Niklas Luhmann and organization studies 9788763003049, 876300304X

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SERIES EDITORS: Stewart R. Clegg & Ralph Stablein

A D VA N C E S I N O R G A N I Z AT I O N S T U D I E S

Edited by

David Seidl and Kai Helge Becker

Niklas Luhmann and Organization Studies

Liber & Copenhagen Business School Press

David Seidl and Kai Helge Becker (eds.) Niklas Luhmann and Organization Studies

© CBS Press and the authors 2006

1st printed edition 2006 The e-book is published in 2013

Series editors: Stewart R. Clegg and Ralph Stablein E-book production: PHi Business Solutions Ltd. (Chandigarh, India)

ISBN (e-book edition): 978-87-630-0304-9 ISBN (printed edition): 978-87-630-0162-5

CBS Press Rosenoerns Allé 9 DK-1970 Frederiksberg C Denmark [email protected] www.cbspress.dk All rights reserved. No part of this publication may be reproduced or used in any form or by any means – graphic, electronic or mechanical including photocopying, recording, taping or information storage or retrieval system – without permission in writing from the publisher.

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Advances in Organization Studies Series Editors: Stewart Clegg Professor, University of Technology, Sidney Ralph E. Stablein Professor, University of Otago, New Zealand Advances in Organization Studies is a channel for cutting edge theoretical and empirical works of high quality, that contributes to the field of organizational studies. The series welcomes thought-provoking ideas, new perspectives and neglected topics from researchers within a wide range of disciplines and geographical locations.

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Table of Contents Acknowledgements.........................................................................

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Introduction: Niklas Luhmann and Organization Studies David Seidl and Kai Helge Becker ....................................................

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PART I: THE THEORY OF AUTOPOIETIC SOCIAL SYSTEMS 1. The Basic Concepts of Luhmann’s Theory of Social Systems David Seidl .................................................................................

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2. The Concept of Autopoiesis Niklas Luhmann .........................................................................

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3. The Autopoiesis of Social Systems Niklas Luhmann .........................................................................

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PART II: ORGANIZATION, DECISION AND PARADOX 4. The Paradox of Decision Making Niklas Luhmann .........................................................................

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5. Displacing the Paradox of Decision Making Morten Knudsen ..........................................................................

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6. On Gorgon Sisters: Organizational Action in the Face of Paradox Barbara Czarniawska..................................................................

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PART III: ORGANIZATION, INTERACTION AND SOCIETY 7. Organization and Interaction David Seidl .................................................................................

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8. Organization and Society Thomas Drepper .........................................................................

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9. The Design of Organization in Society Dirk Baecker ...............................................................................

191

PART IV: LUHMANN’S THEORY IN THE CONTEXT OF OTHER THEORIES 10. Luhmann’s Systems Theory and Theories of Social Practices Kai Helge Becker .........................................................................

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11. Luhmann’s Systems Theory and the New Institutionalism Raimund Hasse ...........................................................................

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12. Luhmann’s Systems Theory and Postmodernism Jochen Koch .................................................................................

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13. Luhmann’s Systems Theory and Network Theory Michael Bommes and Veronika Tacke .......................................

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PART V: FORMS OF ORGANIZATION 14. Analysing Forms of Organization and Management: Stock Companies vs. Family Businesses Fritz B. Simon .............................................................................

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15. On Defining the Multinational Corporation. A SystemsTheoretical Perspective Darnell Hilliard ..........................................................................

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PART VI: IMPLICATIONS FOR MANAGEMENT AND CONSULTING 16. Communication Barriers in Management Consulting Niklas Luhmann .........................................................................

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17. Strategic Management from a Systems-Theoretical Perspective Jan-Peter Vos ...............................................................................

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18. Management Accounting from a Systems-Theoretical Perspective Tobias Scheytt .............................................................................

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PART VII: GLOSSARY AND BIBLIOGRAPHY Glossary to Niklas Luhmann’s Terminology David Seidl .......................................................................................

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Annotated Bibliography of Selected Works by Niklas Luhmann Kai Helge Becker ...............................................................................

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Contributors .....................................................................................

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References ........................................................................................

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Index .................................................................................................

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Acknowledgements The idea for this book goes back to an international symposium on “Niklas Luhmann and Organization Theory”, which was organised by the editors and took place at the University of Munich in June 2002. Eight chapters of the present volume are in some way or other based on presentations given at the conference, whilst others have been written or translated particularly for this book. Both the symposium and the present book would not have been possible without the kind support of various organizations and people who contributed time, money and other resources. In particular, we would like to thank the University of Munich, Hamburg University, Witten/Herdecke University, and the European Group for Organizational Studies (EGOS) for supporting the symposium. Moreover, we record our thanks to the Munich School of Management, the Münchner Universitätsgesellschaft, the Verein zur Förderung der Führungslehre an der Universität München e.V. and the Department of Economics and Business Administration at Hamburg University, who provided the financial means for the symposium and this book project. We are particularly grateful to Evi Groher, Birgit Pemler, Claudia Lusch and Doris Eikhof for their invaluable support in organising the symposium. We acknowledge the helpful critical comments by Nils Brunsson, Alfred Kieser, Dirk Baecker, Werner Kirsch and Günther Ortmann on the concept of this book and earlier versions of the manuscript. To Steward Clegg, editor of the series Advances in Organization Studies, we owe thanks for his confidence, good advice and patience. We are grateful to Artemis Gause for her careful and thorough way of doing the language editing. We thank Andreas Kuhn, Moritz Putzer and Andreas von Ritter-Zahony for their patience and dilligence in checking the final manuscript. Finally, we are thankful to our contributors for placing confidence in the project and their positive spirit of cooperation in face of the numerous and often substantial revisions that we suggested. Munich and London, Autumn 2005 David Seidl and Kai Helge Becker

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Introduction: Luhmann’s Organization Theory David Seidl and Kai Helge Becker

Niklas Luhmann (1927–1998) was without doubt one of the most interesting social thinkers of the twentieth century. Not only in German-speaking countries, but, meanwhile, also among researchers in the English-speaking academic world, Luhmann’s work is considered of equal rank and standard to that by such prominent social theorists as Bourdieu, Giddens, Habermas and Foucault. Drawing on very diverse strands of thinking within sociology and philosophy, and combining them with research in cybernetics, chaos theory, and biology, Niklas Luhmann developed a very distinctive and challenging new way of theorising about the social, which has stimulated research in various academic fields such as media studies, the political sciences, theology, philosophy, literature, pedagogics, sociology, and particularly in organization studies. Until very recently, most of this research was conducted almost exclusively in German-speaking countries while hardly any efforts were made anywhere else. In the last few years, however, there has been a growing interest in Luhmann’s ideas among European organization-theorists: his works are increasingly referenced also in international journals of organization studies. Yet the gap between the various levels of research is still enormous. In view of that, efforts to introduce Luhmann’s approach and the existing research to the international community of organization scholars seem long overdue. As a first step towards this objective, this book will explain the basic concepts of Luhmann’s theory and will demonstrate its potential for studying organizations.

Some important aspects of Luhmann’s theory In view of the innovative character of Lumann’s work and the variety of new concepts that he developed, it is simply not possible to provide a meaningful summary of Luhmann’s achievements in this introduction. In fact, this entire volume is intended to demonstrate the exuberance of ideas that can be found in Luhmann’s writings and the novel perspectives they have to offer, even on well-known phenomena. Nevertheless, we want to highlight here at least some general aspects of his systems theory that we consider to be of particular importance. 8

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Probably the most striking among Luhmann’s conceptual achievements – which is also the most controversial aspect of his work – is the development of a theory that clearly differentiates between social and psychic phenomena. The social and the psychic domains are conceptualised as two clearly demarcated systems with no overlap of any kind: in other words, “social systems” and “psychic systems” constitute “environments” for each other. While at first it may seem completely counterintuitive, this conceptualisation allows us to analyse the social – and the logic of the social (hence also organizations) – in its own right, thereby shedding light on the genuine dynamics that social phenomena possess, independently of individual psychic processes. This does not mean, however – and this is where the controversy started – that the human being (the psychic system) is considered irrelevant to the social system; on the contrary, as Luhmann stressed over and over again, it only underlines the relevance of the two systems for each other. A second aspect that deserves to be mentioned is Luhmann’s specific kind of constructivist epistemology, which is closely linked with his concept of social and psychic systems. In particular, it focusses on the schemes of meaning, or “distinctions”, that social (and psychic) systems employ to make sense of themselves and their surroundings. When it comes to analysing the form and functioning of organizations and the processes of decision making, this approach leads to a range of interesting new insights into the way in which organizations construct themselves, establish their boundaries, and observe their environments. A third point that merits attention is that, on the basis of his general theory of social systems, Luhmann has developed an extensive theory of modern society. In short, his approach accounts for the different kinds of rationality, or rather internal logics, that underlie the different domains of modern society, such as the economy, politics, religion, science, or art. This perspective provides a framework for analysing the various kinds of relationships between organizations and their societal environment as well as between different parts of modern society and their specific types of organization. Fourth, in conjunction with the aspects mentioned above, Luhmann has also managed to develop his own innovative concepts to go beyond many of the traditional dichotomies that have troubled social theorists for so long. On the basis of his unique way of theorising social phenomena, Luhmann provides new insights into theoretical issues such as micro/macro, structure/process, structure/action, continuity/change, and consensus/conflict. A fifth aspect must be considered of particular significance in the context of the present volume: Luhmann was not only a sociologist who has developed a unique perspective on social phenomena in general, and modern society in particular, but, in contrast to other social theorists, he has also contributed directly to organization studies. During the past decades, the classi9

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cal notion of organization as static and hierarchical entities that coordinate labour in a rational way has increasingly been seen as inadequate for accounting for the variety of organizational phenomena. Building on his general theory of social systems Luhmann has developed his own perspective on organizations that offers an original, inspiring and elaborated alternative to approaches that are meanwhile considered unsatisfactory. A final achievement of the theory that we would like to stress here is its self-referentiality. Since the theory aims at including all aspects of the social, it consequently has to include also itself. In other words, the theory does not claim the position of an extramundane observer, but treats itself also as a social phenomenon in need of an explanation. Accordingly, the concepts of Luhmann’s theory are such as to allow us to analyse – and relativise – the very theory itself as a social phenomenon that takes place in the social domain.

The reception of Luhmann’s work on an international level In view of all that, and given the fact that Luhmann’s theory has been a classical topos of even undergraduate courses in sociology within Germanspeaking countries for more than a decade, it appears very surprising that his works have received comparatively little serious attention within the international field of organization studies. In addition to the language barrier and the time necessary for translating his works into English, the main reasons for the rather hesitant reception so far probably lie in the theory itself. One reason is certainly the complexity of Luhmann’s works and the enormous amount of topics and theoretical traditions they cover, which make it very difficult for first-time readers to access his works unaided by commentaries. Moreover, Luhmann developed a very distinctive terminology to express his concepts, which presents an additional hurdle. Because of that, it is often said that when starting to read Luhmann it takes a hundred to two hundred pages before one actually understands anything. This is quite a big investment in time and effort, considering that one can never really know beforehand what one will get out of it. As a first step towards removing the reservations towards Luhmann’s works, this book aims at introducing Luhmann’s way of theorising and at demonstrating its potential for organization and management research. For this purpose the book provides, on the one hand, a detailed, step-by-step introduction to Luhmann’s theory of social systems in general and his organization theory in particular, in which his central concepts and ideas will be carefully outlined. On the other hand, it demonstrates how this theory might be fruitfully applied to different areas and questions of organization and 10

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management studies. In this way the potential of Luhmann’s theory for providing new perspectives on issues of organization and management and for generating a rich variety of challenging new insights in these areas will hopefully be revealed.

The structure of Luhmann’s œuvre Luhmann’s œuvre, which comprises more than seventy books and several hundred articles, can be divided into two parts: the early Luhmann before, and the late Luhmann after the so-called “autopoietic turn”, which took place in the early 1980s. His early writings can be characterized as an adaptation and further development of the works of Talcott Parsons, whom he met personally during his stay at Harvard University in 1960–1961. By contrast, in his late writings Luhmann developed his own “grand theory” with its characteristic and often very bold way of theorising. Although he had already been a widely recognized sociologist in German-speaking countries since the beginning of the 1970s, Luhmann himself referred to his early works as merely a “series of nils in [his] theory production” (Luhmann 1987a, p. 142). In line with that view, this book will mainly focus on the later stage of his work. The starting point of Luhmann’s late theory can be seen in his concept of the autopoietic system. An autopoietic system is a system that reproduces its own elements on the basis of its own elements. Luhmann took this originally biological concept, modified it, and applied it to the social sciences. For him the social domain has to be conceptualised as consisting of autopoietic social systems, which reproduce themselves self-referentially on the basis of their own specific logic. This concept allowed Luhmann to draw on the existing body of social theory and to reorganise it in such a way as to gain completely new insights into the functioning of the social. Luhmann wrote about the concept of autopoiesis: “Autopoiesis, as a concept, has no empirical explanatory value. Its potential lies rather in the fact that it forces other concepts into adaptation” (Luhmann 2000c, p. 49; our translation). This can be clearly seen in Luhmann’s organization theory. While Luhmann drew heavily on the classical theories by Herbert Simon, James March and the like, he produced a very innovative new theory, whose implications were at times diametrically opposed to the conclusions of his predecessors. With regard to its subject, Luhmann’s late oeuvre can be divided into two parts: on the one hand, there is his theory of social systems in general, where Luhmann developed his unique perspective on social phenomena. In those works he elaborated the general notion of social systems as self-reproducing systems consisting of communications. Here, his descriptions and explanations deal with a variety of social phenomena on a rather abstract

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level and are unspecific with regard to the different types of social systems. The central book in this area is Social Systems (1995f), which was originally published in German in 1984. On the other hand, there are his theories that focus on the different types of social systems. In these works the general theory of social systems is specified with regard to the different types of system: society, interaction and organization. Of those three, the societal system occupies by far the greatest part. Not only did Luhmann write about society as an autopoietic social system – the main book here being his Gesellschaft der Gesellschaft (1997a) – but he also wrote separate books on the different sub-systems of society, which were themselves conceptualised as autopoietic systems. There are, for example, works on the system of economy (Die Wirtschaft der Gesellschaft 1988a), on the system of science and humanities (Die Wissenschaft der Gesellschaft 1990c), on the system of art (Art as a Social System 2000d), on the political system (Die Politik der Gesellschaft 2000b), on the system of religion (Die Religion der Gesellschaft 2000d), on the system of education (Das Erziehungssystem der Gesellschaft 2002a), and on the legal system (Law as a Social System 2004). In contrast to the societal system, the interactional system, as the second type of social system, received comparatively little attention. Luhmann wrote merely a couple of articles on them. The most important book on interaction systems, Kommunikation unter Anwesenden (1999), was eventually written by André Kieserling as a PhD thesis under Luhmann’s supervision. The organization, as the third type of social system, occupies a special place in Luhmann’s oeuvre: in his earlier career, Luhmann had worked in public administration for several years and much of his early theory was based on his own experiences there. In fact, he began his life as a sociologist by publishing eight books on public administration and organization between 1963 and 1969. Two of these, Funktionen und Folgen formaler Organisation (“Functions and consequences of formal organization”), published in 1964, and Zweckbegriff und Systemrationalität (“The concept of ends and system rationality”), published in 1968, are considered milestones in organization studies, as they anticipated many important issues that have only recently started to receive appropriate attention. From the groundwork of those early publications, Luhmann gradually shifted the focus of his research to the project of his “grand theory” – however , without ever completely abandoning his interest in organization. It might be justified to say that Luhmann’s general sociological approach is strongly influenced by his detailed knowledge of organization on both the theoretical and the practical level. Towards the end of his life Luhmann eventually revisited and rewrote his former publications on organization theory, now on the basis of his theory of autopoiesis, thereby integrating the former into the framework of 12

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his grand theory. The result of this was published posthumously in 2000 under the title Organisation und Entscheidung (“Organization and decision”).

The contents of this book As the content of the first chapter is taken for granted in the later parts of the book, readers who are not familiar with Luhmann’s theory are strongly advised to read that first before going to other parts.

Part I of this book is dedicated to Luhmann’s theory of social systems in general. The first chapter, “The Basic Concepts of Luhmann’s Theory of Social Systems” (David Seidl), provides a general introduction to and overview of Luhmann’s theory. Here, his central concepts are introduced and carefully explained. The chapter starts off with an account of the originally biological concept of autopoiesis and Luhmann’s modification of it as a transdisciplinary concept, which is equally applicable to psychic and social phenomena. The second section of the chapter focuses on the application of the concept of autopoiesis to the social domain. For Luhmann, social systems are communication systems which reproduce themselves self-referentially. This conceptualisation is based on two other important concepts: first, Luhmann has a very particular definition of communication. In contrast to the standard notion, communication is not conceptualised as the transmission of meaning from a sender to a receiver but as an emergent phenomenon arising from the interaction between different human beings. As such, communications are not the “product” of individual human beings but of their interaction. Second, Luhmann clearly distinguishes between social systems and human beings (psychic systems): social systems reproduce themselves on the basis of communications, and psychic systems on the basis of thoughts. Both systems are operatively closed to each other and can merely cause mutual perturbations in each other. In the following two sections the three types of social systems are described: society, as the all-encompassing communication system which includes the other two types of system; (face-to-face) interaction, as the social system consisting of communications that are based on the perception of the physical presence of the participants; and organization, as the system consisting of decision communications. The chapter closes with a description of Luhmann’s reading of the calculus of distinction, which was developed by the British mathematician George Spencer Brown, and on which Luhmann drew heavily in his latest writings. It should be mentioned that this last section is not absolutely vital for understanding the central aspects of Luhmann’s theory, and for that purpose might be skipped; reading it, however, might help appreciate the finer details of his writings. 13

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The second chapter, “The Concept of Autopoiesis” (Niklas Luhmann), is a translation of a chapter from Organisation und Entscheidung. In this text Luhmann provides a very concise and clear description of his general concept of autopoiesis. This text is generally considered as the best explanation of that concept. In the third chapter, “The Autopoiesis of Social Systems” (Niklas Luhmann), Luhmann shows how the concept of autopoiesis can be applied to social systems. After the general introduction of Luhmann’s systems theory in the first part of the book, Part II focuses on Luhmann’s organization theory. Three concepts form the core of this theory: decision, organization and paradox. These concepts will be introduced and critically discussed, and their potential for empirical research will be demonstrated. According to Luhmann, organizations have to be conceptualised as systems reproducing themselves on the basis of decisions; they are nothing other than a network of decisions. However, the notion of “decision”, as Luhmann has shown, is basically paradoxical: decisions are ultimately undecidable. Thus, Luhmann places a paradox at the heart of his organization theory. Consequently, all issues in organization studies are somehow or other shown to be ways of handling, or symptoms of, this paradox. The first chapter of the second part, “The Paradox of Decision Making”, is a paper by Niklas Luhmann himself that was published in German in 1993 and has never appeared in English before now. In this text Luhmann develops his concept of “decision” as a paradoxical communication. This serves as a starting point for unfolding his entire organization theory. The following chapter, “Displacing the Paradox of Decision Making” (Morten Knudsen), demonstrates how Luhmann’s concept of decision as paradoxical communication can fruitfully be applied to empirical research on organizations. On the basis of an in-depth case study of the changes in the Danish health-care system, the chapter shows how the paradox of decision is handled differently under different circumstances. Apart from its insights in organizational change, the text provides a host of examples of the practical implications of Luhmann’s theory. In the last chapter of this part, “On Gorgon Sisters: Organizational Action in the Face of Paradox” (Barbara Czarniawska) Luhmann’s concepts of (organizational) paradox and deparadoxification are discussed and compared with those of other writers – in particular with those of Lyotard. The chapter shows that paradoxes, if faced, lead to paralysis. The chapter discusses strategies for evading the paralysing effects of paradoxes. In order to demonstrate the fruitfulness of this way of theorising, the concepts are applied to an empirical case from the Swedish public sector. Following the elucidation of Luhmann’s organization theory in the second part, Part III focuses on the relation between organization and the other two types of social systems: interaction and society. The first chapter, 14

