Introduction

“There are things in your life you can control - and there are variables you can't. The more diligent you are at controlling what you can, the more influence you'll have over your destiny. You just have to figure out which are which.“ Carlton Young

Himself being director of the University of Alabama and thereby head of a large organisation, Carlton Young says very clearly that it is important to control as much as you can to ensure a safe destiny - transferred to organisation theory this means that organisations have to control their environment and other organisations as much as they can to secure development and safety.

But which tools are at hand for the organisations to execute control over other entities and how did organisations use them in the past? This essay shows ten possibilities of modifying, manipulating or controlling other organisations and gives case studies to each of them.

The options can be divided up into two broad categories (Daft, 2001, p.149): Firstly we will gain an insight into possibilities to establish inter-organisational linkages to other organisations, afterwards we will look into the options to control an organisation’s environmental domain.

Establish Inter-Organisational Linkages

Daft names 5 options for establishing inter-organisational linkages: Ownership, Contracts & Joint Ventures, Cooptation, Executive Recruitment and Advertising & Public Relations.

For executing control through Ownership, companies can buy a part or a controlling interest in the company to control. Depending on the size of the share, the acquiring company gains control and access to information, technology and other resources of the controlled company, possibly limited by the controlling company’s share. The mother company can also merge with the acquired company if control or integration beyond fully ownership as a subsidiary is necessary. After the merger, the two organisations form a new entity. The merger between Daimler-Benz AG and Chrysler Corp. in 1998 is a good example for a merger: Both single companies exchanged shares and ceased to exist, forming the new legal entity of DaimlerChrysler AG. A perfect example for control through acquisition is the actual HDW-deal (Howaldswerke Deutsche Werft AG) between the vendor Babcock-Borsig (Germany) and One Equity Partners (USA). HDW produces technologically world-leading nonnuclear military submarines in Germany. The deal is probably going to be authorised by the German government although it is feared that One Equity Partners will pass its share majority to General Dynamics (GD), mother company of OEP. This would enable GD to sell non-nuclear submarines to Taiwan, after Germany had denied this sale to Taiwan due to political reasons (Der Spiegel, 15/06/2002)

Forming strategic alliances or joint ventures is another option: Usually companies in the same market having complementary characteristics form strategic alliances. The STAR ALLIANCE between 14 international airlines can offer a world-wide network of flight connections between 729 airports with the same Frequent Flyer

program and wide-spread lounge facilities to their customers, outstripping the possibilities of each separate airline by far. The airlines don’t compete on the same connections, but every airline gains more customers due to the increased service offered (Star Alliance, 2002).

In 1970 Aerospatiale de France and Deutsche Aerospace formed the joint venture “Airbus”. It was foreseeable that each single European aircraft manufacturer wouldn’t be able to compete against the overwhelming market power of Boeing in the widebody aircraft market. By this, the risk of engaging into competition with Boeing was distributed on the partners and the necessary funds could be raised.

Control over and insight into other organisations can also be gained by Cooptation, meaning that executives or directors of one company hold offices in other organisations (“interlocking” according to Daft, 2001). It is important to mention that Cooptation can be a bi-directional way of establishing a linkage, if e.g. the directors of one company give advice from their experience from being executive in another company at the same time. The Brisbane based software company collab.net has a board of directors mainly consisting of members of the executive board of main share holders, as well as Marc Andreessen, founder of Netscape Communications and former CTO ¹ of America Onlince, Inc. (Collab.Net, 2002).

If no relationship between the organisations is permitted or wanted (e.g. between competitors), Executive Recruitment is an option: Executives from one organisation switch to a job in another organisation, taking their knowledge and their contacts in their former organisation with them. This can provide competitive advantages against competitors, especially if the customers are governmental institutions which are less

¹ CTO = Chief Technology Officer

price sensitive than business customers. Daft (2001, p. 150) mentions the recruitment of former generals from the U.S. Department of Defence being recruited by companies in the defence sector to get an insight into future projects and gain orders through personal contacts.

Advertising is used by nearly every organisation. Organisations try to influence other people through commercials, adverts and other means of communication. Since an organisation itself can’t think, e.g. B2B-Advertising is aimed on influencing other organisations indirectly by affecting their members decisions. E.g. Microsoft advertises in Apple Mac-related magazines for its new Office-for-Mac-product, trying to make individuals and company purchaser to decide for their product instead of Apple products ² . Public Relations are a rather indirect way of influence: Microsoft tries to recruit high potential graduates through sponsoring several public events such as the JADE-Meeting in July 2002 in Berlin with hundreds of European future graduates taking part in. 3

In addition to the options of inter-organisational linkages named by Daft, Zeffane (1994, p.28) also mentions the “Networking” option: An inter-organisational network can be defined as a cluster of business units held together, in network fashion, by market mechanisms. Participants gain information through the network concerning potential business partners, outsourcing possibilities and other aid for further growth. The Bund Deutscher Studentischer Unternehmensberatungen (Federation of German Student Management Consultants) is a network operating successfully since 1992, with 24 Consultancies from across Germany joining and contributing. Several conventions per year and internet-backed communication enable co-working and

