responses to

the mentioned conditions respectively: specify, clarify, make testable, concert, reveal,

make discussable, inquire, resolve.

7.1 Focus of mechanisms

Firstly, neither bureaucratic organisational design nor ownership neither environment

where state-owned companies are operating cannot be changed. These are the fixed

conditions which remain at the same position as they were at the beginning. Since the

government has the most power on changing the latter things, it is very unlikely to be

willing to encourage changes, especially if they were towards more loose control, more

cooperative than hierarchical type of organisation. It would be no longer able to have a

strong political influence for such companies and that would be less beneficial for the

state as well. So then what could be done within the given organisational settings.

Individual, organisation and environment are the three entities most important

for the organisational life as well as organisational learning. Thus the main focus is put

on them. Willing to introduce different practices in an organisation, each of the three

needs to be capable of changing. However, as it was already mentioned before, state-

owned company is capable of setting and changing the environment without need to

change itself. Having in mind the organisational setting and the advantage to set and

51

adjust the environment accordingly, it is very unlikely that state-owned company would

be willing to change or even refuse this privilege.

Nevertheless, such point of view is short-sighted. “Most of the long lived

companies were sensitive to their community and their environment.” (De Geus, 1999)

In the long run, such an organisation might suffer from inability to adjust itself towards

the market or competition. Transformations are also happening from time to time, when

state-owned companies are being privatised. If this happens any time, public company

appears under private ownership and without capability to set and define environments

any longer. In order to survive, it will need to develop flexibility and capability to react

to the market changes adequately. The problem is that the beginning might be very

painful for the company. By ability to define the environment, it can be concluded that

no learning is taking place and will not take until the company loses this privilege.

Otherwise, it is very unlikely for it to give that up voluntarily.

The other two entities are individual and organisation. However, the main

attention has to go to individual, as learning is mainly about human capital (Plompen,

2005). If there were no individuals, there would be no organisations – they cannot

simply consist of a bundle of physical assets. Individual is a living being and as

Francisco Varela used to claim, “Every living being that moves, has a brain.” (De Geus,

1999) Brain allows learning and with every movement there is an opportunity for

learning. So unless there is no action taking place and there is complete isolation,

learning is possible. However, learning has not to be forced. The first rule of learning is

that individuals learn things best when they want to learn (Senge, 1999). So there

should be space left for people to choose what they really like. Then they can really pick

up things valuable for them.

When learning is taking place at the individual level through social interaction

and on the basis of common individual and organisational values (De Geus, 1999), it

can be brought up to the organisational level. Only if individuals change, organisations

will change. Nevertheless, in mechanistic type of organisations, thus state-owned

companies, changes can be mainly implemented from top-down. Unless management

call for changes and implement them, nothing will happen. It is so, because people over

the years tend to develop defensive behaviour by doing only what they are expected and

told to do. Argyris (2004) calls this ‘going by the book’, simply to name compliant

behaviour towards the rules and limitations. There are two benefits for such behaviour:

one telling that it might lead to competent performance, as people really know what

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they have to do and another saying that individuals following the book are safe from

personal responsibility. If something goes wrong, only ‘the book’ (rules) are to blame

for, not individuals. However, it would be a contrary situation, if individual

performance was related to individual initiatives.

7.2 Practices

Mechanisms are proposed in terms of practices which could be introduced and practiced

in an organisation. In the proposition there is not explicitly stated whether each practice

facilitate single-loop or double-loop learning or both. However, the author distinguishes

that practices which encourage individual participation, reflection, thinking, questioning

of the things, which can facilitate double-loop learning in an organisation. However,

where individual behaviour is closer related to the observation, participation and

reaction to the environment, this is more beneficial for single-loop learning.

7.2.1 Commitment

The most important is to encourage commitment from individual employees. This is the

basic, initial and the most important thing which is necessary to make people want to

learn and to create a difference for the company. As Polanyi (1967) called, commitment

is critical for human knowledge-creating activity (Nonaka & Takeuchi, 1995).