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“Organization and Interaction” (David Seidl) explores how the relation between organization and interaction system can be conceptualised. On the basis of Luhmann’s writings about the two types of system and his few remarks on their interrelation, a systematic account of interactions within and around organizations is developed. Apart from elaborating on an almost neglected aspect of Luhmann’s theory, the chapter makes a valuable contribution to research on organizational interactions in general. The following chapter, “Organization and Society” (Thomas Drepper), attempts to clarify the relationship between organization and society. Proceeding from a critique of classical organization theory, numerous aspects of the relationship between both kinds of system are discussed and brought together from various parts of Luhmann’s oeuvre. In this way, the chapter provides a comprehensive overview of the subject as covered in Luhmann’s theory of social systems. In the last chapter of this part, “The Design of Organization in Society” (Dirk Baecker), the relation between organization and society is addressed a second time. However, rather than presenting Luhmann’s own theorising about their relation, the chapter presents an attempt to take Luhmann’s organization theory a step further, first, by systematically basing it on the calculus of distinctions by Spencer Brown, and second, by using it as a starting point for a societal theory of organization. Organizational design is thereby presented as a mechanism of structural coupling between organizational communication (social system) and perception (psychic system). While this chapter might prove a difficult read for people without prior knowledge of Luhmann’s theory, it nevertheless provides an excellent example of the way in which certain scholars work on developing Luhmann’s theory further. As the chapter draws on the calculus of distinctions, the readers not familiar with it are strongly advised to read beforehand the relevant sections of the first chapter in this volume, in which the calculus is briefly introduced and explained. In Part IV Luhmann’s organization theory is being confronted with and compared to other strands of theorising in organization studies. By addressing the similarities and differences of systems theory with other approaches, the chapters in this part aim at making transparent the particularities of Luhmann’s theory. Moreover, this part addresses the strengths and weaknesses of the theory of social systems as well as possibilities for combining it with other theoretical traditions. In the first chapter of this part, “Luhmann’s Systems Theory and Theories of Social Practices” (Kai Helge Becker), Luhmann’s approach is contrasted with a strand of social theory that has received particular attention within organization studies in the past few years: theories based on the notion of “social practice”. At first, the chapter shows that systems theory and theories of social practices have two basic assumptions on the nature of social 15

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phenomena in common: their focus on culture and the theoretical move of the “de-centring of the subject”. Proceeding from these insights, it compares the ways in which both strands of theorising conceptualise some social theoretical fundamentals, namely agency, structure, the role of material phenomena and the body. In doing so the chapter aims at providing a better understanding of the conceptual logic inherent in Luhmann’s theory. Moreover, on the basis of assessing the particular strengths and weaknesses of both systems theory and practice-based approaches, it is argued that these two strands of theorising can be seen as complementary perspectives. In the second chapter, “Systems Theory and New Institutionalism” (Raimund Hasse), Luhmann’s theory is compared to another strand of theorizing that has become particularly influential in recent times: the New (Sociological) Institutionalism. The chapter addresses in particular the macro-sociological aspirations of both systems theory and the New Institutionalism and shows the differences in perspective that characterise the two approaches. Moreover, it is argued that systems theory offers a micro-foundation of organizational processes that can complement the institutionalist approach. The following chapter, “Luhmann’s Systems Theory and Postmodernism” (Jochen Koch), shows that the widely held assumption, that Luhmann’s theory is an exemplar of modernist (in contrast to postmodernist) thinking, is inappropriate. Proceeding from the typical characteristics of postmodern epistemology, it carefully elaborate that fundamental aspects of Luhmann’s approach have strong parallels in postmodern theorizing. The chapter identifies areas of commonality and of difference between the logic underlying Luhmann’s systems theory and postmodern theorising. The last chapter of this part, “Luhmann’s Systems Theory and Network Theory” (Veronika Tacke), confronts Luhmann’s systems theory with the network approach in organization studies. The term “network” has become one of the most widespread – and even most fashionable – terms within organization research and is sometimes presented as being at odds with the conceptualisation of organizations as “systems”. Drawing on some of the insights of the network approach, the chapter takes up this issue and demonstrates that Luhmann’s concept of systems theory not only does not contradict the idea of networks, but can even serve as a common frame of reference that allows the integration of insights of both network theory and other strands of organization theory. While the first four parts of the book aimed at explaining Luhmann’s systems theory in general and his organization theory in particular and at placing it in the context of other important strands of theorising, the following two parts will demonstrate the application of the theory to concrete research questions. Part V shows how different forms of organization can be analysed on the basis of Luhmann’s systems approach. 16

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In the first chapter, “Analysing Forms of Organization and Management” (Fritz Simon), Luhmann’s systems theory is used for comparing two different types of companies: stock companies and family businesses are distinguished on the basis of the specific ways in which they observe (construct) their relevant environments, i.e. the ways in which they represent the system/environment distinction internally. The second chapter in this section, “On Defining the Multinational Corporation” (Darnell Hilliard), discusses the concept of the multinational corporation from a systems-theoretical perspective. The “multinationality” of an organization is redescribed as the specific way in which an organization observes its environment. On the basis of such an approach, it can be shown that the concept of “multinationality” is itself ambiguous and, in view of current societal developments, inappropriate. Instead of the “multinational corporation” the concept of the “world corporation” is suggested to describe a corporation that observes (constructs) its environment as a single horizon of worldwide business opportunities and risks. In Part VI the potential of Luhmann’s theory for questions of management and consulting is demonstrated. Since Luhmann himself has written very little on those issues, these chapters have to be read as possible applications of Luhmann’s theory. The first chapter of this part, “Communication Barriers in Management Consulting”, is a text by Niklas Luhmann that was published in 1989 in German and has been translated for the purposes of this book. In this text Luhmann describes the implications of conceptualising the organization as an autopoietically closed system for management consulting. According to Luhmann’s theory, consulting firms and their client organizations have to be conceptualised as operatively closed to each other. As a consequence, consulting firms have no means of influencing any organizational processes directly – despite what they claim. They can, however, cause perturbations in their client systems, triggering internal processes in the systems themselves. Yet, the outcome of this process is beyond the consulting firms’ control. The second chapter in this section, “Strategic Management from a Systems-Theoretical Perspective” (Jan-Peter Vos), uses Luhmann’s theory to analyse the self-referential logic of strategic management. It argues that the existing approaches to strategy fail, as they are not aware of – or if they are, deny – the circularity of their underlying logic: organizations are only defined through their environment and the environment is only defined through the organization. Since organization and environment recursively constitute each other, organizations cannot find a starting point for defining their strategies – ultimately, any starting point would necessarily be arbitrary. In contrast to the existing approaches, Luhmann’s theory is shown

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to offer the possibility of developing a theory of strategy, in which the recursive constitution of organization and environment is acknowledged. In the last chapter, “Management Accounting from a Systems-Theoretical Perspective” (Tobias Scheytt), the perspective of Luhmann’s systems theory is used for criticising the traditional view of management accounting as representing the organizational world in a neutral and objective way. Instead, it is argued that management accounting produces context-dependent observations, which constitute constructions about the organization by the organization itself. In systems-theoretical terms, management accounting can be conceptualised as an internal representation (re-entry) of the system/environment distinction within the system. As such, these observations can be shown to be paradoxical, requiring particular mechanisms for handling them. Finally, Part VII offers a useful glossary of the central terms in Luhmann’s theory and an annotated bibliography of selected books and articles by Niklas Luhmann.

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PART I The Theory of Autopoietic Social Systems

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Chapter 1

The Basic Concepts of Luhmann’s Theory of Social Systems David Seidl

The central concept around which the theory of social systems, as developed by the later Niklas Luhmann, is built is the concept of autopoiesis, originally developed by the two Chilean biologists Humberto Maturana and Francisco Varela. Autopoiesis (< Greek: autos = self; poiein = to produce) means self-(re)production. Thus, autopoietic systems are systems that reproduce themselves from within themselves, as for example a plant reproduces its own cells with its own cells. Luhmann argued that the basic idea of autopoiesis applied not only to biological but also to a large number of nonbiological systems. He thus appropriated the originally biological concept, modified it and applied it to the social domain. In a similar way to biological systems, social systems were thus conceptualised as systems that reproduced their own elements on the basis of their own elements. In this chapter, Luhmann’s concept of autopoietic social systems will be introduced, starting with the originally biological concept of autopoiesis by Maturana/Varela and Luhmann’s modification of it as a general systems concept (first section). Luhmann’s concept of social systems as a specific type of autopoietic system will then be explained on that basis (second section). The third and fourth sections will describe and explain the three existing types of social systems: societal system, interaction system and organizational system. In the fifth section the mathematical calculus of distinction by George Spencer Brown will be introduced, which Luhmann drew on extensively in his later writings, and its relevance to Luhmann’s theory will be shown. Readers who just want to gain a basic understanding of Luhmann’s theory might skip this last section.

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The concept of autopoiesis a. The original biological concept of autopoiesis The theory of autopoiesis was developed by the two Chilean cognitive biologists Humberto Maturana and Francisco Varela in the sixties and early seventies. They were trying to answer the question: What is life? Or: What distinguishes the living from the non-living? Their answer was: A living system reproduces itself. This self-reproduction they referred to as autopoiesis. They defined the autopoietic system as a system that recursively reproduces its elements through its own elements. Central to the concept of autopoiesis is the idea that the different elements of the system interact in such a way as to produce and reproduce the elements of the system. That is to say, through its elements, the system reproduces itself. A living cell, for example, reproduces its own elements. Proteins, lipids etc. are not just imported from outside: Consider for example the case of a cell: it is a network of reactions which produce molecules such that (i) through their interaction [they] generate and participate recursively in the same network of reaction which produced them, and (ii) realize the cell as a material unity. (Varela et al. 1974, p. 188)

In contrast to allopoietic systems (< Greek: allos = other; poiein = to produce), the elements of autopoietic systems are not produced by something outside the system. All processes of autopoietic systems are produced by the system itself and all processes of autopoietic systems are processes of selfproduction. In this sense, one can say that autopoietic systems are operatively closed: there are no operations entering the system from outside nor vice versa. A system’s operative closure, however, does not imply a closed system model. It only implies a closure on the level of the operations of the system in that no operations can enter or leave the system. Autopoietic systems are, nevertheless, also open systems: all autopoietic systems have contact with their environment (interactional openness). Living cells, for example, depend on an exchange of energy and matter without which they could not exist. The contact with the environment, however, is regulated by the autopoietic system; the system determines when, through what channels, and what type of energy or matter is exchanged with the environment (of course there are certain external forces that might influence the system directly – e.g. radioactive radiation might destroy parts of the system – but these influences can never determine what operations come about). This simultaneous (interactional) openness and (operative) closure of the autopoietic system becomes particularly important when considering cognitive processes. For Maturana and Varela the concept of living is directly linked to the concept of cognition. 22

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Living systems are cognitive systems, and living as a process is a process of cognition. (Maturana and Varela 1980, p. 13)

In this sense, the operations of an autopoietic system are defined as its cognitions; life and cognition are one and the same. Hence, everything that has been said about life applies equally to cognition: cognition is a selfreferential, autopoietic process. This stance is generally known as Radical Constructivism (also: Operative Constructivism) and expresses the idea that all cognitions (ideas) are constructs of the respective cognitive system and do not in any way reflect any kind of external reality. In the light of this, we might take a further look at the relation between system and environment. The operative closure of the cognitive system means that the environment cannot produce operations in the system. Cognitions are only produced by other cognitions of the same system. The operative closure does not, however, imply a solipsistic existence of the system; on the contrary. As Maturana and Varela argue: operative closure is a precondition for interactional openness. On the level of its operations, the autopoietic system does not receive any inputs from the environment but only perturbations (or “irritations”), which then might trigger internal operations in the system. In other words, external events may trigger internal processes but cannot determine those processes. In this respect, Luhmann (2000c, p. 401) speaks of a “trigger-causality” [Auslösekausalität] instead of an “effect-causality” [Durchgriffskausalität]. For example, if one puts one’s finger on the flame of a candle, the rapid movement of the atoms in the flame will trigger an electric impulse in the nervous system, which will lead to the cognition of “heat”. Thus, what can be seen very clearly in this example is the clear distinction between cognitive system and environment. The events in the environment do not enter the cognitive system; the rapid movement of the atoms triggers operations in the system that are qualitatively completely different. This triggering is only possible because the system has produced specific structures, that is to say, nervous sensors, which can be stimulated by the rapid movement of electrons (in the same way as they would be stimulated e.g. by acid). From this the nervous system constructs the sensation of heat – the heat does not exist in the flame; in the flame we only have the rapid movement of atoms. If the eye, for example, was moved into the direction of the flame, due to the specific structures of the nervous system in the eye, the nervous system would construct the experience of light and specific colours. Again, light and colours as such do not exist in the flame; in the flame there are merely electromagnetic waves. The theory of autopoiesis clearly distinguishes between, on the one hand, the reproduction of the system as such, and on the other hand, the structures according to which this reproduction takes place: in order to “survive”, an autopoietic system has to produce constantly further elements. If this

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(re-)production stops, the system disappears. For instance, if a plant stops producing its cells it is considered dead. It is irrelevant what concrete cells are produced; whether the plant produces a new leaf, extends its roots or grows a blossom does not matter – as long as any new elements are produced the plant is still alive. The fact of the reproduction as such – independently of the concrete elements reproduced – is referred to as the autopoiesis of the system. The likelihood of the continuation of reproduction, however, depends on the concrete elements reproduced. For example, if a flower stops producing leaves and instead only extends its roots it looses its viability; that is to say, its ability to produce any further elements at all. What concrete elements are produced at any moment is determined by the structures of the system (the system in this sense is structurally determined): for example, the stem of the plant restricts where new leafs can grow. The structures themselves, however, are not pre-given in any sense, as in structuralist theories, but are themselves the product of the autopoietic system. In other words, in its reproduction the system produces and reproduces its very own structures of reproduction. This aspect, i.e. the selfdetermination of its own structures, is referred to as self-organization. Thus, while autopoiesis refers to the reproduction of elements as such, self-organization refers to the determination of structures (Luhmann 2000c, p. 47). A central element within the theory of autopoiesis is the concept of structural coupling, which refers to the relation between systems and their environments. As explained above, environmental events can trigger internal processes in an autopoietic system but the concrete processes triggered (and whether any processes are triggered at all) are determined by the structures of the system. For example, some animals have certain neuronal structures that allow certain electromagnetic waves in their environment to trigger internally the sensation of certain colours; other animals, again, possessing other structures might not be stimulated by such waves or might be stimulated by them in other ways. A system is said to be structurally coupled to its environment (or to other systems in its environment) if its structures are in some way or other “adjusted” to the structures of the environment (or to systems in the environment); in other words, if the structures of the system allow for reactions to “important” environmental events. For example, animals living above ground are structurally adapted to a different environment from those living underground. The former have structures that can be stimulated by electromagnetic waves, which leads to different impressions of colour, while the latter might have structures that can be more easily stimulated by vibrations, which leads, respectively, to equally differentiated impressions.

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b. Luhmann’s general, transdisciplinary concept of autopoiesis There have been many attempts by social scientists to apply the concept of autopoiesis to the social domain (for an overview of different applications see Mingers 1995). Most of them, however, failed as they had tried to transfer the original concept directly from one domain to the other. In contrast to most others, Luhmann did not apply the original concept directly to the social domain but (in line with the general systems tradition) tried to abstract from the originally biological concept of autopoiesis a general, transdisciplinary concept of autopoiesis. This transdisciplinary concept of autopoiesis should then be open to re-specifications by the different disciplines, e.g. sociology, biology, psychology. In this respect, Luhmann wrote: [I]f we abstract from life and define autopoiesis as a general form of systembuilding using self-referential closure, we would have to admit that there are non-living autopoietic systems, different modes of autopoietic reproduction, and general principles of autopoietic organization which materialize as life, but also in other modes of circularity and self-reproduction. In other words, if we find non-living autopoietic systems in our world, then and only then will we need a truly general theory of autopoiesis which carefully avoids references which hold true only for living systems. (Luhmann 1986b, p. 172)

Luhmann suggests that we speak of autopoiesis whenever the elements of a system are reproduced by the elements of the system itself. This criterion, as he points out, is also met by non-biological systems. Apart from living systems, Luhmann identifies two additional types of autopoietic systems: social systems and psychic systems. While living systems reproduce themselves on the basis of life, social systems reproduce themselves on the basis of communication, and psychic systems on the basis of consciousness or thoughts, their elements are not physical substances but elements of meaning (for explanations see below). Furthermore, social systems can be differentiated into the three subtypes: societies, organizations and interactions (Figure 1).

1. Level

2. Level

Autopoietic Systems

Living Systems

Psychic Systems

3. Level

Societies

Social Systems

Organizations

Interactions

Figure 1: Types of autopoietic systems.

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On the basis of this typology of systems one can derive a hierarchy of three levels of analysis. On a first level we find statements which concern autopoietic systems in general without reference to any particular mode of reproduction. On this level we can find the general concept of autopoiesis. Statements on this level are equally valid for living as for psychological and for social systems (and their subtypes). On a second level we find different applications of the general theory of autopoiesis. There are three such areas: research concerned with the particular characteristics of (1) living systems, (2) psychic systems, and (3) social systems. Most of Maturana’s and Varela’s research can be placed on the level of living systems. It produces general statements concerning living systems, which, however, are not applicable to social or psychic systems. Psychological research is concerned with the particularities of systems that are reproduced on the basis of consciousness. Sociological research on this level is concerned with the particularities of systems that reproduce themselves on the basis of communication. Statements produced in this area concern all three types of social systems. On a third level one can find research in the social field concerning the particularities of societies, organizations, and interactions. That is to say, for each type of system the particular mode of reproduction has to be defined and the consequences of the particular mode of reproduction analysed. Thus, for social research in particular, one can find four different areas of research: research on the general level of social systems (e.g. Luhmann 1995a) and research on the particular types of social systems – on societies (e.g. Luhmann 1997f), on organizations (e.g. Luhmann 2000c), and on interactions (e.g. Luhmann 1993j, pp. 81–100). Against the backdrop of categorisation of analytical levels, the transformation of the original autopoiesis concept to a concept applicable to the social domain becomes clear. Instead of being transferred directly from the field of biology into the field of sociology, the concept is first abstracted to a general concept on a transdisciplinary level, and then re-specified as social autopoiesis and the autopoiesis of particular types of social systems. We cannot examine the abstraction of the concept of autopoiesis in detail here, but merely want to highlight two important modifications: the temporalisation and de-ontologisation of the concept of element (if this modified, general concept of autopoiesis were to be re-applied to the biological domain, Maturana’s and Varela’s original theory would have to be modified accordingly). Luhmann’s general concept of autopoiesis radicalises the temporal aspect of autopoiesis. While Maturana and Varela originally conceptualised the elements of their biological systems as relatively stable chemical molecules, which have to be replaced “from time to time”, Luhmann conceptualises the elements as momentary events without any duration. Events have no

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duration but vanish as soon as they come into being; they “are momentary and immediately pass away” (Luhmann 1995f, p. 287). Events are elements fixed as points in time. […] They occur only once and only in the briefest period necessary for their appearance (the “specious present”). (Luhmann 1995f, p. 67)

Through this shift from a reproduction of relatively stable elements, to a reproduction of momentary events, Luhmann radicalises the concept of autopoiesis. Because the elements of the system have no duration the system is urged to produce constantly new elements. If the autopoiesis stops, the system disappears immediately. In addition to temporalisation, Luhmann deontologises the concept of element. Elements are defined as elements merely through their integration into the system. Outside or independently of the system they have no status as elements; that is to say, they are “not ontically pre-given” (Luhmann 1995f, p. 22). Elements can, of course, be made up of different components, which could be analysed independently of the system, but as elementary units they are only defined through their relation to other elements and (in this sense) through the function they fulfil for the system as a whole. Luhmann writes: [W]e have deontologized the concept of element. Events […] are not elements without substrate. But their unity corresponds to no unity in the substrate; it is created in the system through their connectivity. Elements are constituted by the systems that are composed of them […]. (Luhmann 1995f, p. 215)

As a consequence of deontologising the concept of element, the concept of “production” (as in “self-reproduction”) gets a functional meaning. “Production” refers to the use of an element in the network of elements. The important point in this conceptualisation is that the element and the use of the element are not two different issues, but two sides of the same coin. It is not that we first have the element and then the system makes use of it: only by being used, i.e. by being related to other elements, does the element become an element. Thus, one can say: the element is produced as a result of being used (Luhmann 1997a, pp. 65–66). One can, of course, analyse the substratum, on which an element rests, and find a whole range of causal factors that are involved in bringing the element about, but the particular unity, as which the element functions in the system (i.e. the characteristics that make it an element of the system), can only be produced by the system itself.

