Final Activity Report Summary - TOS (A Theory of Organizational Structures : A Game Theoretic Approach)
The general objective of this project was to contribute to the development of a game theoretic theory of organisational structures with a particular focus on the analysis of collective decision-making mechanisms and power relations in structured organisations, i.e. where there are contractual and authority relations and communication links between the decision-makers.
Out of this class of structures hierarchies, i.e. structured organisations with authority relations among its members, were identified as the most important and interesting subclass. The literature on power in hierarchies contained a wide variety of contributions from various disciplines, dealing with different types and aspects of power. These could broadly be classified by a combination of two features, namely the subject of the analysis and its primary origin. The subject was either the possession of power or its exercise and its primary origin was either an individual or a position in an organisation. Power was thus taken to be rooted in an individual or a position. Based on these two features, the literature could, in very general terms, be said to consist of four categories, including studies on
1. positional power
2. individual power
3. the exercise of positional power, and
4. the exercise of individual power.
This project was devoted to the study of the first category. Positional power is what results from the interplay of two components of an organisation architecture, i.e. the arrangement of positions in the organisation and the decision-making mechanisms in use. During our study we discovered that all existing approaches developed for the analysis of a positional power were in fact inappropriate for such a power analysis. The reason was that decision-making in hierarchies was typically sequential, an element that the literature on power in hierarchies had more or less ignored so far. The effect could be that in certain instances the existing approaches ascribed power to members of a hierarchy even if they were excluded from decision-making. Moreover, we could not only end up with inappropriate power values, but also inappropriate power rankings. This required us to develop a completely new method for the study of positional power in hierarchies and sequential decision-making situations in general. As a result we suggested an action-based approach, represented by an extensive game form, which could take the features of such mechanisms into account.
Based on this approach we introduced a power score and measure that could be applied to ascribe positional power to actors in sequential decision making mechanisms in general. Based on this measure we analysed and compared the positional power structures of all feasible hierarchical organisations with up to five members. This turned out to be sufficient to obtain properties for the characterisation of our new method, i.e. based on our new approach we identified appropriate properties of positional power in hierarchies and characterised our new score and measure for a number of usual collective decision-making mechanisms. The relevance of the achievements made during the project for basic and applied science and applications lied in particular in the developed new approach for the measurement of positional power. This could be regarded as fundamental for the research on power in organisations and its applications in politics and business. While former approaches, which we showed to be inappropriate, were also missing a fully fledged conceptual foundation, being bare formal adoptions of the classical measures for non-hierarchical organisations, and were criticised for this, our approach provided a conceptual foundation which found acceptance by leading scholars working on the philosophical aspects of power.
Out of this class of structures hierarchies, i.e. structured organisations with authority relations among its members, were identified as the most important and interesting subclass. The literature on power in hierarchies contained a wide variety of contributions from various disciplines, dealing with different types and aspects of power. These could broadly be classified by a combination of two features, namely the subject of the analysis and its primary origin. The subject was either the possession of power or its exercise and its primary origin was either an individual or a position in an organisation. Power was thus taken to be rooted in an individual or a position. Based on these two features, the literature could, in very general terms, be said to consist of four categories, including studies on
1. positional power
2. individual power
3. the exercise of positional power, and
4. the exercise of individual power.
This project was devoted to the study of the first category. Positional power is what results from the interplay of two components of an organisation architecture, i.e. the arrangement of positions in the organisation and the decision-making mechanisms in use. During our study we discovered that all existing approaches developed for the analysis of a positional power were in fact inappropriate for such a power analysis. The reason was that decision-making in hierarchies was typically sequential, an element that the literature on power in hierarchies had more or less ignored so far. The effect could be that in certain instances the existing approaches ascribed power to members of a hierarchy even if they were excluded from decision-making. Moreover, we could not only end up with inappropriate power values, but also inappropriate power rankings. This required us to develop a completely new method for the study of positional power in hierarchies and sequential decision-making situations in general. As a result we suggested an action-based approach, represented by an extensive game form, which could take the features of such mechanisms into account.
Based on this approach we introduced a power score and measure that could be applied to ascribe positional power to actors in sequential decision making mechanisms in general. Based on this measure we analysed and compared the positional power structures of all feasible hierarchical organisations with up to five members. This turned out to be sufficient to obtain properties for the characterisation of our new method, i.e. based on our new approach we identified appropriate properties of positional power in hierarchies and characterised our new score and measure for a number of usual collective decision-making mechanisms. The relevance of the achievements made during the project for basic and applied science and applications lied in particular in the developed new approach for the measurement of positional power. This could be regarded as fundamental for the research on power in organisations and its applications in politics and business. While former approaches, which we showed to be inappropriate, were also missing a fully fledged conceptual foundation, being bare formal adoptions of the classical measures for non-hierarchical organisations, and were criticised for this, our approach provided a conceptual foundation which found acceptance by leading scholars working on the philosophical aspects of power.