However, there exist two kinds of commitment: internal and external (Argyris, 2004).

The essential difference between them is that external commitment produces self-

respect and commitment to others within specific setting while internal commitment is

when a person holds oneself responsible for many things. As a result, external

commitment in a way resembles respect for the rules, management. Person engaging

himself into external commitment is not taking any individual responsibility on one’s

own and tend to hold others responsible for the things. This type of commitment is

similar to compliance and is more beneficial for the individual as he or she is able to

distinguish different contexts and separating his or her own life from the organisational.

However, internal commitment seems to be more beneficial and promising for

organisational learning. Then a person truly engages into organisational matters and

puts as much effort as he or she would tend to put in any other, even personal, matter.

Nevertheless, this type of commitment is more demanding from an individual as such,

as at the end it can even lead to corrosion of character – when a person tries to be

53

responsible for more things that he or she can actually manage and then, as a result, is

not able to deal with tensions (Argyris, 2004).

Individual commitment is highly necessary for organisation learning to occur.

However, probably the most beneficial for both, individual and organisation would be

to obtain a combination of both kinds of commitment. Here are several practices, which

could help to attain it:

Job enlargement – giving more responsibilities to an individual as an intention to

feel him/her more important and to show more trust in him/her and the work he/she

does. Reorientation and promotion possibilities are to make the position important.

Participation – making employees acquainted with and involved in ongoing

organisation matters. First, every organisation has its own intentions; however, not

all of employees are usually familiar with them. Therefore, an organisation has to

formulate its intention and propose to people (Nonaka & Takeuchi, 1995). This

creates better knowledge about the company among employees. The best way to

make employees acquainted with intentions is through company strategy, as the best

form to display intentions to others (Nonaka & Takeuchi, 1995). Communicating

strategy to individuals might create new knowledge and encourage their

commitment. Second, improved communication throughout organisation can also

increase commitment. Usually communication is going one way in such

organisations. Employees keep doing their job and reporting back to the top

management. Management, on the other hand, hardly bothers to prepare any

feedback for employees to know how the things are going. Feedback sessions or

common formal or informal meetings concerning organisational issues could

encourage communication between departments and would let employees gain new

knowledge or perspectives on the company itself. With the help of such meetings, it

is easier to show collective interest and action, possibly commitment, as well as

exchange views. As a result, collective commitment can help to reorient and

promote individuals into their own commitment (Nonaka & Takeuchi, 2005). Third,

mentoring and coaching inspires individuals for participation and experimentation.

Making individuals feel as a completely necessary part for the company as well as

providing all possibly needed assistance, encourage people to do more than they are

actually required. This is especially applies to management, which should not keep

telling how the things should be done, but instead just presenting the situation and

asking employees to do things on their own, as well as they can. Management

54

should be supposed as the one giving advice, inspiration and showing the direction

for those who are “lost”. As a result, trust and belief in employee capabilities tend to

shape individual way of thinking about job and position in a different way.

Self-management – more trust in individuals, and more freedom given for them,

makes them feel as an important part of an organisation. Besides the given

description of the position and the main requirements to be fulfilled, the rest has to

be free for an individual to design on his/her own. As a matter of fact, in this

individuals feel best reaching for the most important results. People like what can be

voluntarily chosen, so the same applies to the design of one’s work. The more

freedom individuals within organisation can feel, the more committed they can

choose to be. It is all about the commitment what matters the most for people to

learn.

Empowerment – the more autonomy can be felt in the work, the higher motivation

can be expected from the employees. Motivation is what correlates with

commitment.

7.2.2 Social interaction

Besides commitment, it is important that individuals gain new knowledge and share it

with other individuals in a company. Social interaction is the main tool, to bring in

knowledge sharing and spreading. According to dynamic model of knowledge creation

(Nonaka & Takeuchi, 2005), social interaction between tacit and explicit knowledge

enables creation and expansion of human knowledge. Tacit knowledge can be defined

as knowledge gained by experience and practice while explicit knowledge is related to

kind of knowledge which is gained through learning theory and using rational mind

(Nonaka & Takeuchi, 2005). So in order to encourage learning, and development of

knowledge, it is necessary to ensure conditions for interaction of these kinds of

knowledge.