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Social systems a. Communications as the elements of social systems The first decision Luhmann as a theoretician had to make for constructing his general sociological theory of autopoiesis (which on this level of analysis is still unspecific with regard to the three types of social systems: society, organization, interaction) was, what he should treat as the basic elements of the social system. The sociological tradition suggests two alternatives: either persons or actions. Luhmann rejected both as incompatible with the concept of autopoietic social systems. Instead, he chose a completely different element: communication (or more precisely: the communicative event), suggesting a “conceptual revolution” (Luhmann 1986b, p. 178). He writes: Social systems use communications as their particular mode of autopoietic reproduction. Their elements are communications which are recursively produced and reproduced by a network of communications and which cannot exist outside of such a network. (Luhmann 1986b, p. 174)

In order to understand this conception of social systems, we have to clarify Luhmann’s concept of communication, which differs considerably from the conventional notion of communication as an asymmetrical process of transferring meaning or information from a sender to a receiver. Building on the speech theories of Karl Bühler (Bühler 1934), Luhmann conceives of communication as a combination of three components: (1) information, (2) utterance and (3) understanding, each of which Luhmann conceptualised as a selection. In accordance with Shannon and Weaver (1949) he defined information as a selection from a repertoire of possibilities. Every communication selects what is being communicated from everything that could have been communicated. With utterance Luhmann refers to the form of and reason for a communication: how and why something is being said. One can say, the utterance is the selection of a particular form and reason from all possible forms and reasons. Understanding is conceptualised as the distinction between information and utterance. For a communication to be understood, the information has to be distinguished from the utterance: what is communicated must be distinguished from how and why it is communicated. For example, if alter says to ego: “I am tired”, ego has to distinguish the information (“I am tired” and not e.g.: “I am very energetic”) from the utterance (the words alter is using and the reason why alter is saying it: for example, here alter wants to indicate that ego should leave him alone; he is not saying it in order to get any advice on what to do about his tiredness). Thus, understanding can be defined as a selection of a particular distinction between utterance and information.

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While most communication theories refer only to the first two elements – information and utterance – in Luhmann’s concept, the third element – understanding – plays a central role. Instead of approaching a communication from an “intended meaning” of the communication, Luhmann reverses the perspective: (the meaning of) a communication is ultimately determined through the understanding. Luhmann (1995, p. 143) writes: “Communication is made possible, so to speak, from behind, contrary to the temporal course of the process.” This is also called the “principle of hermeneutics”: [This principle states] that not the speaker but the listener decides on the meaning of a message, since it is the latter whose understanding of the set of possibilities constrains the possible meaning of the message, no matter what the speaker may have had in mind. (Baecker 2001, p. 66)

A central point in Luhmann’s concept of communication is that the three selections form an “insoluble unit”; undoubtedly, this unit can be divided analytically into its three components (for example by other communications), but only as a unit does it constitute a communication. Because of that, a communication – as this unity of the three selections – cannot be attributed to any one individual (psychic system). Instead, communication constitutes an emergent property of the interaction between many (at least two) psychic systems. As Luhmann writes: Communication is a genuinely social – and the only genuinely social – operation. It is genuinely social insofar as it presupposes the involvement of a multitude of psychic systems but, or better: because of that, it cannot be attributed as a unit to a single psychic system. (Luhmann 1997a, p. 81; my translation)

Thus, although psychic systems are necessarily involved in bringing about communication, the communication (as this unit) cannot be understood as the product of any particular psychic system. In order to render more precise Luhmann’s concept of communication we have to take another, closer look at his concept of understanding. Understanding, as we said above, is the distinction between utterance and information; but whose understanding is of relevance here? Again, for Luhmann it is not the psychic system that is of interest. Instead, it is the understanding implied by the ensuing communications – in the same way as the concrete meaning of a word in a text is only defined through the words following it in the text. Thus, the meaning of a communication, i.e. what difference a communication makes for later communications, is only retrospectively defined through the later communications. For example, whether a “Yes” is understood as approval or as a question or as a neutral acknowledgement of the given information is only determined through the reaction 29

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of the connecting communications; e.g. “I’m happy you agree”, “You don’t believe me?”, or “What is your own opinion?” (again, the meaning of those communications is itself only defined through the communications connecting to them). In other words, Luhmann is not referring to any form of psychic understanding, but to an understanding on the level of the communications. What the “involved” psychic systems think during the communication processes, i.e. how the psychic systems understand the communication, is (at first) completely irrelevant to the communication. For example, the psychic systems might understand the “Yes” as a question, while the ensuing communications might treat it as approval. Of course, what the psychic systems think about the communications might ultimately influence the communications because of the structural coupling between the two systems: different thoughts about the communications might lead to the psychic systems causing different perturbations in the social system, and thus might ultimately lead to different communications coming about. But it has to be stressed again that the psychic systems cannot determine what communications come about. This retrospective determination of the communication through ensuing communications is connected with a fourth type of selection. With understanding, a communicative event, as the synthesis of the three selections (utterance, information and understanding), is complete. However, if the social system is not discontinued, a fourth type of selection will take place: acceptance or rejection of the meaning of the communication. This fourth selection is already part of the next communication. It is important not to confuse the third and fourth selections: understanding does not imply acceptance! For example, a pupil understands when the teacher says: “do your homework”, but he might still reject the communication, answering: “No, I won’t”. There might be communicative structures which make acceptance more likely than rejection, but the concept of communication is not focussed on acceptance – in contrast, for example, to Habermas’s (1987) concept of communication. On the contrary, every communicative event provokes the selection between acceptance and rejection. This distinction between understanding (as part of the first communication) and the selection acceptance/rejection (as part of the ensuing communication) adds a dynamic element which bridges the gap from one communicative event to the next. This leads to a very important point: the (re-)production of communications. In accordance with the general concept of autopoiesis, communications only “exist” as communications through their relation to other communications; as explained above, a communication is only defined through the ensuing communications. This does not mean that without the relation there is nothing at all (there are, for example, words and sounds), but they have no status as communications. In this sense one can say that it is the 30

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network of communications that “produces” the communications. In other words, it is the context of other communications that makes a communication count as such at all. Luhmann thus famously said: “Only communications can communicate.” So far we have explained the autopoiesis of social systems, i.e. the reproduction of communications through communications. We have explained how communications produce communications but not what communications are produced, which is a question about the structures of social systems. Luhmann conceptualises social structures as expectations (Luhmann 1995f). In every situation certain communications are expected and not others. For example, a question about one’s wellbeing is expected to be followed by an answer on this issue and not by a statement about the latest weather forecast. The expectation to a certain extent preselects the possibilities for further communications: it makes certain communications more likely than others (it does not, however, exclude any possibilities completely). These expectations are recursively reproduced through communications. Whenever a specific expectation is met by an adequate communication, the expectation is confirmed and thus likely to continue to function as a structure. However, if the expectation is repeatedly not met, it might be changed. The topics of communication are an important form of social structure. Topics provide preselections of all, in principle, possible communications: certain possibilities of communication fit a specific topic and others do not. For example, in a conversation about social theory one would not expect a communication about cooking. However, if such a communication came about, the topic of communication might be changed.

b. Interpenetration: the relation between social and psychic systems The relation between social system and “human being” is a very controversial aspect of Luhmann’s theory; it is also the most misunderstood aspect. For an adequate appreciation it is thus necessary to outline this relation carefully. In Luhmann’s theory the “human being” is not conceptualised as forming a systemic unity. Instead, it has to be understood as a conglomerate of organic and psychic systems. The former consists of biochemical elements, the latter of thoughts. Both systems are operatively closed towards each other: neither system can contribute elements to the other system. The systems are, however, structurally coupled; that is to say, their respective structures are adjusted to each other in such a way as to allow mutual perturbations. Although the “human being” does not constitute a systemic unity, the social system treats it as such: it constructs it as a person. In other words, “persons” do not exist as such: they are not systems but a construct of the 31

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social system with which this system refers to the conglomerate of organic and psychic systems. A social system might, for example, construct the person “John Smith”. Whenever the “corresponding” conglomerate of organic and psychic systems causes perturbations in the social system, the social system will refer to it as caused by “John Smith”. In the course of time a social system will develop certain expectations about when and how this conglomerate might cause perturbations. These expectations become part of the construct “John Smith”. Ultimately, we could say that a person is nothing other than a complex of expectations that a system has vis-à-vis a specific conglomerate of organic and psychic systems. Luhmann defines “person” in this sense as the “social identification of a complex of expectations directed toward an individual human being” (Luhmann 1995f, p. 210). Particularly important for the social system is the psychic system. Like social systems, psychic systems are meaning-constituted systems. However, in contrast to social systems, the meaning events do not materialise as communications but as thoughts. In other words, psychic systems reproduce themselves on the basis of consciousness: only thoughts can produce thoughts. Not even events in the brain, i.e. electric impulses, can take part in the autopoiesis of psychic systems: a nerve impulse is not a thought. Psychic systems are not only closed with regard to other types of systems but also with regard to each other. No psychic system has direct access to another psychic system; my thoughts can never enter your psychic system. As operatively closed systems, psychic and social systems constitute environments for each other: thoughts cannot become communications and communications cannot become thoughts. Mutual influences are restricted to the structural level. There merely exists a relation of structural coupling: both types of systems are structurally adapted to each other in a way which allows for mutual perturbation (see our explanations on structural coupling above). Luhmann calls the specific structural coupling of social and psychic systems interpenetration. Luhmann speaks of interpenetration if an autopoietic system presupposes the complex achievements of the autopoiesis of another system and can treat them like parts of the own system. (Luhmann 1995g, p. 153; my translation)

The simultaneous (but separate) autopoieses of psychic systems is constitutive for the autopoiesis of the social system. Without psychic systems social systems are impossible – and probably vice versa. Every communicative event presupposes “parallel” events in the psychic systems. For the perception of utterances, the social system depends at any rate on the psychic system: the social system cannot hear spoken words, nor read letters. Furthermore, psychic systems serve as a memory as they can remember communicative events beyond their momentary point of existence. Because of their structural coupling, social systems can expect their communications to 32

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cause perturbations in the psychic systems and to receive perturbations from the psychic systems when necessary. They can, for example, count on psychic systems to trigger further communications after every communication. Although psychic systems trigger communication processes and vice versa – we repeat this point, since it is very important – the processes of the psychic system and the social system do not overlap in any way. The most important evolutionary achievement for the coupling of social and psychic systems is language – this does not, of course, mean that communication is possible only with language. Language ensures that psychic systems are perturbed through the communication processes. Articulated speech, for example, normally disturbs people who are not involved in the communication more than mere noise does. As Luhmann writes: The differentiation of specific objects of perception, which stand out and fascinate as they have no resemblance at all with anything else perceptible, is crucial [for the coupling between social and psychic systems] […]. Language and writing fascinate and preoccupy consciousness and in this way ensure that it comes along, although the dynamic of consciousness does not necessitate this and always provides distractions. (Luhmann 1995g, p. 41; my translation)

Language is a purely social phenomenon (psychic systems do not think in language) but thought processes can be structured in a way that is complementary to language, particularly during communication processes: thoughts are broken down into chunks equivalent to those of sentences and words. In other words, psychic processes are synchronised with communication processes and, in this way, they “know” when to contribute perturbations to the communication process in order to make the reproduction of the social system possible. Although Luhmann’s strict distinction between social and psychic systems runs counter to our everyday beliefs and almost all social and psychological theories, it has one important theoretical advantage. It allows for a concept of the social realm which is clearly distinguished from the psychological. Consequently, social and psychic phenomena can be analysed in their own right. This does not lead to a marginalisation of psychic systems for social systems – as has often been criticised. On the contrary, through this differentiation it can be clearly shown that, and in what way, both types of system depend on each other. The treatment of human beings as environments of the social system (and not as part of it), as Luhmann writes, does not mean that the human being is estimated as less important than traditionally. Anyone who thinks so (and such an understanding underlies either explicitly or implicitly all polemics against this proposal) has not understood the paradigm change in systems theory.

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Systems theory begins with the unity of the difference between system and environment. The environment is a constitutive feature of this difference, thus it is no less important for the system than the system itself. (Luhmann 1995f, p. 212)

c. Communication and action While Luhmann suggests treating communications – and not actions – as the elements of social systems, the concept of action does not become completely irrelevant. On the contrary, Luhmann assigns it an important role in the reproduction of the system. The very fact that not only sociologists but all social systems use the concept of action means that it cannot be ignored. Often communication is treated as some kind of action; in this sense Habermas (1987), for example, speaks of “communicative action”. But Luhmann’s communication – and this is very important – is not a kind of action. As explained above, communication is constituted as a synthesis of a threefold selection of utterance, information and understanding. The concept of action cannot account for all three selections. It might capture the first two selections but certainly not the third: understanding. [T]he perfection of communication implies understanding and understanding is not part of the activity of the communicator and cannot be attributed to him. (Luhmann 1986b, p. 178)

Thus, a central element of Luhmann’s concept of communication would be missing if interpreted as action. Apart from that, the original intention of an action is not important for the communication. For example, looking at one’s watch might be understood as communicating one’s boredom, although one only wants to know what time it is. Luhmann suggests treating action as a (fictive) construct of social systems for observing, and communicating about, their communications: social systems observe their communications not as communications but as actions, which they causally attribute to “persons” (“actors”). As explained above also the “person” is a construct of the social system, with which the system refers to the human being as the conglomerate of psychic and social systems. This attribution of communications to persons as actions is deeply ingrained in language: our sentences are usually based on a subject-object logic – “somebody is doing something”. In other words language forces the attribution of communication to someone; it is almost impossible to speak about communications as something that is not “done” by someone. In this way, the social system constructs an image (self-description) of itself as a nexus of actions. This self-description constitutes a simplification of the system and this is also where its function lies. The simplified version of itself serves as a means of orientation for its (re-)production, which has several advantages: first, actions are easier to recognise and deal with than 34

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communications. While an orientation according to communications presupposes a clear distinction between utterance, information, and understanding, an orientation according to action only has to deal with the specific rules of attribution. The simplification lies in the fact that only actions and not fully communicative events serve as connective points, in that an abstraction suffices to communicate action or simply connective behaviour, and in that one can to a great extent omit the complexities of the complete communicative occurrence. The fact that one need not examine (or need examine only under very specific conditions) which information an utterance referred to and who understood it takes some of the load off. (Luhmann 1995f, p. 168)

Second, the description of communication processes as connections of actions leads to clear-cut temporal relations between different elements. While communications are completed only after understanding has taken place, that is, the communicative occurrence is “held in suspense” between utterance and understanding (Luhmann 1995f, p. 169), actions mark one point in time (determined by the utterance).1 As a consequence, the different communications are also much more clearly differentiated: while communications are heavily entangled with each other – with later communications retrospectively defining the meaning of earlier ones – actions appear to be self-defined and do not presuppose other actions.

Society and interaction According to Luhmann we can distinguish three types of social systems: society, face-to-face interaction and organization. All three systems are social systems insofar as they reproduce themselves on the basis of communications. They are, however, different types of social systems insofar as they reproduce different types of communications. In the following we will give a brief description of Luhmann’s concept of society and interaction system; the organization as the third type of social system will be dealt with afterwards in a separate section.

a. Society For Luhmann society is the system that encompasses all communications; all communications that are produced are part of society and as such reproduce it. Hence there are no communications outside society. The borders of society are the borders of communication. Luhmann thus writes: 1 The phenomenon of “suspense” is particularly extreme in the case of communications by letter where the utterance and the understanding are usually drawn far apart.

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[S]ociety is the all-encompassing social system that includes everything that is social and therefore does not admit a social environment. If something social emerges, if new kinds of communicative partners or themes appear, society grows along with them. They enrich society. They cannot be externalized or treated as environment, for everything that is communication is society. Society is the only social system in which this special state of affairs occurs. (Luhmann 1995f, p. 408)

As a consequence of this conceptualisation society only exists in singular: there is only one world society. For Luhmann, society is thus “the autopoietic system par excellence”: all elements (communications) are produced by the own elements (communications) and cannot get out of this network of elements (society). Amongst the three types of social systems, society is a very particular one as it encompasses the other two systems – interaction and organization. As the system including all communications, it also includes the specific interactional and organizational communications. Or, the other way around, all interactional and organizational communications always also reproduce society. In the course of its evolution society has undergone three major structural changes; that is to say, changes of how societal communications were structured (Luhmann 1997a). In archaic times society was differentiated into equal subsystems (segmentation), e.g. different tribes, clans or families. This was replaced later on by a differentiation according to the logic of centre and periphery: the differentiation between city and country. In late medieval times a hierarchical form of differentiation emerged with different social strata or classes (stratification). With the emergence of modern society, around the 18th century, that was replaced by the current, functional differentiation, where we find several societal subsystems specialised in serving specific societal functions; for example, law, science, economy, art, religion. Each of these primary forms of differentiation can be combined with the other forms of differentiation on a secondary level: for instance, in stratified society the various strata were often differentiated internally into equal subsystems (segmentation) or on the basis of centre vs. periphery. Similarly, the various functional subsystems might be differentiated internally into equal subsystems, into centre and periphery, or hierarchically. While Luhmann has written extensively about all four types of differentiation, the functionally differentiated society, as the present form of differentiation, is of most interest to us here. It is characterised by the existence of different functional systems. All of these systems are communication systems that are themselves operatively closed on the basis of a specific binary coding. That is to say, all communications taking part in the reproduction of a particular functional subsystem “carry” a specific code. For example, the code of the legal system is legal/illegal; the code of the economic system is 36

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payment/non-payment; the code of the system of science is truth/untruth; the code of the political system is power/non-power. Each of these systems communicates about itself and its environment according to its specific code: for example, for the legal system something is either legal or illegal, or has no relevance at all; for the economic system something is either a payment or a non-payment, or has no relevance to it: that is to say, whether something is legal or illegal is irrelevant to the economic system. Each communication of a functional system relates to other communications of the same function system on the basis of the function-specific coding. For example, a communication of the legal system relates to other legal communications as either legal or illegal communication. A legal ruling refers to another legal ruling (as a legal ruling) in order to substantiate itself – it cannot, however, refer to payments being made (economic system). These functional systems are operatively closed in the sense that only communications carrying the function-specific code can take part in the reproduction of the function system. Thus, only legal communications can reproduce the legal system, while economic, scientific, political etc. communications cannot; only scientific communications can reproduce science, and so on. The functionally differentiated society combines extreme inclusiveness with extreme exclusiveness. On the one hand, each function system includes all function-specific communications. Thus, all legal communications are part of the legal system; all economic communications are part of the economic system; all scientific communications are part of the scientific system, etc. On the other hand, these societal functions are exclusively served by the respective function system: only the legal system can provide justice (legality), while the economic or scientific system cannot; only the economic system can produce payments; only the scientific system can produce truth. Thus, each of these systems has an enormous reach as each refers to the entire world society. At the same time, however, each system’s range is also very narrow as each deals with only one function. Functional systems constitute environments for each other. The systems cannot “exchange” their communications: an economic communication cannot take part in the scientific system, a political communication cannot take part in the legal system etc. Each system reproduces itself selfreferentially and registers communications of other function systems merely as perturbations, which it processes according to its own logic. The economic system, for example, would register legal communications merely with regard to their consequences on payments/non-payments. No function system can control any other function system; no system – not even the political system – is dominant over any other system. In this sense there is no centre to the functionally differentiated society. The different systems are merely structurally coupled to each other; that is to say, their structures are adjusted to each other in such a way as to allow them to react to their 37

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respective operations. For example, the legal system and the economic system are structurally coupled through sales contracts. For the legal system the sales contract is a legal communication re-distributing legal rights and duties; for the economic system it is an economic (i.e. different) communication re-distributing payments. In other words, the sales contract is two different communications for the two different function systems, but it allows the two systems to somewhat “co-ordinate” their respective processes.

b. Interaction Like all social systems (face-to-face) interactions are systems that reproduce themselves on the basis of communications. In contrast to society, however, these communications are of a particular kind; namely, communications that are based on the perception of the physical presence of their participants. There is no doubt that perception as such is clearly a psychic phenomenon – communications cannot perceive. However, reflexive perception gives rise to communication as Luhmann argues: If alter perceives that alter is perceived and that this perception of being perceived is perceived, alter must assume that alter’s behavior is interpreted as communication whether this suits alter or not, and this forces alter to control the behavior as communication. (Luhmann 1995f, p. 413)

Thus, every communication refers to the fact that all participants perceive each other as present – a face-to-face contact is thus a precondition. However, not everyone who is physically present will also be treated as present by the communication. For example, people at other tables in a restaurant, although physically present, might not be considered present by the interactional communication. Similarly, not all perceptible behaviour will necessarily be treated as perceptible, i.e. treated as present, by the interaction; for example blowing one’s nose. In other words, every interactional communication distinguishes between what to consider present and what to consider absent. Making this distinction qualifies the communication as interactional. One could also say, the interactional communications carry the code “presence/absence” analogously to the function codes described above. Like functional systems, interactional systems are operatively closed insofar as only communications carrying the code “presence/absence” take part in the reproduction of the interaction system. Communications in an interaction can only connect to other communications that are treated as present and not to those treated as absent (e.g. the communications of another communication at the next table; unless those communications are treated as present and thus as part of the same interaction system). What communications are treated as present or absent depends to a certain extent on the structures of the interaction. Like all social systems,

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interactional communications are structured through the topics of communication. These topics often make a pre-selection of who to treat as present. For example, if the managers of a company sat in a pub to discuss the company’s strategy, the interaction would probably treat only the managers as present and all other visitors of the pub, who might even happen to sit with them at the same table, as absent. However, if the topic changed to football new persons might be included in the interaction, while some of the initial participants might be excluded again.