² www.microsoft.com

³ http://www.jadenet.org/berlin/

sharing of ideas or resources between the members. Professional companies are also taking part in the conventions and contribute with their experience. The network is a win-win situation for all members and contributors, since the professional companies gain first-hand access to highly skilled prospect graduates, while the students can get in touch with the companies’ representatives, talk about career prospects and get an insight into the companies during case studies and workshops. Finally, the consultancies can exchange ideas how to tackle problems that other members have already encountered and solved.

Control the Environmental Domain

The second category of methods influencing other organisations comprises controlling the environmental domain. Daft (2001, p.151) names four options: The change of domain, political activity & regulation, trade associations and illegitimate activities.

“Change of Domain” actually is not a direct way of influencing the business environment; it is rather a reactive procedure: The organisation changes its place in the business environment. This can be done by e.g. switching the industry sector or customer segments. An actual example for a change of domain is the renaming of Preussag AG into TUI AG. The renaming is just a consequence of the group’s decision in 1995 to invest into the growing tourism business and to retreat from the former, struggling heavy industry and energy focus. Today the tourism division accounts for 45% of overall profits, making it to the biggest and most successful tourism corporations in the world (TUI AG, 2001).

“Political Activity & Regulation” comprises all organisation’s activities towards influencing decisions by political and regulatory authorities. Their decisions can influence companies in extreme ways, from opening vast opportunities to legally shutting down whole industry sectors. In 1999 the German parliament passed a law to forbid producing energy from nuclear sources in Germany due to unpredictable environmental & health risks. The remaining plants were allowed to operate until the end of their fiscal depreciation time. The energy industry unsuccessfully tried to influence political decision making by threatening the government to hold it liable for incurred losses but were unsuccessful to topple over the law in the legislative authorities. These companies now have to migrate into other sectors or products to remain in the market.

Most companies joined one or more “Trade Associations” to bundle power in one organisation that represents the members’ opinion towards various topics. These organisations can be more effective in influencing other organisations due to their representative office of, in some cases, several thousand members. The Bundesverband der Deutschen Industrie (Federation of German Industries) represents almost 80.000 private industrial enterprises employing almost eleven million people (BDI, 2002). It is hard to prove the influence of such associations, but their advice and opinion to topics like environmental legislation or work legislation is often seeked by politicians. In case of the BDI, chats between the present and past German Chancellor(s) and the head of the BDI are nothing special, although treated as an anti-democratical process by critics ⁴ .

⁴ The German left-radical terrorist group „Rote Armee Fraktion“ kidnapped and killed the president of the

German Federation of Employers in 1977 to set a sign against increasing influence of industrial leaders

(“imperialists”).

Although “Illegitimate activities” are either morally or even legally condemned they play a sad but true role in today’s business landscape. Various reasons can tempt managers to venture in illegitimate activities: For some companies this might be the last surviving chance in a highly competitive market, in other situations the sheer greed of gain is the trigger for breaking moral boundaries or legal laws. The bribing of political authorities is probably the most common violation, existing as a business tool for the past thousands of years. Corruption was an issue even during the times of the Roman Republic, when usurpers bribed senators to give their blessing to unlawful and aggressive acts (Günther, 2002). The non-profit organisation “Transparency International” fights against international corruption in today’s global business world. Although many companies such as the Swiss construction giant ABB foresweared bribery as a business tool, many people such as Thomas et al. (2001, p.42) don’t believe in a quick cure for worldwide corruption because of its long history and its acceptance in many cultures. Corruption is present not only in pure business contracts but also in the awarding of the honourable Olympic Games to applying cities, so happened in 1993 when the Salt Lake Olympic Committee bribed at least seven members of the International Olympic Committee to vote for their city to host the 2002 Winter Olympic Games (Berliner Zeitung online, 24/12/1998). Cost-Avoidance is another example motivation for illegitimate activities: Some production residuals are toxic and have to be disposed in specially designed and approved, expensive waste sites or combustion plants. Lufthansa Technik, Agfa and Ford decided that it was cheaper, although illegal, to use a Bavarian farmer’s field for illegal disposal (DER SPIEGEL, 24/06/2002).

Conclusion

Depending on what an organisation wants to achieve, different options can seem favourable to reach that aim. Some tools are not usable by all organisations, depending on their power or regulatory environment. It is up to the managers or leaders to decide which option(s) contribute most to their organisations aims. One option available for all organisations: Illegitimate Activities. Although the actual balance manipulation scandals by US-firms have the impression that business ethics are a dream of the past, hopefully illegitimate activities seem unfavourable for the big rest of the organisations.

Bibliography

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