First, there has to be increased interaction among employees. Interacting people

are able to observe, to act and to socialise. In addition, interaction can be encouraged by

the rotation of personnel. People going around and working for some time in different

departments gain a completely whole new perspective on the organisation. As a result,

individuals can better understand operational performance, learn new skills and, as a

result, feel themselves as an integrated part of the company. The more employees know

55

about the organisation, the more smooth company’s performance can be. Knowledge

brings better understanding and tolerance into the workplace.

Moreover, encouraged socialisation among employees enables them to share

individual experiences, thus learn from each other. There can be several different ways

to inspire employees to socialise. For example, team work, informal meetings,

workshops and other similar activities which would allow sharing of mental models and

technical skills (Nonaka & Takeuchi, 2005).

Finally, as it was recognised before, rules are not good for employees since they

tend to limit individual initiatives and creativity. However, in state-owned companies

they are guiding principles for how the work should be done. So in a way they are

source of information. Therefore, slightly adjusted rules could encourage learning. They

could be more interactive and contain individual experiences as examples on how the

work could be done. Not necessarily everything has to be followed as written, but the

available information of peer experience can give new insights and inspiration for

individual behaviour. At the same time, it would be learning from experiences. The

useful thing here is that information would always be available, though could be

checked only upon request or individual wish. So, as a result, memory would not be

overloaded with too much information at once, just as it could be during a meeting,

conversation, or, for example, learning seminar. (Nonaka & Takeuchi, 2005)

7.2.3 Feedback

Feedback is of high importance in order to facilitate learning. To explain that better

SLAM (strategic learning assessment map) model is relevant (Bontis et al., 2002). The

main idea of this model is “relationship between stocks of learning at all levels

(individual, group or organisation) and business performance”. So that the learning

would take place, it is necessary to provide some measures which would allow

reflection and evaluation of performance and call for improvements. Thus feedback can

be understood at the best of such measures.

Besides the three levels of learning, SLAM model also introduces two concepts

of reflection: feed-forward and feed-back. The first concept goes with the idea if and

how individual learning gets integrated into learning at the group and organisational

levels, while the second concept has a vice versa idea – how organisational learning

affects individual and group learning. In other words, feed-forward comes as if

individual learning can have power to bring changes into structure, products,

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procedures, culture of an organisation, while feed-back talks about the influence of

organisational systems, structure and strategy for an individual. The problem feed-back

brings in a state-owned company is that organisational learning as well as conditions

facilitating it are absent there, thus it cannot affect individual or group learning anyhow.

What matters here is the feed-forward learning. Individuals are the ones who can bring

the change and, thus encourage organisation to learn. Thus, if individual behaviour is

motivated and committed to participate and learn, it is possible to bring that change in.

7.2.4 Rewards and incentives

As it was mentioned at the beginning, punishment and reward system is a powerful tool

to enhance learning, even if not the one necessary for organisations to learn and

develop. However, this principle could be slightly modified and used for encouragement

of new, beneficial learning. Reward system should not be considered as the main

motivator. On the contrary, it can be applied for testing real motivation and commitment

to do the job. As Senge proposes (1999), if people are showing greater interest in work

and willingly put more effort into their job, such behaviour should not be rewarded with

higher pay and promotions immediately. If the person is really committed, he or she is

not seeking for additional financial benefits, for their additional time spent doing the

job. The work itself is already rewarding, as the author claims. However, if financial

rewards would be chosen as a response, this might destroy individual initiatives and

behaviour, mainly due to equalisation of effort to money.