Organization a. Decisions as the elements of organizations Luhmann conceptualises organizations as social systems that reproduce themselves on the basis of decisions. In other words, organizations are systems that consist of decisions and that themselves produce the decisions of which they consist, through the decisions of which they consist. (Luhmann 1992a, p. 166; my translation)

But what is a decision? Luhmann argues that the standard definitions of “decision” are not very helpful. Mostly, a decision is defined as “choice”. This, however, means that a decision is defined through a synonym that is equally unclear. Sometimes the definition is specified somewhat more as “a choice among alternatives”. This, however, does not add much as the concept of alternative is itself only defined in relation to choice: alternatives are those possibilities among which one can choose; in other words, the choice defines the alternatives. Thus, one only finds tautological definitions. Building on, and modifying, the existing definitions Luhmann suggests conceptualising decision as a specific form of communication. It is not that decisions are first made and then communicated; decisions are communications. As has been said about communications in general, decision communications too are not produced by “human beings” but by the social system, the organization. What is particular about decisions is that they are “compact communications” (Luhmann 2000c, p. 185), which communicate their own contingency (“contingency” here in the sense of “also possible otherwise”). In contrast to an ordinary communication, which only communicates a specific content that has been selected (e.g. “I love you”), a decision communication communicates also – explicitly or implicitly – that there are alternatives that could have been selected instead (e.g. “I am going to employ candidate A and not candidate B”). As such, decision communications are always paradoxical communications: the more they communicate that there are real alternatives to the one that has been selected, the less the selected alternative 39

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will appear as justified and thus the less the decision will be accepted as “decided”. Equally, the more the selected alternative is being justified as the right selection, the less the other options will appear as alternatives and thus the less the decision will appear as “decision”. Or, to put it in linguistic terms, every decision communication contains a performative self-contradiction: the “report” aspect and the “command” aspect (Ruesch and Bateson 1951) of the decision communication contradict each other. The more clearly the decision is communicated as a selection among possible alternatives (report aspect), the less the decision will be accepted by later communications as a decision (command aspect). Because of their paradoxical nature, decision communications are subtly calling for their own deconstruction by the ensuing communications. Without any other communicative provisions, decision communications would have a very high “failure rate”. So, why does organizational communication not break down all the time? Luhmann gives two answers to this question. First, organizations totalise decisions as the organizational form of communication – organizations are operatively closed on the basis of decisions. Thus, even the deconstruction of a decision in an organization has to be communicated as a decision. In other words, the rejection of a decision can itself only be communicated as yet another decision, otherwise it would not be part of the organizational autopoiesis (Luhmann 2000c, p. 145). Furthermore, decision communications in organizations can usually refer to other (successfully completed) decisions (“decision premises”; see below) to stabilise the decision, i.e. decisions prohibiting the rejection of certain other decisions (Luhmann 2000c, p. 142). As Luhmann pointed out in his later writings (Luhmann 2000c), the operative closure of organizations on the basis of decision communications must not be misunderstood, in the sense that there are no other communications “in” organizations: there are, of course, also other communications, such as gossip. These communications take place in the organization but ultimately do not contribute to the autopoiesis of the organization. Luhmann illustrates this idea with an example from biology: In living cells there are also some minerals […] which do not take part in the autopoiesis of the system, but which nevertheless serve important functions. (Luhmann 2000c, p. 68; my translation)

b. Uncertainty absorption Within organizations, decision communications are always integrated into a process of connecting decisions – the actual autopoiesis of the organization. Every decision is the product of earlier decisions and gives rise to ensuing decisions. Luhmann describes this process of decisions connecting to each

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other using the concept of uncertainty absorption, the idea of which he takes from March and Simon: Uncertainty absorption takes place when inferences are drawn from a body of evidence and the inferences, instead of the evidence itself, are then communicated. (March and Simon 1958, p. 165)

For a decision to be made, information is needed on the basis of which one alternative can be chosen over the others. An investment decision, for example, is based on information on the availability of financial resources, on current interest rates, on current market demand etc. Formulating this the other way around, one can say that a decision is “inferred” from the given information. Yet, the important point is that no decision can rely on complete information; some uncertainty inevitably remains. In our example, there is uncertainty concerning future market demand, investment projects of competing firms, future inflation figures etc. All this uncertainty, however, is absorbed by the decision: all given information and all remaining uncertainty is transformed into the selection of one alternative over the other ones. Uncertainty absorption now takes place in the connection between decisions. As decisions do not inform about the uncertainties involved in making the decision – they merely inform about selected and excluded alternatives – ensuing decisions connecting to them cannot “see” the uncertainties. That is to say, from the perspective of the connecting decisions orienting themselves toward the first decision, the uncertainty of the first decision is absorbed. On the basis of such a processual understanding of decisions, we can distinguish between two “states” of a decision: before and after subsequent decisions have connected to it. A decision is only completed when subsequent decisions connect to it. Before that, the decision is merely virtual (Baecker 1999c 9, p. 138). The decision is virtual because the realisation of the decision in subsequent decisions is expected but not yet realised. For example, the organization decides to manufacture a particular new product – in contrast to producing another new product or not producing anything new at all. This decision is only virtual until subsequent decisions have completed it as a decision by orienting themselves according to it. The marketing division, for example, might decide on the advertisement of this new product. This can be understood in analogy to the relation between different communications, as described above, where a communication is only completed once another communication connects to it by defining its meaning retrospectively.

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c. Decision premises A concept closely related to uncertainty absorption is that of decision premises, originally introduced by Herbert Simon (Simon 1957, p. 201). The concept of decision premises refers to the structural preconditions that define – or create – a decision situation; for example, the alternatives given, the objectives of the decision, and so on. While one could include in the term everything that influences the situation, Luhmann argues that such a concept would not be very fruitful. Instead he restricts the term – in a first step – to those structural preconditions that are themselves the “result” of other decisions. In other words, a decision takes previous decisions as decision premises, or, formulated the other way around: every decision serves as a decision premise for later decisions. With regard to the previous section we have reversed our perspective: we are not looking at the transformation from the viewpoint of the initially chosen situation towards the connection of subsequent decisions, but are looking “back” from the viewpoint of a decision towards previous decisions and ask about their relevance to it. From this viewpoint they serve as decision premises. To bring the concepts of uncertainty absorption and decision premise together we can say: uncertainty absorption takes place when a decision is used by subsequent decisions as a decision premise. An important aspect of the concept of decision premises is its double function as both creating and restricting the decision situation. Decision premises create the decision situation in the first place: they define the decision situation as such. Without decision premises there is no occasion for decision making. At the same time, decision premises restrict the decision situation by creating a particular decision situation and not a different one. If decision premises define a decision situation as a choice between alternative A and alternative B, one cannot decide between X and Y. The concept of decision premises becomes particularly interesting when the concepts of decision and decision premise are applied recursively to each other. Apart from the factuality of every decision becoming a decision premise for subsequent decisions, decisions can decide explicitly on decision premises for other decisions, that is to say, they function as decisions on decision premises. The crucial point of this is that a decision can decide on decision premises which are not only binding for immediately succeeding decisions, but for a multitude of later decisions. They serve as “a sort of anticipated, generalised uncertainty absorption” (Luhmann 2000c, p. 261). In this way decisions can influence other decisions that take place much later in the decision process. Luhmann now suggests restricting the term decision premise – in a second step – to those far-reaching decision premises. He distinguishes three types of such decision premises: programmes, communication channels and personnel. Programmes are decision premises that define conditions for correct 42

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decision making; they are often also called “plans”. There are two different kinds of programmes: conditional programmes and goal programmes. Conditional programmes define correct decision making on the basis that certain conditions are given. They generally have an “if-then” format – “if this is the case, then do that”. Goal programmes, in contrast, define correct decision making by defining specific goals that are to be achieved (e.g. “profit maximisation”), and in this way structure the given decision possibilities. Neither type of programme, however, removes the uncertainty from the decisions that they bring forth – neither decides the decisions (otherwise they would not be decisions). In the case of conditional programming there is uncertainty about whether the conditions are actually met by the decision situation – there is always some scope for interpretation. In the case of goal programming the main uncertainty concerns the causal link between alternatives and the goal; for example, which alternative maximises profit. Apart from that, there is in both cases uncertainty on whether the programmes should actually be applied to the decision situation – reasons for making an exception can always be found. The decision premise of personnel concerns the recruitment and organization of personnel. Organizations decide, on the one hand, on the commencement and termination of membership and, on the other hand, on the transfer of members to different positions within the organization, both with and without promotion. Personnel is a decision premise insofar as it makes a difference to the question of who is in charge of a decision. An experienced manager is likely to “give rise” to different decisions from those of a newcomer (this recognition of different individuals making a difference to the organization does not contradict the concept of autopoiesis. Different individuals are only considered for the difference in perturbations that they cause). In this sense, organizations have expectations about the behaviour of different persons, which serve as a basis for selecting their personnel. The decision premise communication channels concerns what can be called the organization of the organization. Usually in an organization not everybody can communicate with everybody at any one time, but the communication is restricted to certain channels. The classic case is the hierarchical structure, in which the communication channels only run vertically. Decisions on one level only inform decisions on the next lower or next higher level, but not decisions on the same level. That is to say, decisions can only use other decisions on the vertical line as decision premises and not ones on the horizontal line. Apart from the hierarchy, there exists a multitude of other forms of communication channels – for example the matrixorganization. The three decision premises – programme, personnel and communication channel – are coordinated through the creation of positions. Positions are nodes at which the three decision premises meet and are specified with 43

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regard to each other. Every position executes a particular programme, is filled by a particular person, and is located somewhere in the communication network. Positions coordinate decision premises in two respects: on the one hand they coordinate them with regard to concrete decisions. On the other hand they serve as an orientation for decisions on new decision premises: only such new decision premises can be integrated, which fit into the existing structures of positions, or for which new positions can be created. In his latest writings Luhmann (2000c) introduced another type of decision premise: the so-called undecidable decision premise. In contrast to the decidable decision premise described above, these are premises that have not been explicitly decided but are merely some sort of “by-product” of the decision process. These premises are undecidable since the organization does not see their contingency and thus takes them as “necessary” and unchangeable. There are two types of undecidable decision premises. The first one is the organizational culture. Decision premises of this type refer to the way in which an organization deals with its own processes of decision-making. For example, if the organization always produces the same kind of decision (e.g. recruiting merely male candidates) this might condense into an undecided decision premise for future decisions – in the sense of “we have always done it this way”. The second type of undecidable decision premise is the cognitive routine, which refers to the way the environment is being conceptualised by the organization. Cognitive routines, for example, inform about characteristics of the customer.

d. The double closure of the organization Like all autopoietic systems organizations can be said to be doubly closed (on this point see particularly Baecker 1999c, p. 147 ff.): closed on the level of their operations and closed on the level of their structures. The first closure refers to the conceptualisation of organizations as reproducing themselves exclusively on the basis of decisions. No external operations can take part in the network of decisions nor can any decisions get out of this network. In other words, on the basis of its operations, the organization has no contact to its environment whatsoever. Decisions are only oriented according to other decisions and nothing beyond the decision network. Thus, the individual decisions are “blind” with regard to anything outside the organization. On this operative level the only thing that is important is the continuous reproduction of decisions out of decisions – regardless of which decisions. As long as some decisions are produced, the autopoiesis of the organization is continued. The “blindness” of decisions is, however, compensated through the decision premises, i.e. the structures of the organization (structural level). These decision premises (in particular: decision programmes, communication channels, personnel) determine which decisions are produced. For example, 44

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a recruitment programme will lead to certain recruitment decisions and not to decisions on the colour of wastepaper baskets. In other words, the decision premises channel the reproduction of decisions. In this sense, the orientation according to decision premises serves the decisions as a substitute for the orientation according to the environment. But even on this structural level of decision premises the organization cannot get out of the decision network; even there it does not get into direct contact with its environment. This is the second closure. Decision premises are not in any way given from outside but are themselves the product of decisions. Decisions and decision premises are recursively reproduced – compare Giddens’s (1984) concept of structuration. Thus, neither on the level of its operations (first closure) nor on the level of its structures (second closure) is the environment directly taken into account in the reproduction of decisions. The double closure of the organization has a twofold implication. On the one hand, double closure implies autonomy: it is the organization itself that determines its own structures and operations. Without the ability to decide on its own structures, the organization would be the mere continuation of its environment. On the other hand, double closure implies unavailability. As the organization can only operate on its “inside” and cannot distance itself from itself (i.e. it has no other mode of operation than decisions), it is captive of its own processes and thus does not have (complete) control over itself.

e. The paradox of decision at the heart of Luhmann’s organization theory In this last section on organization I want to come back briefly to the paradox of decision in order to highlight how crucial it is for Luhmann’s way of theorizing about organizations. Particularly in his later writings, (1993d; 2000c) Luhmann makes the paradox of decisions the starting point for unfolding his entire organization theory. Independently of the conceptualisation of decisions as communication, Luhmann argues that the very idea of decisions is paradoxical. In this respect, he quotes Heinz von Foerster (1992, p. 14), who famously wrote: “Only those questions that are in principle undecidable, we can decide” – everything else would be mere calculation. In other words, in a real decision situation the given alternatives are all equally valid; there are no better or worse alternatives – otherwise these would not be real alternatives. If the “alternatives” were of different value (in which case they would not be real alternatives) there would be no need to decide between them any more – the decision situation would have already been decided. In a real decision situation with real alternatives, however, there is no valid reason for choosing one alternative over the other – otherwise the alternatives would not be of equal value. Thus, at the heart of every decision there is undecidability. 45

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In order to prevent a paralysis of decision situations, the paradox of decision has to be deparadoxified; i.e. the paradox has to be deferred to another place. This deferral does not mean that the paradox disappears but that it is just moved “out of sight”. For example, the undecidability of the decision might be shifted to the selection of a decision rule; e.g. “choose the alternative that is least risky”. This decision rule might allow a clear ranking of the different alternatives and in this way the decision rule can be said to “decide” the original decision situation. In this case, the original decision paradox has been deferred to the decision on which decision rule to choose. There exist many different decision rules, which themselves constitute alternatives between which one needs to decide. Again, this decision situation is itself undecidable and thus paradoxical. The paradox might thus have to be deferred to yet another place, e.g. to the decision about a meta-decision rule. Ultimately, the paradox can only be deferred but never solved. This might lead to an infinite regress, unless the paradox ends up in a place where it is not “noticed”. For Luhmann most organizational phenomena can in one way or another be traced back to this undecidability of decisions: most problems in organizations are directly or indirectly linked to the decision paradox, and most structures and processes function as a means of deparadoxification.

Luhmann’s theory of social systems as a theory of distinction In his writings – particularly the later ones (e.g. Luhmann 2000c) – Luhmann drew heavily on the calculus of distinctions, The Laws of Form, by the British mathematician George Spencer Brown. This calculus allowed him to describe the self-referential logic of autopoietic systems in an extremely stringent and analytical way. While it is possible to comprehend Luhmann’s theory of social systems also without Spencer Brown, a deeper appreciation of it presupposes an at least rudimentary familiarity with Spencer Brown’s basic ideas. Some of Luhmann’s followers have even tried to translate Luhmann’s theory completely into the language of the calculus, aiming at making the theory of social systems “calculable” (in particular Dirk Baecker). In the following, we want to introduce the central elements of Spencer Brown’s Laws of Form and explain the way in which Luhmann used it in his systems theory. It should, however, be noted that our explanations of Spencer Brown are based on Luhmann’s own reading of him, which differs from other readings.

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a. Observation as basic concept Spencer Brown suggests treating observation as the most basic concept of any analysis. As a concept it is supposed to be even more basic than e.g. that of thing, event, thought, action or communication. This means, of course, that the concept of observation is not restricted to its usual sense of optical perception – optical perception is just one type of observation, the observation of psychic systems. Instead, its level of abstraction is such that it refers to any operation from communications to thoughts and even to operations of machines; even the observer himself is an observation. Spencer Brown’s concept of observation does not focus on the object of observation but on the observation itself as a selection of what to observe. In this sense, the underlying question is not: what does an observer observe, but how does an observer observe; how is it that an observer is observing what he is observing, and not observing something else. Every observation is constructed from two components: a distinction and an indication. An observer chooses a distinction with which he demarcates a space into two spaces (synonymously: “states” or “contents”). Of these two states he has to choose one that he indicates. That is to say, he has to focus on one state, while neglecting the other. It is not possible for him to focus on both. In this way, the initially symmetrical relation between the two states becomes asymmetrical. We get a marked state and an unmarked state. Spencer Brown illustrates this rather abstract idea with an example: let us imagine a uniform white piece of paper. On this paper we draw a circle. In other words, we draw a distinction which creates an “inside” of the circle and an “outside” of the circle. It is important to note that it is the act of drawing the circle which establishes the two different states: without us drawing the distinction, the two states as such do not exist. We can now indicate one of the two states: either the inside or the outside. Let us choose the inside. The inside becomes the marked state and the outside the unmarked state. While we can see the marked state, the unmarked state remains unseen. With the metaphor of figure and ground we can say: the inside becomes figure and the outside ground. Spencer Brown calls the distinction with both sides the form of the distinction. Thus, in contrast to the common use of the term, form does not refer merely to the marked state. The form of something is not sufficiently described by the defined – the marked state – but the unmarked state is a constitutive part of it. The marked side cannot exist without its unmarked side. In our example, the form of the circle is the inside together with the outside of the circle. In this context, Spencer Brown declares: Distinction is perfect continence. (Spencer Brown 1979, p. 1)

A distinction, thus, has a double function: like any boundary it both distinguishes and unites its two sides. 47

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Spencer Brown introduces a specific notation to refer to the distinction, “the mark of distinction” or the “cross” (synonymously: token, sign, mark):

Marked state

Unmarked state

Figure 2: The mark of distinction.

This sign symbolises the distinction separating the two sides. Connected with this sign is the instruction to cross the boundary from the right to the left side; a process by which the left side becomes the marked state and the right side the unmarked state. It is important to understand that the “cross” has two meanings: an operative and a descriptive meaning. Firstly, the cross stands for an instruction to cross (!) the distinction from unmarked to marked state. Secondly, the cross stands as a sign for the result of crossing; the marked state. In our example, the cross can be meant as an instruction to draw a circle or stand as a symbol of the result of drawing, i.e. stand for the circle itself. In this context, Spencer Brown writes: In the command let the crossing be to the state indicated by the token we at once make the token doubly meaningful, first as an instruction to cross, secondly as an indicator (and thus a name) of where the crossing has taken us. (Spencer Brown 1979, p. 81)

In terms of the calculus, the cross is used both as operator and operand: on the one hand, it gives instructions to calculate and, on the other hand, it is the element that is calculated. This double meaning might be confusing, but as Spencer Brown writes: It is the condensation [of the two meanings into one symbol] which gives the symbol its power. (Spencer Brown 1979, p. 81)

Another important element of the Laws of Form is the “unwritten” distinction (unwritten cross), which defines the space – context – within which the distinction is drawn. In our example from above, the unwritten cross is constituted by the border of the paper. As the border of the unmarked state, it remains as unobserved as the unmarked space itself. Now we have a complete unit of observation: a space defined by an unwritten cross is divided by a distinction into two states; the relation between the two states becomes asymmetrical by indicating one state as the marked state in contrast to the other, which becomes the unmarked state (Figure 3): 48

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Unwritten cross

Marked state

Unmarked state

Figure 3: Observation as distinction and indication.

The central point in this concept of observation is that once you have drawn a distinction you cannot see the distinction that constitutes the observation – you can only see one side of it. As Heinz von Foerster (1981, pp. 288–309) pointed out, this can be referred to as the “blind spot” of observation. The complete distinction with both its sides (the inside and the outside), can only be seen from outside; if you are inside the distinction you cannot see the distinction. We can now distinguish two orders of observation: first-order and secondorder observation (von Foerster 1981). So far we have been explaining the operation of a first-order observer, who cannot observe the distinction he uses in order to observe. The second-order observer is an observer who observes another observer. He uses a different distinction from the firstorder observer: in order to observe the observer, he has to draw a distinction that contains the distinction (the marked and the unmarked state) of the first-order observer in his marked state. The second-order observer can see the blind spot – the distinction – of the first-order observer. He can see what the first-order observer cannot see and he can see that he cannot see. Particularly, he can see that the first-order observer can see what he sees, because he uses one particular distinction and not another. He sees that he could also have used another distinction and, thus, that the observation is contingent. In this sense, a second-order observation is more than a firstorder observation, because it not only sees its object – the first-order observer – but it also sees what he sees, and how he sees; and it even sees, what he does not see, and sees, that he does not see, that he does not see, what he does not see (Luhmann 1993k, p. 16). Since the second-order observer needs a distinction to observe the distinction of the first-order observer, he himself is a first-order observer, who could be observed by another second-order observer. In this sense, every second-order observation is only possible as a first-order observation and as such knows as little about its own observation as every other first-order observer. For Luhmann, the most interesting element of Spencer Brown’s calculus of form is the re-entry describing the operation of self-observation. As explained above, an observer can only observe the marked side, and not the unmarked side or the distinction itself. In order to observe the other side he 49

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would have to “leave” the marked state and cross to the other side of the distinction. This, however, would mean that it would no longer be possible for the initially marked state to be observed; one can either observe the one or the other side of the distinction but not both at the same time. As such, self-observation, that is to say, observing one’s own observations, would be impossible. Spencer Brown’s “solution” to the problem is the re-entry of the distinction into the distinction; i.e. the original distinction contains a copy of the distinction (with marked and unmarked states) in its marked state. This, however, constitutes a paradox: the unmarked state is both unmarked state and marked state (as it is contained in the marked state) and the marked state is both marked state and unmarked state (as it contains the unmarked state). In other words, the observer can see his blind spot, but then, if he can see it, it is not his blind spot any more. Spencer Brown unfolds this paradox claiming that the re-entered distinction is never exactly the same as the original distinction.

b. Autopoietic systems as distinction processing systems On the basis of the calculus of forms, Luhmann described autopoietic systems as distinction-processing systems. Every operation of an autopoietic system constitutes an observation, i.e. a distinction and indication. Take, for example, communications: every communication communicates something (marked state) while at the same time having to leave everything else out – in particular, all other possible communications (unmarked state). These other possibilities of communication, however, are not just other communicative options, which just happen not to have been realised, but they are constitutive for the realised communication. That is to say, the meaning of the communication depends to a large extent on what has not been communicated. In other words, one needs to know what could have been communicated (i.e. the context of the communication) in order to establish the meaning of the communication. These other possibilities are on the unmarked side of the communication, as they have not been communicated. Other communications (second-order observation), however, can communicate about the communication (first-order observation) and its unmarked state, but only at the cost of producing yet another unmarked state. Thus, the communication can never fully communicate about its own conditions of communication. Not only the operations but also the system itself can be conceptualised as an observation, i.e. as a distinction and an indication. A system is constituted as a distinction between system and environment, of which the system is the marked state and the environment the unmarked state. In accordance with Spencer Brown’s concept of observation, the system and the environment are the two sides of the same distinction and as such are constitutive for each other. 50

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While an observer can draw his distinctions where he likes and thus define what to treat as a system and what as an environment, the concept of autopoiesis assumes that the system/environment distinction is not drawn by an external observer but by the system itself. Luhmann writes in this respect: If we describe [something] as an autopoietic system, we are dealing with the production and reproduction of a distinction (in terms of systems theory: the distinction of system and environment), and the concept of autopoiesis says that an observer using it assumes that the difference is produced and reproduced by the operations of the system itself. (Luhmann 2000c, p. 55; my translation)

How are we to understand this reproduction of the system/environment distinction? Every operation of an autopoietic system constitutes a distinction between that which it is, i.e. an operation of the system, and that which it is not, i.e. an operation of the environment. Let us take the organization, for example: the operations of that system are decisions (decision communications). Every decision constitutes a distinction between that which it is (marked state), i.e. a decision and thus an element of the organization, and that which it is not (unmarked state), e.g. a “normal” communication or a thought. In this sense, every single decision (re-)draws the distinction between system and environment. Thus, in actual fact, the reproduction of decisions is the reproduction of the distinction decision/non-decision; that is to say, of the distinction organization/environment. According to this conceptualisation every single operation of a system reproduces the “boundary” of the system. In this sense we do not distinguish between “boundary elements” and elements taking place “inside” the boundary, as the classical notion of systems suggests. This conceptualisation of the system’s boundary, as reproduced by every single operation, implies an operative closure of the system: every operation constitutes a distinction between the operation and everything else (i.e. between system and environment). It can only be this operation as the one side (marked state) of the distinction and not the other one (unmarked state). For instance, a decision is only a decision (marked state) to the extent that it is not something else (unmarked state). In this sense, operative closure of a system means that the system (i.e. system/environment distinction) is only reproduced by operations that are themselves constituted as a system/environment distinction. For example, the “decision system/environment” distinction (organization) can only be reproduced by operations constituted as decision/non-decision distinctions and not by other distinctions – for example thought/non-thought (decision is here included in the unmarked space). The integration of other distinctions, in which decision is included in the unmarked space, would dissolve the organization/environment distinction and thus dissolve the system. In other words, the system 51

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cannot enter its environment nor could the environment enter the system, otherwise the distinction between system and environment would disappear. While the system can only operate on the marked state of the system/environment distinction, other observers outside the system might observe the system/environment distinction by including this distinction in their marked state. Consider, for example, an organization: the organization as a system of decisions is constituted by the distinction “decision network/social environment”. While the organization can only operate on its inside, – that is to say, it can only produce and reproduce decisions and cannot enter its environment, which consists of all kinds of other communications – the societal system, which consists of the distinction “all-encompassing social system/ non-social environment”, contains the organization/environment distinction in its marked state. Society can thus observe the distinction of the organization and can thus see what the organization itself cannot see. Although autopoietic systems can only operate on their inside (marked state) and have no contact to their outside (unmarked state), the system/ environment distinction can re-enter the system. We can distinguish two reentries: first, every single operation distinguishes between other operations of the same system and other events outside the system. In other words, every operation has a self-referential aspect and an other-referential aspect. Take, for example, communications as elements of a social system. Every communication can be divided into, on the one hand, the utterance, i.e. how and why something is expressed, which is (treated as) determined by the communication system (self-reference), and on the other hand, the information, i.e. what is expressed – (treated as) referring to events in the environment (other-reference). For example, A says to B: “My dog is dead”. Here we can distinguish the utterance (i.e. the words A uses, what other communications this communication is referring to etc.) as the self-referential aspect, and the information about a dog being dead as referring to something outside the communication network (other-reference). The important point here is that the re-entered distinction is not identical with the distinction itself: (1) the utterance/information distinction is not the system/environment distinction – a communication is not a system – and (2) the information about the dog being dead is not the dead dog. A second re-entry takes place on the structural level of the system. Structures “represent” internally the system/environment distinction to the system. As explained above with regard to organizations, the operations of a system cannot observe their environment. Instead, they observe the system’s programmes as a substitute for the environment and orient themselves according to them. Take, for example, a business programme of a corporation. This programme refers, on the one hand, to the market situation, possible moves by competitors, characteristics of consumers, or something similar, and on the other hand, to the necessary decision processes in 52

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the organization. By taking the programme as a decision premise decisions orient themselves according to the two aspects of the programme as if to the organization/environment distinction itself. Again, here we have to note that the programme represents the system/environment distinction but is not identical to it. These few comments on the application of Spencer Brown’s calculus of distinctions to Luhmann’s systems theory have to suffice for now. While our descriptions and explanations have been very selective, the basic ideas should hopefully have become clear so far.

Conclusion In this chapter we have tried to present the basic concepts and ideas of Niklas Luhmann’s theory of social systems. We started with Luhmann’s general concept of autopoiesis explaining how it was derived from the originally biological concept by Maturana and Varela. We went on to explain the concept of the social system as an autopoietic system of communications, where communications reproduce communications. We highlighted as one of the central ideas in this context the clear distinction between social and psychic systems. We have tried to clarify this often misunderstood idea. From there we went on to describe the three types of social systems – society, interaction and organization. In our last section we introduced the calculus of distinction by Spencer Brown and demonstrated how it could be and has been applied to the theory of social systems.

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Chapter 2

The Concept of Autopoiesis Niklas Luhmann

For several years now, there has been a lively discussion about “autopoiesis”.1 Unlike in physics, however, in the realm of knowledge, sound, as Jean Paul wrote, moves faster than light.2 Therefore, the word “autopoiesis” is indeed familiar but the discussion is far from understanding the concept sufficiently. And in turn, one encounters formulations without the word “autopoiesis” that say the same thing but whose significance is not recognized.3 In the following we want to outline briefly our understanding of the conceptual complex of self-reference, autopoiesis, and operative closure in general and with regard to organizations in particular. The theory of self-referential systems abstains from determining its object (in our case, organizations) by means of assumptions about its essence. Experience shows that such assumptions lead to irresolvable differences of opinion as soon as different observers offer different definitions of that, which they take for the essence of the matter – regardless of the matter at issue, be it the essence of law, of politics, of the family, of religion, or, actually, of organizations. Therefore, we begin with a circular definition: an organization is a system that produces itself qua organization. Now, we only have to define in what way this happens. However, this next step requires a series of theory decisions that could be made differently if it were possible to show how an alternative of the same quality would look.

1

For a topical survey, see especially Mingers (1995). Cf. also Robb (1989); Fischer (1991), in’t Veld et al. (1991), Bardmann (1994), passim but esp. pp. 72 ff. and on the connection with the discussions about “organization culture” pp. 365 ff.; Bailey (1994), pp. 285 ff. The publication of individual essays can barely be surveyed any longer. On the application to organizations cf., e.g., Kirsch and zu Knyphausen (1991); Kickert (1993); Willke (1994a); Wollnik (1994). 2 Paul (1961): “In the realm of knowledge – different from the physical realm – sound always arrives earlier than light” (1014). 3 Thus one reads, “Any enterprise’s first product is itself,” in Bausor (1994), p. 181. There is also talk about “autogenesis”; cf. Drazin and Sanderlands (1992). If one is referring to the Greek sense of these words, however, then it is preferable not to proceed from an “origin” but from the “product”. For a system is its own origin, only insofar as it is its own product. The question concerning the origin is better left to theology.

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Here, we are going to offer a concise synopsis that lists the most important of these assumptions that have the effect of concretization and break the circle: 1. The basal unit of an autopoietic system has the temporal form of an event – that is, of an occurrence that makes a difference between “before” and “after” and therefore can be observed only if one’s observations are based on the distinction before/after. Whenever we are concerned with results, we also speak of the “operation”, and in the case of organizations of the “decision”. In the context of a comparison of theories, it is important to keep in mind this foundation on events (and not on substances).4 From this it follows that the theory proceeds from the presumption of discontinuity, the presumption of a steady decay, and takes continuity (thingness, substance, process) to be in need of an explanation.5 A theory of autopoietic systems constructed in this manner finds itself in radical opposition to all types of process theories, including the dialectical ones. Such a theory rejects any kind of “essentialism” and requires, on the contrary, that every event (or in our area: every decision) leave all that follows to a subsequent event. Forms of essence are but instructions for a repetition of the selection. The theory of autopoiesis also stands in opposition to theories of action. For theories of action revert to the ideas (intentions, purposes) of an actor in order to connect their “unit acts”. By contrast, events – e.g., communications – that constitute autopoietic systems produce surpluses of possibilities so that in a further step something suitable may be selected. It is not necessary that the selected possibility was anticipated; the decision about this selection is made typically and better in retrospect, in light of an event that has already taken place. 2. A system that has produced itself must be capable of observing itself – that is to say, it must be capable of distinguishing itself from its environment.6 Occasionally, this is disputed. But since “organization” cannot mean the whole world, it is necessary to provide a criterion that serves to delimit that which is designated as an organization. Under these circumstances, the theoretically decisive question is whether this delimitation is put into effect by the organization itself or not; in the negative case, the question is, who or what else would put it into effect. 4 For a rather rare conception of this kind see Allport (1940; 1954; 1967). The relations to Alfred North Whitehead’s cosmology are quite obvious. 5 Ingold (1986), p. 24 provides the appropriate formulation: “Process is to event as continuity is to discontinuity.” 6 This requirement, taken by itself, need not lead to a theory of autopoiesis. Similar discussions can be found in the context of a distinction between “matter” and “symbol”. See, e.g., Pattee (1982). But in such a case, these concepts must be clarified, especially in regard to the concept of reference.

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3. In the process of self-observation, an organization does not observe itself as a stationary object whose qualities can be recognized. Instead, the organization uses its own identity only for the purposes of continuously attaching new determinations to it and subsequently giving them up again.7 For this reason, autopoietic systems can also create variations in their structures (this is called “self-organization”), insofar as such variations are compatible with the continuation of autopoiesis. All reflections on identity that propose stable self-descriptions by means of contentrelated properties must therefore proceed in a highly selective manner; in the process, they commit themselves to exacting normative demands and usually remain controversial. 4. The variability of the “self” that is introduced in each case as the fixed point is guaranteed by the fact that the organization observes itself observing. Already the organization system operates at the level of second-order observation; it diagnoses its own observations continuously (albeit not in every individual case). The theory or organization must therefore be placed at the level of third-order observation. Such a theory observes a system that observes itself; in consequence of this arrangement, it is capable of extending its observations to circumstances that are inaccessible to self-observation. Here, we touch on the classical sociological problem of latent structures and functions.8 5. Accordingly, autopoiesis is possible only as long as the system finds itself in a constant state of uncertainty about itself in relation to its environment, and as long as it can produce and control this uncertainty by means of self-organization. The system cannot transform the built-in (we will also say: the self-produced) uncertainty into certainty. The absorption of uncertainty can happen only as a transformation of the form of uncertainty that is relevant in each moment. Such absorption happens as an adjustment to the changing states of perturbation. Even reflection and self-observation cannot change this. Every “transcendental” identity could endanger the continued self-reproduction of the system. 6. The best possibility of coming to terms with uncertainty is to stick with all that has already happened. For this reason, organizations clarify the meaning of their actions to a large extent retrospectively. This, however, tempts them to pay little attention to the state of their environment at any given moment. This differentiation at the operative level must be balanced at the structural level. Preferably, decisions about the appropriateness of structures (such as decision programs or the typical length 7

For the same argument regarding the self-consciousness of psychic systems cf. Churchland (1984), p. 73: “… self-consciousness involves the same kind of continuously updated knowledge that one enjoys in one’s continuous perception of the external world.” 8 For a synopsis see Merton (1957), pp. 60 ff.

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of time of operations) will therefore have to be made with regard to the environment. 7. Concepts such as self-reference, self-observation, and self-description presuppose operations that produce in reality that which they mean. These operations must take place in the system (where else?). If one also considers that this is not possible in the form of unconnected, singular events, one comes up against the problem of the recursive interlacing of these operations. In order to make itself possible, every operation presupposes the recourse to and anticipation of other operations of the same system. Only in this way can connections be identified and the boundaries in relation to the environment be produced and reproduced. It is for this very reason (aside from the fact that the biologist Humberto Maturana gave this state of affairs this name) that one speaks of “autopoietic” systems.9 Therefore, a first application to the case of organizations was preventively and explicitly marked as a “metaphor”.10 A concept of cognition that was too broad, and a tie to biochemical realization that was too tight often influenced and misguided the subsequent discussion. 8. In light of the complex and often confused discussion, a few explanatory remarks on this topic are in order: (a) As the concept of “poíesis” indicates, we are dealing with the production of something: namely, the creation of the system as its own product. Of course, this does not mean that the system itself has at its disposal all of the causes that are necessary for self-production. A causal theory simply has no place for such a combination of all causes in a system (except in God). For concepts such as product, production, and reproduction this already applies at the conceptual level. In fact, only if a system does not simply exist but must reproduce itself by means of its own products can it depend on its environment in precisely this sense. However, it is important that the system has at its disposal a sufficient range of disponible causes (e.g., in the case of an organization this would be members that are subject to the instructions of the organization), so that it can secure its own reproduction under regular circumstances. (b) The concept “poíesis” does not emphasize the rule-bound, and even less the absolute, certainty of production. Instead, it emphasizes reproduction – that is to say, the production by means of its own products. Following Heinz von Foerster, one can therefore also speak of a “historical machine” – that is to say, of a system that 9 See especially Maturana and Varela (1975 and 1987). At this stage, the development of the theory was strongly conditioned by epistemological questions and presupposed biochemical processes insofar as the autopoietic operation itself was concerned. 10 In Morgan (1986).