7.2.5 People management

Nevertheless, mostly what has been said until now is concerned with individual and

with how to enhance individual learning. But it not enough to enhance individual

learning and fail to implement it into an organisation. Therefore, the right people

management is necessary to enable this condition. If the organisational environment is

friendly and comforting enough for individuals to learn and share their knowledge as

well as experiences, then individuals on their behalf are willing to learn and to

contribute their gained knowledge for the benefit of organisation. People management is

based on a broader perception of organisations and the role of individual in the learning

process (Plompen, 2005). It is crucial for an organisation to tap intellectual capacity of

people at both, individual and group, levels. However, it might be rather challenging to

57

do this in a state-owned company. On the contrary, public-owned organisations usually

do not seek to employ only people with high intellectual capacity mainly because they

do not want things inside the organisation to be questioned and disturbed. Since such

organisations do not support the full cycle of thinking, doing, evaluating and reflecting,

which is necessary for learning, people with full intellectual capacity appearing in such

organisation can become demotivated and engage into the process of self-degradation,

unless there are changes made taking the advantage of individual intelligence for the

organisational benefit and overall learning and improvement. As for the moment, state-

owned companies are able to master thinking and doing, though lack capabilities to

evaluate and reflect.

In order to improve such situation, people should be considered as partners

instead of ‘slaves’ just doing the job. This puts everyone inside an organisation on an

equal basis and allow them feel and behave in a more encouraging and supportive

manner. This gives individuals more appreciation and they feel more freedom to come

up with new ideas and propositions. On the opposite, being on a hierarchical stand,

suppresses individual initiatives accordingly to the place on the hierarchy tree. Of

course, state-owned company might face difficulties by trying to bring in the

partnership idea into the practice. However, it is possible to loosen tight hierarchy belts

a little bit and make individuals work towards partnership. Partnership at individual

level is more likely than on any other.

7.2.6 Experimentation and failure

What is more, experimentation environment is highly appreciated by all learning

companies. So there is need to have an inside relationship which allows experimentation

and failure (Plompen, 2005). This way it is possible to explore new ways of learning

and changing things in an organisation. However, during experimentation and learning

there is a need for the right mix of initiatives (Senge, 1999).

It does not cost anything to allow individual employee to go with his/her idea. If

that employee is really passionate about it and have enough devotion for it, it can

possibly come out as an enjoyable outcome. This is highly likely. However, if

experiments are not allowed by the corporate culture, then no one knows whether some

initials ideas were really good or not.

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7.3 Challenges

There have been quite a few propositions made on the change of mechanisms inside

organisations so that they would be able to condition and facilitate organisational

learning. However, the biggest challenge to all these suggestions is human resistance to

change (De Geus, 1999). In the real world, we can often hear many companies to claim

that they are flexible and constantly changing. However, in fact, this is a lie, most of the

organisations do not like to change. People prefer to cling to habitual ways of doing

things and thus even the best ideas proposed remain not implemented (Senge, 1999). On

the contrary all idea proposals from the lowest levels of organisations appear to be

intimidating for these individuals themselves, so instead of trying to come up with any

new ideas, they put all their energy in fulfilling their duties and thus pleasing their

bosses (Senge, 1999). Just as it was the idea of Merton model, keep repeating the

assigned procedures in order the fulfil all duties as well as possible in order to get the

reward and not be held responsible for violating assigned procedures and to satisfying

the expectation of managers.

Nevertheless, this resistance to change can possibly be reduced by making

people interested in change and willing to change before there comes the final moment

when change is unavoidable for the survival and before it becomes too painful to live

through that for the company. First, it can be reduced through individual commitment

for the company. However, it might take quite a lot of time and effort in order to make

employees committed to the company and ensuring that this commitment is lasting.