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produces its subsequent operations in the state in which it finds itself due to its previous actions. (c) According to all this, the concept of autopoiesis is defined formally. For this reason, it leaves open qua concept the material operations by which the autopoiesis is executed. These operations may be biochemical or neurophysiological; they can also be conscious attentive dispositions or communications. Here, we are neither arguing by means of analogy nor metaphorically.11 Rather, it is a matter of different applications of a general theory. (d) The mere concept of autopoiesis serves as the distinction and indication of a corresponding state of affairs. As a concept, it has no empirical explanatory value. The effect of this concept consists first and foremost in constraining and adjusting other concepts, e.g., the concept of evolution or the understanding of the relationship between system and environment. All further consequences depend on the operations and the structures resulting from evolution and learning, by means of which autopoiesis is materialized. (e) The autopoiesis of the system is realized at the level of operations. Therefore it is compatible with all structures that make a connection from one operation to another possible. Here, the concept of structure is a concept that correlates with autopoiesis, not, as is usual in another context, a concept that correlates with the division of labor. Structures are produced (and reproduced or perhaps varied or even forgotten) by operations for the use in operations.12 For this reason, one cannot infer structural conservatism from the concept of autopoiesis.13 On the contrary, it is precisely the closure vis-à-vis the environment that offers the system opportunities for structural 11 Besides, it would cause no damage but be only of little use if we agreed that a metaphor is at stake in our use of the term “autopoiesis”. For this would apply to all approaches to organization theory (see, e.g., Morgan 1980); and, since the concept of metaphor (from “metapherein”) is a metaphor, it would merely amount to the requirement that every universalistic theory must be reminded of the necessity of an autological self-foundation. 12 We find ourselves in full agreement here with Anthony Giddens’s theory of “structuration” – with the single exception that Giddens rejects a systems-theoretical foundation of this concept. See Giddens (1986). 13 As do, apparently, Kickert (1993) and many others who associate “autopoiesis” with a conservative ideology. Management consultants also tend to describe autopoietic systems as structurally conservative in order to supply arguments in support of the function, if not necessity, of specific interventions from the outside. See, e.g., Wollnik (1994). The thesis regarding structural conservatism does not teach us something about the theory of autopoietic systems but rather about those entities that present this thesis: that is, about the autopoiesis of firms and the educational institutions of management consulting; alternatively, we could say with Maturana, loc. cit., p. 64: it does not tell us anything about the area that is being described but rather about the observer who produces or uses such a description.

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variation, which it could not have under the condition of immediate linkages with the environment. Autopoietic modes of operations are typical one-time-only inventions of evolution that have tended towards structural diversification in the course of history. Thus “autopoiesis” merely designates a barrier for structural variations. However, as evolution extending over long times and expansive spaces teaches us, it is precisely the difference between inner and outer that leads to the acceleration of changes. Of course, it also teaches us that these changes do not accord with the wishes of certain observers, which has the effect that to them, these systems may appear as rigid and inflexible. (f) The recursive interlacing of operations follows neither logical nor rational rules. It only creates connections and holds out a prospect of connectivity. Thus, sales figures may be taken as proof of success and of the quality of a given organizational structure. Thus, information may trigger the suspicion of distortions caused by specific interests and motivate further attempts at confirming this suspicion. Thus, in the international relations between organizations ecological criteria for products may be interpreted as trade barriers. Hence recursions actually secure the preservation and reproduction of repressed paradoxes. Something determinate is always also something different. 9. Autopoietic systems are operatively closed and precisely in this sense autonomous systems.14 The concept of operative closure does not allow for any gradation; in other words, it does not permit that the system operates in its environment or, vice versa, the environment in the system. A system cannot be more or less autopoietic;15 but it can be more or less complex. Operatively closed autopoietic systems cannot be described via input/output functions; this much is clear for mathematically demonstrable reasons.16 From this result descriptions 14

Cf. for a very narrowly circumscribed segment Varela (1979). This is a contentious point. Especially Gunther Teubner (1987a; 1987b) has introduced the opposing viewpoint into the discussion. For the application to organizations see Kirsch and zu Knyphausen (1991). If one decided to take this path in the formation of concepts, one would, however, need a conception of the unity of the system that can be produced without depending on the concept of autopoiesis. Moreover, this version would have to abandon the rigid connection between autopoiesis and decision in the case of organizations. Then, “autopoietic” systems would be systems in which autopoiesis also happens (among other occurrences). This, however, would not explain the unity of the system. Perhaps in such cases it would be better to replace the concept of autopoiesis by the old concept of circular causality. In any case, from Maturana’s point of view, reflections on gradation pertain exclusively to the area of the structures of systems and precisely not to the area of autopoiesis itself. 16 On this topic and the reasons it provides for the necessity of a “blind spot”: that is, the necessary opacity of the system to itself, cf. Heinz von Foerster (1993a, pp. 21 ff.; 1993b). 15

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and impressions such as: freedom, arbitrariness, and opacity. The concept of operative closure also abstracts from causal assumptions. In no way does it claim a causal isolation (even if it were merely relative). It is possible that a system (say, a brain) is operatively closed and at the same time depends to an extreme degree on the continuous supply of resources of a very specific kind (in our case this would be the circulation of the blood). Operative closure merely means that the system can operate only in the context of its own operations and that it depends in this process on the structures that are being produced precisely by these operations. It is in this sense that one speaks of self-organization or, with reference to operations, of structural determination. 10. These theory stipulations have far-reaching consequences for the relation between system and environment. In this case, operative closure does not mean that an organizational system cannot maintain any contacts with its societal environment. Society, on the one hand, makes it possible to communicate within society across the boundaries of subsystems. On the other hand, an organization cannot participate in communication without observing itself as a participant. Qua recipients of communications, the organization’s own structures regulate the information by which the system lets itself be perturbed and incited to undertake its own information processing. Qua sender of communications, the organization decides what it wants to communicate and what not. To this degree, the organization’s environment remains the organization’s own construction, which is not to say that its reality is denied. On this point, we agree with Karl Weick.17 Whatever is observed in the organizational system as environment is always itself a construction: that is, a filling-in of the external reference (otherreference) of the system.18 In a manner of speaking, the environment validates the decisions of the system by providing the context that makes possible to determine retrospectively how one has decided (Weick speaks of action). The environment makes possible the externalization of unpleasant causes of one’s own decisions – that is to say, it makes possible a sort of “punctuation” of one’s own operations. Thus, the environment is a collecting area for problems that allows the system to disregard its own participation in the creation of these problems. To sum up, one might say that the environment provides the possibility of referring one’s own operations to a “niche” without posing the question of how it is that the world and society in particular contain such niches. Nothing else is expressed by the old concept “milieu”. 17

See Weick (1977a; 1979, pp. 147 ff). Cf. also Smircich (1983), pp. 229 ff. “The ‘outside’ or ‘external’ world cannot be known,” one reads in Weick (1977), “The outside is a void, there is only the inside” (p. 273). 18

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11. Although biology bestowed the concept of autopoiesis upon us, we can safely leave open whether or not and in what way one could understand the reproduction of relatively stable large molecules in cells as “autopoietic.” Perhaps one might do so, because such reproduction is possible only in cells, or perhaps because we are dealing here with extremely unstable units that must be continuously replaced. In the case of social systems, autopoiesis can be recognized much more easily, and it is structured quite differently, in any case. For we are not dealing here with units that need to replicate and must be replaced continuously. Rather, social systems (and conscious systems as well) consist merely of events that are about to vanish as soon as they have come about and must be replaced not by the same but by different events. The steady transition from one element to another, the steady reproduction of difference, can in fact be understood only in terms of autopoiesis; for it presupposes the connectivity that is produced in and by the system itself. No environment could inject something fitting for the system as quickly as is necessary. Only the system can arrest its own decay as it happens from one moment to the next. At the same time, this situation makes very specific demands on structures; repetition is precisely what they must not aim at; instead, they first and foremost must regulate the transition from one element to the next. To this purpose, a meaning that is rich in reference but nonetheless determinable must provide the necessary orientation, as I have explained elsewhere.19 12. Autopoiesis depends on the fact that a system is capable of producing internal improbabilities and thereby deviating from the usual. In such a case, structurally restricted contingencies function as information in the system. In fact, they function as information that is not derived from the environment, since the system cannot contact its environment. At best, they function as information about the environment (and even this is not the case in biological systems such as cells, immune systems, and brains but only in systems that can distinguish between themselves and their environment in the medium of meaning). Thus, an autopoietic system can only inform itself; and in the system, information has the function of selectively restricting the possibilities for the continuation of its own operations combined with the additional function of being able to decide relatively quickly about connective possibilities. 13. Closure in this operative sense is the condition of a system’s openness. Especially in regard to the law of entropy in thermodynamics, the older type of systems theory spoke of “open systems” in order to be able to 19

See Luhmann (1995f), pp. 59 ff.

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explain how order is created and preserved through a contrary tendency. But the question of what actually makes a system capable of being open was not posed. In other words, one did not ask what degree of systemic order had to be given so that a system could afford its own openness and, if necessary, even increase the complexity of those aspects that buttress its openness. This question was not asked because empirical examples and the input/output model, respectively, provided the orientation of this theory. The older type of cybernetics had already spoken of systems that are closed in regard to information but open in regard to energy. But only the more recent theory of self-referential systems states clearly that operative closure is the condition of openness. 14. The theory of autopoietic systems distinguishes strictly between the continuation of autopoiesis and the preservation of certain structures that serve the safeguarding of sufficient redundancy and connectivity and thus, in one way or the other, make autopoiesis possible in the first place. Thus, structures are presupposed as functional, as contingent, and as also possible under different circumstances and in different forms. Seen from the viewpoint of the theory construction, this allows for an understanding of the ambiguity, the need for interpretation, and the possible avoidance of specific structural arrangements. To put it differently, one might say that the theory of autopoietic systems above all points out to the observer that structures have meaning and therefore must be constituted within open horizons of referring to other possibilities, while the system’s own autopoiesis is not under consideration in autopoietic systems. With these insights, we find ourselves in the vicinity of theories of “symbolic interactionism” or of theories of the hermeneutic “interpretation” of reality – but without having to resort to behaviorist (Mead) or subjectivist assumptions. In the case of organizations, we see that uncertainties must be reduced and ambiguities in the decision process must be clarified. At the same time, however, we also see that uncertainty and ambiguity must always also be regenerated in the processing of meaning. Particularly the autopoiesis of organizations is kept going precisely by the fact that uncertainty is not only reduced but also renewed. The impressive gain achieved by means of this complex maneuvering of concepts consists in the transformation of the fundamental problem of systems theory: the preservation of existence is turned into the preservation of a difference. This also means that we no longer speak of “existential” necessities (e.g., an organization can exist only if …)20 but of the conditions of the pos20 Many – too many – items could be enumerated as such existential necessities, not just “goals” or other “essential” structures (“functional requisites”) but also humans capable of action, fresh air, constant laws of gravity, etc.

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sibility of observing organizations. Whenever we describe organizations as autopoietic systems, it is always a matter of the production and reproduction of a difference (in systems-theoretical terms: between system and environment). The concept of autopoiesis means that an observer who uses it presupposes that this difference is produced by the system itself and is reproduced through the system’s own operations. – Translated by Peter Gilgen

Acknowledgements This text is an edited and translated version of pp. 44–55 of Niklas Luhmann (2000) Organisation und Entscheidung (Opladen: Westdeutscher Verlag).

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Chapter 3

The Autopoiesis of Social Systems Niklas Luhmann

Meaning and life as different modes of autopoietic organization The term “autopoiesis” has been invented to define life. Its origin is clearly biological. Its extension to other fields has been discussed, but rather unsuccessfully and on the wrong premises. The problem may well be that we use a questionable approach to the issue, “tangling” our “hierarchies” of investigation. At first sight it seems safe to say that psychic systems, and even social systems, are also living systems. Would there be consciousness or social life without (biological) life? And then, if life is defined as autopoiesis, how could one refuse to describe psychic systems and social systems as autopoietic systems? In this way we can retain the close relation between autopoiesis and life and apply this concept to psychic systems and to social systems as well. We are almost forced to do it by our conceptual approach (Maturana 1980; Hejl 1982; Bunge 1979). However, we immediately get into trouble in defining precisely what the “components” of psychic and social systems are whose reproduction by the same components of the same systems recursively defines the autopoietic unity of the system. And what does “closure” mean in the case of psychic and social systems if our theoretical approach requires the inclusion of cells, neurophysiological systems, immune systems, etc. of living bodies into the encompassing (?) psychological or sociological realities? Moreover, because it is tied to life as a mode of self-reproduction of autopoietic systems, the theory of autopoiesis does not really attain the level of general systems theory which includes brains and machines, psychic systems and social systems, societies and short-term interactions. From this point of view, living systems are a special type of systems. However, if we abstract from life and define autopoiesis as a general form of systembuilding using self-referential closure, we would have to admit that there are non-living autopoietic systems, different modes of autopoietic reproduction, and general principles of autopoietic organization which materialize as life, 64

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but also in other modes of circularity and self-reproduction. In other words, if we find non-living autopoietic systems in our world, then and only then will we need a truly general theory of autopoiesis which carefully avoids references which hold true only for living systems. But which attributes of autopoiesis will remain valid on this highest level, and which will have to be dropped on behalf of their connection with life? The text that follows uses this kind of multi-level approach. It distinguishes a general theory of selfreferential autopoietic systems and a more concrete level at which we may distinguish living systems (cells, brains, organisms, etc.), psychic systems and social systems (societies, organizations, interactions) as different kinds of autopoietic systems (see Figure 1). Self-referential autopoietic systems

Living Systems

Cells

Brains

Psychic Systems

Organisms

Societies

Social Systems

Organizations

Interactions

Figure 1: Types of self-referential autopoietic systems.

This scheme does not describe an internal systems differentiation. It is a scheme not for the operations of systems, but for their observation. It differentiates different types of systems or different modes of realization of autopoiesis. This kind of approach is usable only if we are prepared to accept its antiAristotelian premise that social systems, and even psychic systems, are not living systems. The concept of autopoietic closure itself requires this theoretical decision, and leads to a sharp distinction between meaning and life as different kinds of autopoietic organization; and meaning-using systems again have to be distinguished according to whether they use consciousness or communication as modes of meaning-based reproduction. On the one hand, then, a psychological and a sociological theory have to be developed which meet these requirements; on the other hand, the concept of autopoiesis has to be abstracted from biological connotations. Both tasks are clearly interdependent. The general theory of autopoietic systems forms the foundation of the theories of psychic and social systems; the general theory itself, however, is meaningful only if this implementation succeeds, because otherwise we would be unable to determine which kind of attributes are truly general. 65

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Communications as the basic elements of social systems To use ipsissima verba, autopoietic systems “are systems that are defined as unities, as networks of productions of components, that recursively, through their interactions, generate and realize the network that produces them and constitute, in the space in which they exist, the boundaries of the network as components that participate in the realization of the network” (Maturana 1981, p. 21). Autopoietic systems, then, are not only self-organizing systems. Not only do they produce and eventually change their own structures but their self-reference applies to the production of other components as well. This is the decisive conceptual innovation. It adds a turbocharger to the already powerful engine of self-referential machines. Even elements, that is last components (in-dividuals), which are, at least for the system itself, undecomposable, are produced by the system itself. Thus, everything which is used as a unit by the system is produced as a unit by the system itself. This applies to elements, processes, boundaries and other structures, and last but not least to the unity of the system itself. Autopoietic systems, of course, exist within an environment. They cannot exist on their own. But there is no input and no output of unity. Autopoietic systems, then, are sovereign with respect to the constitution of identities and differences. They do not create a material world of their own. They presuppose other levels of reality. Human life, for example, presupposes the small scope of temperature in which water exists as a liquid. But whatever they use as identities and as differences is of their own making. In other words, they cannot import identities and differences from the outer world; these are forms about which they have to decide themselves. Social systems use communication as their particular mode of autopoietic reproduction. Their elements are communications which are recursively produced and reproduced by a network of communications and which cannot exist outside of such a network. Communications are not “living” units, they are not “conscious” units, they are not “actions”. Their unity requires a synthesis of three selections: namely, information, utterance1 and understanding (including misunderstanding).2 This synthesis is produced by the network of communication, not by some kind of inherent power of consciousness, or by the inherent quality of the information. Also – and this goes against all kinds of “structuralism” – communication is not produced by language. Structuralists have never been able to show how a structure can produce an event. At this point, the theory of autopoiesis offers a decisive 1

In German I could use the untranslatable term, “Mitteilung”. The source of this threefold distinction (which also has been used by Austin and Searle) is Karl Bühler (1934). However, we modify the reference of this distinction. It refers not to “functions”, and not to types of “acts”, but to selections. 2

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advance. It is the network of events which reproduces itself, and structures are required for the reproduction of events by events. The synthesis of information, utterance and understanding cannot be preprogrammed by language. It has to be recreated from situation to situation by referring to previous communications and to possibilities of further communications which are to be restricted by the actual event. This operation requires self-reference. It can in no way use the environment. Information, utterances and understandings are aspects which for the system cannot exist independently of the system; they are co-created within the process of communication. Even “information” is not something which the system takes in from the environment. Pieces of information don’t exist “out there”, waiting to be picked up by the system. As selections they are produced by the system itself in comparison with something else (e.g., in comparison with something which could have happened). The communicative synthesis of information, utterance and understanding is possible only as an elementary unit of an ongoing social system. As the operating unit it is undecomposable, doing its autopoietic work only as an element of the system. However, further units of the same system can distinguish between information and utterance and can use this distinction to separate hetero-referentiality and self-referentiality. They can, being themselves undecomposable for the moment, refer primarily to the content of previous communications, asking for further information about the information; or they can question the “how” and the “why” of the communication, focusing on its utterance. In the first case, they will pursue heteroreferentiality, in the second case self-referentiality. Using a terminology proposed by Gotthard Günther (1979), we can say that the process of communication is not simply auto-referential in the sense that it is what it is. It is forced by its own structure to separate and to recombine heteroreferentiality and self-referentiality. Referring to itself, the process has to distinguish information and utterance and to indicate which side of the distinction is supposed to serve as the base for further communication. Therefore, self-reference is nothing but reference to this distinction between hetero-reference and self-reference. And, whereas auto-referentiality could be seen as a one-value thing (it is what it is), and could be described by a logic with two values only, namely, true and false, the case of social systems is one of much greater complexity because its self-reference (1) is based on an ongoing auto-referential (autopoietic) process, which refers to itself (2) as processing the distinction between itself and (3) its topics. If such a system did not have an environment, it would have to invent it as the horizon of its hetero-referentiality. The elementary, undecomposable units of the system are communications of minimal size. This minimal size, again, cannot be determined independent

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of the system.3 It is constituted by further communication or by the prospect of further communication. An elementary unit has the minimal meaning which is necessary for reference by further communication – for instance, the minimal meaning which still can be negated. Further communication can very well separate pieces of information, utterances and understandings and discuss them separately, but this still would presuppose their synthesis in previous communication. The system does not limit itself by using constraints for the constitution of its elementary units. If need be, it can communicate about everything and can decompose aspects of previous communication to satisfy actual desires. As an operating system, however, it will not always do this to the extreme. Communication includes understanding as a necessary part of the unity of its operation. It does not include the acceptance of its content. It is not the function of communication to produce a consensus as the favoured state of mind. Communication always results in an open situation of either acceptance or rejection. It reproduces situations with a specified and enforced choice. Such situations are not possible without communication; they do not occur as natural happenings. Only communication itself is able to reach a point which bifurcates further possibilities. The bifurcation itself is a reduction of complexity and, by this very fact, an enforcement of selection. Automatically, the selection of further communication is either an acceptance or rejection of previous communication or a visible avoidance or adjournment of the issue. Whatever its content and whatever its intention, communication reacts within the framework of enforced choice. To take one course is not to take the other. This highly artificial condition structures the self-reference of the system; it makes it unavoidable to take other communications of the same system into account, and every communication renews the same condition within a varied context. If the system were set up to produce consensus it soon would come to an end. It would never produce and reproduce a society. In fact, however, it is designed to reproduce itself by submitting itself to self-reproduced selectivity. Only this arrangement makes social evolution possible, if evolution is seen as a kind of structural selection superinduced on selectivity.

Societies and interactions as different types of social systems Social systems, then, are recursively closed systems with respect to communication. However, there are two different meanings of “closure” which 3

This argument, of course, does not limit the analytical powers of an observer, who, however, has to take into account the limitations of the system.

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make it possible to distinguish between societies and interactions as different types of social systems. Societies are encompassing systems in the sense that they include all events which, for them, have the quality of communication. They cannot communicate with their environment because this would mean including their understanding partner in the system, understanding being an essential aspect of the communication itself.4 By communication they extend and limit the societal system, deciding about whether and what to communicate, and what to avoid. Interactions, on the other hand, form their boundaries by the presence of people who are well aware that communication goes on around them without having contact with their own actual interaction. Interactions must take into account environmental communication, and have to acknowledge the fact that persons who are present and participate in the interaction have other roles and other obligations within systems which cannot be controlled here and now. But interactions also are closed systems, in the sense that their own communication can be motivated and understood only in the context of the system. For example, if somebody approaches the interactional space and begins to participate, he has to be introduced and the topics of conversation eventually have to be adapted to the new situation. Interactions, moreover, cannot import communication ready-made from their environment. They communicate or they do not communicate, according to whether they decide to reproduce or not to reproduce their own elements. They continue or discontinue their autopoiesis like living systems which continue as living systems or die. There are no third possibilities, neither for life nor for communication. All selections have to be adapted to the maintenance of autopoietic reproduction. Something has to be said, or, at least, good and peaceful (or bad and aggressive) intentions have to be shown if others are present.5 Everything else remains a matter of structured choice within the system. Some of its structures, then, become specialized in assuring that communication goes on even if nothing of informative quality remains and even if the communication becomes controversial and unpleasant (Malinowski 1960).

The relation between action and communication Confronted with the question of elementary units, most sociologists would come up with the answer: action. Sometimes “roles” or even human individuals are preferred, but since the time of Max Weber and Talcott Parsons, 4

For problems of religion, and particularly for problems of “communication with God” (revelation, prayer, etc.), see Niklas Luhmann (1985). 5 This again is not a motive for action but a self-produced fact of the social system. If nobody is motivated to say anything or to show his intentions, everybody would assume such communications and they would be produced without regard to such a highly improbable psychological environment.

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action theory seems to offer the most advanced conceptualization.6 Communication is introduced as a kind of action – for example, as “kommunikatives Handeln” in the sense of Jürgen Habermas (1981). Usually this conceptualization is taken for granted, and classical sociological theory finds itself resumed under the title of “Theory of Action” (Münch 1982). Controversies are fought over headings such as action versus system, or individualistic versus holistic approaches to social reality. There is no serious conceptual discussion which treats the relation of actions and communications, and the important question of whether action or communication should be considered as the basic and undecomposable unit of social systems has not been taken up. For a theory of autopoietic systems, only communication is a serious candidate for the position of the elementary unit of the basic self-referential process of social systems. Only communication is necessarily and inherently social. Action is not. Moreover, social action already implies communication; it implies at least the communication of the meaning of the action or the intent of the actor, and it also implies the communication of the definition of the situation, of the expectation of being understood and accepted, and so on. Above all, communication is not a kind of action because it always contains a far richer meaning than the utterance or transmittance of messages alone. As we have seen, the perfection of communication implies understanding, and understanding is not part of the activity of the communicator and cannot be attributed to him. Therefore, the theory of autopoietic social systems requires a conceptual revolution within sociology: the replacement of action theory by communication theory as the characterization of the elementary operative level of the system. The relation of action and communication has to be reversed. Social systems are not composed of actions of a special kind; they are not communicative actions, but require the attribution of actions to effectuate their own autopoiesis. Neither psychological motivation, nor reasoning or capacity of argumentation, constitutes action, but simply the attribution as such, that is, the linking of selection and responsibility for the narrowing of choice.7 Only by attributing the responsibility for selecting the communication can the process of further communication be directed. One has to know who said what to be able to decide about further contributions to the process. Only by using this kind of simplifying localization of decision points can the process return to itself and communicate about communication. 6

See the discussion of “The Unit of Action Systems” in Parsons 1937, pp. 43 ff., which had a lasting impact on the whole theoretical framework of the later Parsons. 7 To elaborate on this point, of course, we would have to distinguish between “behaviour” and “action”. A corresponding concept of “motive” as a symbolic device facilitating the attribution of action has been used by Max Weber. See also Mills (1940); Burke (1945/1950); Blum and McHugh (1971).

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Reflexive communication is not only an occasional event, but also a continuing possibility being co-reproduced by the autopoiesis itself. Every communication has to anticipate this kind of recursive elaboration, questioning, denial or correction, and has to preadapt to these future possibilities. Only in working out this kind of presumptive fitness can it become part of the autopoietic process. This, however, requires the allocation and distribution of responsibilities. And this function is fulfilled by accounting for action. The process therefore produces a second version of itself as a chain of actions. Contrary to the nature of communication itself, which includes the selectivity of information and the selectivity of understanding, and thereby constitutes its elements by overlapping and partial interpenetration, this action chain consists of clear-cut elements which exclude each other. Contrary to the underlying reality of communication, the chain of communicative actions can be seen and treated as asymmetric. In this sense the constitution and attribution of actions serve as a simplifying self-observation of the communicative system. The system processes information but it takes responsibility only for the action part of this process, not for the information. It is congruent with the world, universally competent, including all exclusions, and at the same time it is a system within the world, able to distinguish and observe and control itself. It is a self-referential system and, thereby, a totalizing system. It cannot avoid operating within a “world” of its own. Societies constitute worlds. Observing themselves, that is, communicating about themselves, societies cannot avoid using distinctions which differentiate the observing system from something else. Their communication observes itself within its world and describes the limitation of its own competence. Communication never becomes self-transcending.8 It never can use operations outside its own boundaries. The boundaries themselves, however, are components of the system and cannot be taken as given by a pre-constituted world. All this sounds paradoxical, and rightly so. Social systems as seen by an observer are paradoxical systems.9 They include self-referential operations, not only as a condition of the possibility of their autopoiesis but also because of their self-observation. The distinction of communication and action and, as a result, the distinction of world and system are operative requirements. The general theory of autopoietic systems postulates a clear distinction between autopoiesis and observation. This condition is fulfilled in the case of social systems as well. Without using this distinction, the system could not accomplish the self-simplification necessary for self8 See the distinction between perceiving oneself and transcending oneself made by Hofstadter (1979). 9 The term “paradox” refers to a logical collapse of a multi-level hierarchy, not to a simple contradiction. See Wilden 1972, pp. 390 ff.; Hofstadter (1979); Barel (1979).

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observation. Autopoiesis and observation, communication and attribution of action are not the same and can never fuse. Nevertheless, self-observation in this specific sense of describing itself as a chain of clear-cut and responsible actions is a prerequisite of autopoiesis as such. Without this technique of using a simplified model of itself, the system could not communicate about communication and could not select its basic elements in view of their capacity to adapt themselves to the requirements of autopoiesis. This particular constellation may not be universally valid for all autopoietic systems. In view of the special case of social systems, however, the general theory has to formulate the distinction of autopoiesis and observation in a way which does not exclude cases in which self-observation is a necessary requirement of autopoiesis as such. Observing such systems under the special constraints of logical analysis, we have to describe them as paradoxical systems or as “tangled hierarchies”. It is not the task of an external observation to de-paradoxize the system and describe it in a way which is suitable for multi-level logical analysis.10 The system de-paradoxizes itself. This requires “undecidable” decisions. In the case of social systems these are decisions about the attribution of action. If desired, these decisions themselves can be attributed as actions, which again could be attributed as action, and so on in infinite regress. Logically, actions are always unfounded and decisions are decisions precisely because they contain an unavoidable moment of arbitrariness and unpredictability. But this does not lead into lethal consequences. The system learns its own habits of acting and deciding,11 accumulating experiences with itself and consolidating, on the basis of previous actions, expectations concerning future actions (structures). The autopoiesis does not stop in face of logical contradictions: it jumps, provided that possibilities of further communication are close enough at hand.

Maintenance of social systems by self-referential production of elements The formal definition of autopoiesis gives no indication of the span of time during which components exist. Autopoiesis presupposes a recurring need for renewal. On the biological level, however, we tend to think about the process of replacement of molecules within cells or the replacement of cells within organisms, postponing for some time the final, inevitable decay. The 10

I do not comment on the possibility of a logical analysis of self-referential systems which bypasses the Gödel limitations and avoids hierarchization. 11 “Learning” understood as aspect of autopoiesis, that is, as a change of structure within a closed system (and not as adaptation to a changing environment): see Maturana (1983, pp. 60–71).

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limited duration of life seems to be a way of paying the cost of evolutionary improbability. All complex order seems to be wrested from decay. This holds true for social systems as well, but with a characteristic difference. Conscious systems and social systems have to produce their own decay. They produce their basic elements, that is, thoughts and communications, not as short-term states but as events which vanish as soon as they appear. Events, too, occupy a minimal span of time, a specious present, but their duration is a matter of definition and has to be regulated by the autopoietic system itself: events cannot be accumulated. A conscious system does not consist of a collection of all its past and present thoughts, nor does a social system stockpile all its communications. After a very short time the mass of elements would be intolerably large and its complexity would be so great that the system would be unable to select a pattern of coordination and would produce chaos. The solution is to renounce all stability at the operative level of elements and to use events only. Thereby, the continuing dissolution of the system becomes a necessary cause of its autopoietic reproduction. The system becomes dynamic in a very basic sense. It becomes inherently restless. The instability of its elements is a condition of its duration. All structures of social systems have to be based on this fundamental fact of vanishing events, disappearing gestures or words that are dying away.12 Memory, and then writing, have their function in preserving not the events, but their structure-generating power.13 The events themselves cannot be saved, but their loss is the condition of their regeneration. Thus, time and irreversibility are built into the system not only at the structural level, but also at the level of its elements. Its elements are operations, and there is no reasonable way to distinguish between “points” and “operations”. Disintegration and reintegration, disordering, and ordering require each other, and reproduction comes about only by a recurring integration of disintegration and reintegration. The theoretical shift from self-referential structural integration to selfreferential constitution of elements has important consequences for systems maintenance. Maintenance is not simply a question of replication, of cultural transmission, of reproducing the same patterns under similar circumstances, such as using forks and knives while eating and only while eating;14 its primary process is the production of next elements in the actual situation, 12

It is rare that social scientists have a sense for the radicality and the importance of this insight; but see Allport (1940, 1954). 13 This explains that the invention of writing speeds up the evolution of complex societal systems, making it possible to preserve highly diversified structural information. This is, by now, a well explored phenomenon which still lacks a sufficient foundation in theory. See Yates (1966); Ong (1967); Havelock (1982). 14 This is the famous “latent pattern maintenance” of Parsons – “latent” because the system cannot actualize all its patterns all the time but has to maintain them as largely unused possibilities.

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and these have to be different from the previous ones to be recognizable as events. This does not exclude the relevance of preservable patterns; indeed, it even requires them for a sufficiently quick recognition of next possibilities. However, the system maintains itself not by storing patterns but by producing elements; not by transmitting “memes” (units of cultural transmission analogous to “genes”)15, but by recursively using events for producing events. Its stability is based on instability. This built-in requirement of discontinuity and newness amounts to a necessity to handle and process information, whatever the environment or the state of the system offers as occasions. Information is an internal change of state, a self-produced aspect of communicative events and not something which exists in the environment of the system and has to be exploited for adaptive or similar purposes.16 If autopoiesis bases itself on events, a description of the system needs not just one, but two dichotomies: the dichotomy of system and environment, and the dichotomy of event and situation.17 Both dichotomies are “world” formulas: system-plus-environment is one way, and event-plus-situation is another way, to describe the world. If the system (or its observer) uses the event/situation dichotomy, it can see the difference between system and environment as the structure of the situation, the situation containing not only the system, but also its environment from the point of view of an event. Processing information by producing events-in-situations, the system can orient itself to the difference of internal and external relevances. As the horizon (Husserl) of events, the situation refers to the system, to the environment and to its difference – but it does all this selectively, using the limited possibilities to produce the next event as a guideline.18 Thus, the double dichotomy describes the way in which the system performs the “re-entry” of the difference between system and environment into the system. On the other hand, the difference between system and environment structures the limitation of choice which is needed to enable the system to proceed from one event-in-situation to another event-in-situation. Systems based on events need a more complex pattern of time. For them, time cannot be given as an irreversibility alone. Events are happenings which make a difference between a “before” and a “thereafter”. They can be identified and observed, anticipated and remembered only as such a difference. Their identity is their difference. Their presence is a co-presence of the before and the thereafter. They have, therefore, to present time within time 15

Dawkins’s term; see Dawkins (1976). See also (for systems) von Foerster (1981) especially p. 263: The environment contains no information; the environment is as it is. 17 Using this theoretical framework, it is not permitted to speak of “environment of events, of actions, etc.”, or to speak of “situations of a system”. 18 See Markowitz (1979) for further elaborations using the method of phenomenological psychology. 16

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and to reconstruct temporality in terms of a shifting presence which has its quality as presence only owing to the double horizons of past and future which accompany the presence on its way into the future.19 On this basis conscious time-binding can develop.20 The duality of horizons doubles as soon as we think of a future present or a past present, both of which have their own future and their own past. The temporal structure of time repeats itself within itself, and only this reflexivity makes it possible to renounce a stable and enduring presence (Luhmann 1982g). By a slow process of evolution, the semantics of time has adapted to these conditions. For a long time it used a religious reservation – aeternitas, aevum, or the co-presence of God with all times – to avoid the complete historization of time. Only modern society recognizes itself – and consequently all previous societies – as constituting its own temporality (Luhmann 1980b). The structural differentiation of society as an autonomous autopoietic system requires the coevolution of corresponding temporal structures with modern historicism as the well-known result.

The contribution of the general theory of autopoietic systems These short remarks by no means exhaust the range of suggestions that the theory of social systems can contribute to the abstraction and refinement of the general theory of autopoietic systems (for a more extensive treatment, see Luhmann 1984b). We can now return to the question, What is new about it, given a long tradition of thinking about creatio continua, continuance, duration, maintenance and so forth21 (Ebeling 1976)? Since the end of the sixteenth century, the idea of self-maintenance has been used to displace teleological reasoning, and to reintroduce teleology with the argument that the maintenance of the system is the goal of the system or the function of its structures and operations. It is no surprise, therefore, that the question of what is added by the theory of autopoiesis to this well-known and rather futile traditional conceptualization has been appended to this discussion.22 An easy answer would be to mention the sharp distinction between selfreference on the level of structures (self-organization) and self-reference on the level of basic operations, or elements. Moreover, we could point to the 19

One of the best analyses of this complicated temporal structure remains Husserl (1928). For social systems see Bergmann (1981). 20 See Korzybski (1949). From an evolutionary point of view, see Stebbins (1982), pp. 363 ff. 21 See Ebeling (1976), and of course the extensive “functionalist” discussion about “systems maintenance”. 22 See Jantsch (1981), who prefers the theory of thermodynamic disequilibrium and dissipative structures.

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epistemological consequences of distinguishing autopoiesis and observation, observing systems being themselves autopoietic systems. We have only to look at the consequences of an “event-structure” approach for sociological theory to be aware of new problems and new attempts at solution, compared with the Malinowski/Radcliffe Brown/Parsons level of previous controversies. There is, however, a further aspect which should be made explicit. The theory of autopoietic systems formulates a situation of binary choice. A system either continues its autopoiesis or it does not. There are no inbetween states, no third states. A woman may be pregnant or not: she cannot be a little pregnant. This is true, of course, for “systems maintenance” as well. Superficial observers will find the same tautology. The theory of autopoietic systems, however, has been invented for a situation in which the theory of open systems has become generally accepted. Given this historical context, the concept of autopoietic closure has to be understood as the recursively closed organization of an open system. It does not return to the old notion of “closed [versus open] systems” (Varela 1979). The problem, then, is to see how autopoietic closure is possible in open systems. The new insight postulates closure as a condition of openness, and in this sense the theory formulates limiting conditions for the possibility of components of the system. Components in general and basic elements in particular can be reproduced only if they have the capacity to link closure and openness. For biological systems this does not require an “awareness” of, or knowledge about, the environment. For meaning-based conscious or social systems the autopoietic mode of meaning gives the possibility of “re-entry”,23 that is, of presenting the difference between system and environment within the system. This re-entered distinction structures the elementary operations of these systems. In social, that is, communicative, systems, the elementary operation of communication comes about by an “understanding” distinction between “information” and “utterance”. Information can refer to the environment of the system. Utterance, which is attributed to an agent as action, is responsible for the autopoietic regeneration of the system itself. In this way information and utterance are forced to cooperate, forced into unity. The emergent level of communication presupposes this synthesis. Without the basic distinction between information and utterance as different kinds of selection, the understanding would be not an aspect of communication, but a simple perception. Thus, a sufficiently differentiated analysis of communication can show 23

In the sense of Spencer Brown (1971). Gotthard Günther makes the same point in stating that these systems of self-reflection with centers of their own could not behave as they do unless they are capable of “drawing a line” between themselves and their environment. And this leads Günther to the surprising conclusion that parts of the universe have a higher reflective power than the whole of it (Günther 1976, p. 319).

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how the recurrent articulation of closure and openness comes about. It is a constitutive necessity of an emergent level of communication. Without a synthesis of three selections – information, utterance and understanding – there would be no communication but simply perception. By this synthesis, the system is forced into looking for possibilities of mediating closure and openness. In other words, communication is an evolutionary potential for building up systems which are able to maintain closure under the condition of openness and openness under the condition of closure. These systems face the continuing necessity to select meanings which satisfy these constraints. The result is our society. In addition, the concept of autopoietic closure makes it possible to understand the function of enforced binary choices. The system can continue its autopoiesis or it can stop it. It can continue to live, to produce conscious states or to communicate, or it can choose the only alternative: to come to an end.24 There are no third states. This is a powerful technical simplification. On the other hand, the system lacks any self-transcending power. It cannot enact operations from the outer world. A social system can only communicate. A living system can only live. Its autopoiesis as seen by an observer may have a causal impact on its environment. But autopoiesis is production in the strict sense of a process which needs further causes, not produced by itself, to attain its effect. The binary structure of autopoiesis seems to compensate for this lack of totality. It substitutes this kind of “internal totality”. To be or not to be, to continue the autopoiesis or not, serves as an internal representation of the totality of possibilities. Everything which can happen is reduced for the system to one of these two states. The system emerges by inventing this choice, which does not exist without it. The negative value is a value not of the world but of the system. But it helps to simplify the totality of all conditions to one decisive question of how to produce the next system state, the next element, the next communication under the constraints of a given situation. Even unaware of the outer world, the living system “knows” that it is still alive and chooses its operations in using life for reproducing life. A communicative system too can continue to communicate on the base of the ongoing communication. This requires no reliable knowledge about outside conditions but simply the distinction between system and environment as seen from the point of view of the system. The unity of the autopoietic system is the recursive processing of this difference of continuing or not which reproduces the difference as a condition of its own continuity. Every step has its own selectivity in choosing autopoiesis instead of stopping it. This is not a question of preference, nor a question of goal attainment. Rather, it has to be conceived as a “code” of 24 “End” in this theory, therefore, is not “telos” in the sense of the perfect state, but just the contrary: the zero-state, which has to be avoided by reproducing imperfect and improbable states. In a very fundamental way the theory has an anti-Aristotelian drift.