Second, managers can capture employees’ attention towards change and inspire learning

behaviour by their own example. Behaving in the way management would like others to

behave and think about the company, it might attract most of the people to act in a

similar manner. Third, use incentive schemes to show what behaviour is appreciated

and what is not. As already mentioned, individuals are quick to tie reward system to the

actual behaviour and adjust themselves accordingly. Last, in addition to the rewards and

incentive system, some threatening can be also involved. The biggest threat for an

employee is to lose the job. If there was an ultimatum announced that either an

organisation changes itself or goes down to bankruptcy and everyone loses his job as a

result. This is a very good practice to make individuals think and use all their effort to

come up with very good idea, propositions for saving the company. As Argyris (2004)

noted, there were some real examples, where individuals were teamed up in an

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organisation, presented with a quite disastrous situation and were asked to come up with

realistic solution. One condition was added, that if the problem remained unsolved, all

employees would be left without a job. Surprisingly enough, most of the teams came up

with very smart and highly applicable solutions. So it means that all of the employees

had enough of the right potential to solve most of the problems and to do more than they

are usually asked. However, in most cases they tend to exhibit only a small part of that,

only to the extent which is necessary to carry the duties. Of course, this last practice

could not be constantly applied as individuals might start feeling manipulation, pressure

and threat which in longer term might become demotivating factor.

8. Conclusion

The aim of this thesis is to identify mechanisms which would facilitate organisational

learning in state-owned companies. So in order to access learning better, organisational

characteristics are examined. Two groups of organisational features, namely

management and organisational culture are found to disturb the learning process at the

second stage – information distribution. This means that managerial issues and cultural

settings of an organisation do not support smooth flow information across the

organisation, what is crucial for learning. In addition, groups of human resource related

features as well as organisational structure are found to disturb learning at the

organisation at the third stage – information interpretation. Due to the presence of

conditions, which are not supportive for correct interpretation, learners fail to assign

appropriate meaning for the newly gained information and knowledge.

What is more, management can be closely related to the issues of efficiency and

effectiveness, both of which are considered to be at low level in state-owned companies.

Human resource issues tend to be closer associated with compliance and commitment.

While compliance is assumed to be at high level at the state organisation, commitment,

on the contrary, is low among employees. Due to low levels of efficiency and

effectiveness, it can be assumed that state-owned companies face the disadvantage of

poor management. After close examination of the specifics of state-owned companies,

this inference is of no surprise. Due to political interference management has limited

possibilities to design operations in the most beneficial for the company way. At the

same time it can also have negative influence for the individual work.

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Similarly to the initial expectations possessed before this analysis, organisational

learning is not likely to be present in state-owned companies. The evidence emerging

from literature and the analysis comes as no surprise. Simply there are too many triggers

for learning, which can be found in such organisations.

Moreover, the analysis of organisational learning at state-owned companies is

focused on three main entities – individual, organisation and environment. Since these

companies are incapable of responding to the environment in the most appropriate way,

mostly because of the political influence, there is little what can be proposed in such

situation. The problem is that if any potential changes were offered, such company

would prefer the ability to set the environment according to its needs as long as the

ownership status does not change. In addition, state company as an organisation is static

and rigid itself, so it requires a lot of time and much effort for it to change. Therefore,

the main emphasis while proposing potential changes (mechanisms for improving

organisational learning) is put on individual. An individual is the smallest unit in an

organisation and the smallest unit which can participate in the learning process.

Both kinds of organisational learning – single-loop and double-loop learning –

are considered while proposing new practices, however, with a slight emphasis on the

double-loop learning, which is considered to be more beneficial for the organisational

change and improvement.

Since the management is not very likely to change (state job security) nor bring

any substantial changes due to political interference, only HR issues can be addressed to

bring in change in conditions for organisational learning. With focus on individuals,

thus HR issues it is possible to “soften” the organisational structure by interaction and

communication, trying to break the socialisation barriers imposed by it. Similarly the

organisational culture can be influenced to change, though it might take longer time for

this to happen.

Finally, mechanisms facilitating organisational learning are suggested. They are

expressed in terms of the desired changed, i.e. as propositions for commitment, social

interaction, feedback, rewards and incentives, people management and experimentation

and failure.

Nevertheless, since state-owned companies are quite stiff and ignorant to any

changes (what is also familiar for any human nature), it is not very likely that these

practices could be extensively applied to organisational work. Still there is a possibility

61

of using them as an inspiration while designing organisational procedures or conducting

further research on organisational learning.

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