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existence, if code is taken as an artificial duplication of possibilities with the consequence that every element can be presented as a selection. This may become more clear if we consider the case of social systems. Autopoiesis in this case means “to continue to communicate”. This becomes problematic in face of two different thresholds of discouragement. The first tends to stop the process because the communication has not been understood. The second tends to stop the process because the communication has been rejected. These thresholds are related to each other because understanding increases the chances of rejection.25 It is possible to refrain from communication in face of these difficulties, and this is a rather common solution for interaction systems, particularly under modern conditions of highly arbitrary interactions. Society however, the system of all communications, cannot simply capitulate in the face of these problems; it cannot stop all communications at once and decide to avoid any renewal.26 The autopoiesis of society has invented powerful mechanisms to guarantee its continuity in the face of a lack of understanding or even open rejection. It continues by changing the interactional context or by reflexive communication. The process of communication returns to itself and communicates its own difficulties. It uses a kind of (rather superficial) self-control to become aware of serious misunderstandings, and it has the ability to communicate the rejection and restructure itself around this “no”. In other words, the process is not obliged to follow the rules of logic. It can contradict itself. The system which uses this technique does not finish its autopoiesis and does not come to an end; it reorganizes itself as conflict to save its autopoiesis. When faced with serious problems of understanding and apparent misunderstandings, social systems very often tend to avoid the burden of argumentation and reasoned discourse to reach consensus – very much to the dismay of Habermas. Rather, they tend to favour the rejection of proposals and to embark on a course of conflict. However this may be, the communication of contradiction, controversy and conflict seems to function as a kind of immune system of the social system (Luhmann, 1984b). It saves autopoiesis by opening new modes of communication outside normal constraints. The law records experiences and rules for behaving under these abnormal conditions and, by some kind of epigenesis, develops norms for everyday behaviour which help to anticipate the conflict and to preadapt to its probable outcome (Luhmann, 1983a). In highly developed society we even find a functionally differentiated legal system which reproduces its own autopoietic unity. It controls the immune sys25

From an evolutionary point of view – see Luhmann (1981d). That the physical destruction of the possibility of communication has become possible, and that this destruction can be intended and produced by communication, is another question. In the same sense, life cannot choose to put an end to itself, but conscious systems can decide to kill their own bodies. 26

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tem of the larger societal system by a highly specialized synthesis of normative (not-learning) closure and cognitive (learning) openness (Luhmann 1983b). At the same time, it increases the possibilities of conflict, makes more complex the immune system and limits its consequences. It cannot, of course, exclude conflicts outside the law, which may save the autopoiesis of communication at even higher costs.27

The epistemological consequences of autopoietic closure A final point of importance remains: the epistemological consequences of autopoietic closure. This problem also has to be discussed with respect to the present situation of scientific evolution in which the theory of autopoietic systems seems to offer advantages. For many decades, scientific research has no longer operated under the guidance of an undoubted orthodoxy – be it a theory of cognition or a theory of science in particular. The universally accepted expedient is “pragmatism”; the results are the only criteria of truth and progressive knowledge? This is clearly a self-referential, circular argument, based on a denial of circularity in theory and on its acceptance in practice. The avoidance of circularity becomes an increasingly desperate stance – a paradox which seems to indicate that the condemned solution, the paradox itself, is on the verge of becoming accepted theory. One way to cope with this ambiguous situation is to test whether methodologies have the capacity to survive the coming scientific revolution. Functional analysis is one of them. It can be applied to all problems, including the problem of paradox, circularity, undecidability, logical incompleteness, etc. Stating such conditions as a problem of functional analysis invites one to look for feasible solutions, for strategies of de-paradoxization, of hierarchization (in the sense of the theory of types), of unfolding, of asymmetrization and so on. Functional analysis, in other words, reformulates the constitutive paradox as a “solved problem” (which is and is not a problem) and then proceeds to compare problem solutions.28 27

Recent tendencies to recommend and to domesticate symbolic illegalities as a kind of communication adapted to too high an integration of society and positive law seems to postulate a second kind of immune system on the basis of a revived natural law, of careful choice of topics and highly conscientious practice; see Guggenberger (1983). 28 In a way, the problem remains a problem by “oversolving” it, that is, by inventing several solutions which are of unequal value and differ in their appropriateness according to varying circumstances. This gives us, by a functional analysis of functional analysis, an example of how de-paradoxization can proceed. The happy pragmatist, on the other hand, would be content with stating that a problem becomes a problem only by seeing a solution; see Laudan (1977).

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In addition to this kind of preadaptation in scientific evolution to an expected change of the paradigm of the theory of cognition itself, the theory of autopoietic systems constructs the decisive argument. It is a theory of self-referential systems, to be applied to “observing systems” as well – “observing systems” in the double sense that Heinz von Foerster (1981) used when he chose the phrase as the title of a collection of his essays. The theory distinguishes autopoiesis and observation, but it accepts the fact that observing systems themselves are autopoietic (at least, living) systems. Observation comes about only as an operation of autopoietic systems, be it life, consciousness or communication. If an autopoietic system observes autopoietic systems, it finds itself constrained by the conditions of autopoietic self-reproduction (again, respectively, life, consciousness and communication, e.g., language), and it includes itself in the fields of its objects, because as an autopoietic system observing autopoietic systems, it cannot avoid gaining information about itself. In this way, the theory of autopoietic systems integrates two separate developments of recent epistemological discussion. It uses a “natural” or even “material” epistemology, clearly distinct from all transcendental aspirations (Quine 1969) – transcendentalism being in fact a title for the analysis of the autopoietic operations of conscious systems. In addition, it takes into account the special epistemological problems of universal or “global” theories, referring to a class of objects to which they themselves belong.29 Universal theories, logic being one of them, have the important advantage of seeing and comparing themselves with other objects of the same type. In the case of logic, this would require a many-valued structure and the corresponding abstraction. Classical logic did not eliminate self-reference, but it did not have enough space for its reflection. “The very fact that the traditional logic, in its capacity of a place-value structure, contains only itself as a subsystem points to the specific and restricted role which reflection plays in the Aristotelian formalism. In order to become a useful theory of reflection a logic has to encompass other sub-systems besides itself” (Günther, 1976, p. 310; emphasis added). Only under this condition does functional analysis become useful as a technique of self-exploration of universal theories. The usual objection can be formulated, following Nigel Howard, as the “existential axiom”: knowing the theory of one’s own behaviour releases one from its constraints (Howard 1971: pp. xx, 2 ff. and passim). For an empirical theory of cognition, this is an empirical question. The freedom, 29

See Hooker (1975, pp. 152–79). Many examples: the theory of sublimation may itself be a sublimation. Physical research uses physical processes. The theory of the Self has to take into account that the theorist himself is a Self (a healthy Self, a divided Self). For this last example see Holland (1977).

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gained by self-reflection, can be used only if its constraints are sufficiently close at hand. Otherwise the autopoietic system simply will not know what to do next. It may know, for example, that it operates under the spell of an “Oedipus complex” or a “Marxist” obsession, but it does not know what else it can do. A “new epistemology” will have to pay attention to at least two fundamental distinctions: the distinction between autopoiesis and observation on the one hand, and the distinction between external observation and internal observation (self-observation) on the other. To combine these two distinctions is one of the unsolved tasks of systems theory. Autopoiesis is the recursive production of the elements by the elements of the system. Observation, being itself an autopoietic operation, applies a distinction and indicates which side is used as a basis of further operations (including the operation of “crossing” and indicating the other side). Selfobservation is a special case of observation because it excludes other observers. Only the system can self-observe itself; others are by definition external observers. Therefore self-observation does not and cannot use criteria. It cannot choose between different perspectives.30 It observes what it observes, and31 can only change its focus and the distinction it applies. It is always sure about itself. External observers, on the other hand, are always a plurality. They have to presuppose other observers. They can observe other observers and other observations. They can compare their observations with others. They can be seduced into a reflexive observing of observations, and they need criteria when different observations yield different results.32 Classical epistemology looks for a set of conditions under which external observations yield identical results. It does not include self-observation (the “subjective” or “transcendental” approach, meaning only that these conditions can be found by introspection). This excludes, however, societies as observed and as observing systems. For within societies all observations of the society are self-observations. Societies cannot deny the fact that the observation itself is an element of the system which is observed. It is possible to differentiate subsystems within the societal system, giving them the special function of “observing society”. This still implies self-observation, because the subsystem can only operate within the society. It can look at its social environment, at political, economic, legal and religious affairs, but this observation itself (1) is part of the autopoiesis of the societal system and 30 See, for the special case of conscious autopoietic systems (i.e. not for social systems!), Shoemaker (1963, 1968). 31 It can, of course, distinguish between self-observation and external observation, and it can observe external observation focusing on itself. 32 Not, of course, when different observations choose different objects; and the classical epistemology does not give useful criteria for the case in which different observations use different distinctions.

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(2) becomes self-observation as soon as it tries to observe and control its epistemology. Somehow, a “Third Position” (Bråten 1984) would be required, one which contains the possibility of shifting between external observation and self-observation and of defining rules which tackle the paradox of being at the same time inside and outside of the system. It is within this context that universal theories become relevant. They are designed for external observation but are generalized in a way that includes the observing system as well. The rules and methodologies of universal theories may become the nucleus from which the development of a truly social epistemology can start. At least, they provide a field of experience in which we are logically forced to oscillate between external observation and selfobservation. We may leave as an unresolved question whether this kind of argument can generate not only sociological33 but also biological (Maturana 1978) and psychological (Campbell 1970, 1974, 1975) epistemologies. This depends, last but not least, upon the possibility of applying the concept of selfobservation not only to social systems and conscious systems, but also to living systems. In any case, advances in substantial theory may have sideeffects on the theories which are supposed to control the research. Until the eighteenth century these problems were assigned to religion – the social system specialized for tackling paradoxes.34 We have retained this possibility, but the normalization of paradoxes in modern art and modern science seems to indicate our desire eventually to get along without religion (Dupuy, 1982, pp. 162 ff.). Apparently, our society offers the choice of trusting religion or working off our own paradoxes without becoming aware that this is religion.

Acknowledgements This text was originally published in Geyer, F./Zeuwen, J. v. d. (1986) (eds.), Sociocybernetic Paradoxes: Observation, Control and Evolution of SelfSteering Systems (London: Sage), pp. 172–192.

33 For a case study, using this mode of controlled self-reference, see Cole and Zuckermann (1975). 34 See the impasse as formulated by Bishop Huet: “Mais lors que l’Entendement en vue de cette Idée forme un jugement de l’objet extérieur, d’où cette Idée est partie, il ne peut pas savoir très certainement et très clairement si ce jugement convient avec l’objet extérieur; et c’est dans cette convenance que consiste la Vérité, comme je l’ai dit. De sorte qu’encore qu’il connoisse la Vérité, il ne sçait pas qu’il connoît, et il ne peut être assuré de l’avoir connue” (Huet 1723, p. 180).

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PART II Organization, Decision and Paradox

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Chapter 4

The Paradox of Decision Making Niklas Luhmann

What are “decisions”? Decisions are often described as the causes of their effects. However, this is simply the result of attribution, which drastically simplifies the vast number of possible perceptions of causality. If we observe organizations as networks of decision operations, we still have no access to meaningful causal analyses; we only see what the organization itself reveals – highly selectively – for purposes of exerting influence, planning, accounting, and controlling. The progression of operations from decision to decision is thus a self-made artefact. Like statistics, it is grounded in a fictional (and, in a narrower sense, documented) reality. Decision making is, in other words, the way in which the organization differentiates itself and, by doing so, recognises what it is doing. No more, but no less. This introductory reflection suggests that it is not so easy to define what a decision actually “is”. When we speak of decisions, we normally think of an act of selecting, which is characterised by a certain arbitrariness. Something that has already been determined in all respects cannot be decided. Therefore, a decision involves some degree of unpredictability, even irrationality, which is precisely why people are tempted to exert influence. This raises the question of whether efforts to rationalise decisions, or decision-making processes, make people less inclined to take decisions, undermine motives, and thus lead to the situation where nobody is particularly committed to implementing a decision – once it has been taken1. The same is true of risk acceptance2. The classical notion that good decisions are correct decisions and that correct decisions can be reached by rationally calculating means and ends is in the process of being dismantled. But what is taking its place? The usual distinction of “decision”, as opposed to behaviour or simple action by a moment of arbitrariness, was clearly related to the hierarchical 1 2

With regard to Swedish experience, see Brunsson (1985). Cf. Japp (1992).

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structuring of organizations. Not all behaviour in organizations is designated in those organizations as “decision”, and the decision-making burden – and with it responsibility, experience, authority, and possibly wisdom – increases, we assume, along the chain of command from bottom to top; or at any rate this expectation is encouraged by the way decisions are talked about in organizations. By resorting to whatever ruse possible, we let our superiors take the decisions – and we let them enjoy doing so. They reinforce their role with the expectation that has been linguistically institutionalised, that it is only up to them (or especially up to them) to decide; even though everybody (themselves included) knows that they are being controlled through the preparation of the decisions. The use of language, because it marks only few decisions as decisions, serves to “upgrade” decision making, making certain decisions difficult and important. The mystery of decision and the mystery of hierarchy support each other mutually. Both develop an inexpressible (should we say divine?) moment, which makes them what they are. Or what they appear to be? Evidently, it is difficult to pin down the decision component “arbitrariness” – both in practice and in theory. It is certainly not a psychological moment but, rather like “intention”, it is a need to attribute decisions, a need to localise the points of decision in the network of communications. We should not ask, therefore, how the decision maker feels when he detects signs of arbitrariness cropping up in him, or when he “has to pull himself together”; rather, we should observe those points that attribute arbitrariness3. Arbitrariness appears to be a fiction that serves attribution; or perhaps even the impossibility of attribution is a precondition for attribution. Whatever the case, the models of rational decision do not illuminate this blind spot. Using the old poetic and theological term integumentum we could say: the decision conceals what is decisive. But why? We presume (and there are similar considerations; especially George Spencer Brown’s calculus of form4 would confirm this) that the blind spot serves to conceal a paradox which we would come upon if we pursued the analysis further. Heinz von Foerster expresses this with great clarity: “Only those questions that are in principle undecidable, we can decide”; everything else is a matter of (more or less tedious) calculation5. An analysis that takes this point seriously can go in two directions, depending upon whether it proceeds from a factual or a temporal description of the decision. In the factual description, a decision is, according to general opinion, a choice between alternatives. It is not the one or the other side of the 3 From the literature on “systems therapy” we learn that even this counts as a “systemic approach”: the problem is not where the layperson would suppose, but elsewhere; and this is why the system needs advice. 4 See Spencer Brown (1979); Luhmann (1993c). 5 Von Foerster (1992), p. 14.

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alternative but precisely this “or” or this “between”. But what is this “or”, what is the form of the alternativity6? It is not itself a possible object of choice. You cannot decide on the “or”7. Evidently, the “or”, the form of alternativity, is excluded from the possible decisional scope, although (or because?) it is constitutive for it. Constructing alternativity, therefore, is all about including the excluded, the “parasite” in the sense of Michel Serres8. The parasite exploits the opportunity that arises from being excluded. The decision maker himself is not an alternative, nor is he an option within the alternative. He can only choose himself, and this he does unnoticed. The more rational the choice, the more mysterious the parasite that evades designation with ever more distinctions. With Jacques Derrida we can at best follow the trail that the excluded (paradox) leaves behind; or to put it more precisely: “la trace de l’effacement de la trace”9. We find ourselves in more familiar company when we realise that semiotics, too, which is based upon the distinction of signifier and signified, has to assume a third element, for example, the “interpretant” in the sense of Peirce; and that legal experts are accustomed to the fact that they (1) have to interpret the meaning (2) of a text (3). If we want to formulate this assumption as a paradox, we talk about the unity of a distinction; about the sameness of the different – in other words, the point at which Hegelians experience the bliss of “sublation” [Aufhebung]. If we transfer this reflection from the factual dimension to the temporal dimension, the same paradox of decision takes on a different form. All systems that reproduce themselves through their own operations can be said to exist only in the form of recursive operation. In other words, they exist only at the moment an operation is actually taking place. For this reason, the world always exists concurrently with the actual operations – neither before 6

We should not forget that there have been attempts to logically reconstruct alternativity, which aim at securing consistency and excluding paradox. See, e.g., Rödig (1969). But these efforts simply shift the problem to further distinctions which themselves are not problematised; thus, Rödig, for instance, distinguishes several possible worlds (e.g., p. 43) or (real) individuals and sets (p. 58), and, very typically in logic and linguistics, several “levels” of analysis or language. All these endeavours have one weakness in common: they can only displace but do not tackle the problem of (the unity of) distinction. If we are to represent this, we need a clearly metalogical theory that encompasses logic, i.e., it can show that we can only avoid paradox if we draw distinctions that are – for the moment – sufficiently plausible. “Draw a distinction” is the first paradoxical rule of every calculus for avoiding paradox. See Spencer Brown (1979), p. 3, on the need for a “creative” unfolding of paradoxes (cf. also Krippendorff 1984). There are also tendencies to recognise such procedures as mathematics if not as logic (cf. Kauffmann 1998). 7 Of course, we can decide not to decide; but then we construct a new alternative with a new “or”: to decide or not to decide. 8 Serres (1980). Derrida, too, uses the term in this sense. 9 Derrida (1972) pp. 76–77.

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nor after.10 Insofar as such systems can use their operations for observing, i.e. use them as distinction and indication, they can treat the present (in which they alone can “be”, i.e., operate) as the boundary between a respective past and a respective future; in other words, they can make a temporal distinction and thus in a sense de-temporalise the world. It then appears as though the world exists from the beginning to the end of time (or for ever) and in this world-time things exist for a longer or shorter duration. But that is and will always be the construction of an observer, who can only ever operate in the present and only ever concurrently with the world. Viewed from the present moment, the world comprises the non-actual time horizons of past and future, and the present disappears, as it were, in the world. It is simply the distinction between past and future; or, to be more precise, it is the unity of this distinction – in other words a paradox. When we take a decision, we as observers need these non-actual time horizons of past and future. It is only their non-actuality that enables us to construct alternatives into the concurrently present world, which is always as it is and never anything different. The actuality of the decision cannot be reflected in the decision. It is and remains the boundary that renders distinction possible but cannot be incorporated into what is being distinguished. The decision itself is neither something in the past nor something in the future, and it is neither the one side nor the other side of the alternative. Undoubtedly, an observer can observe the decision; and another decision can accept or reject the decision as a decision premise. But that would be a different operation, for which the principle likewise holds that the unity of the distinction that is made remains invisible for the distinguishing operation. G.L.S. Shackle11 believes, therefore, that every decision can be construed as “original”, as the “beginning” of something new and, accordingly, as “subjective”. But this is just one observer’s schematisation of the problem; there may well be other observers who, like ourselves, are happy with the analysis from the perspective of an observation of observers, in other words with second-order cybernetics. With this reformulation the insight remains unchanged, that decision making actualises an – as it were – “unnatural”, reverse relationship between past and future. From each present the past is observed as no longer changeable, while the future is observed as still changeable. Analogously, a decision cannot be determined by the past. It constructs the alternativity of its alternative from the perspective of “what might be”; and it constructs it in the present time. However, with regard to future present times, the decision proceeds from the assumption that it will 10 This definition is also found in Shackle (1979), p. 20: “… the notion of the present, the moment of actuality embracing all that is. All that is, is the present”. 11 See footnote 10.

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make a difference whether and how a decision is taken. In other words: there is no commitment to the (no longer changeable) past, but commitment to the (still changeable) future. In this way, the decision appears motivated, intentional, reasoned; and it can also be defended. It makes commitment visible, and by doing so, it contributes to uncertainty absorption in the sequence of connecting decisions – even in cases, and there particularly, where subsequent decisions can neither be predicted nor determined. Accordingly, an observer (irrespective of which present he is in) sees the decision differently, depending on whether he is considering the time before or the time after the decision. For the observer the decision before the decision is a different decision from that after the decision. Before the decision it is an open alternative; in other words, it is an open contingency. Several decisions are possible, or so it is said.12 After the decision the contingency becomes fixed; and we only see that the taken decision could have been different. The contingency (defined as neither necessary nor impossible) is now fixed to a decision. Here, too, we can say: a decision is different things, “the same is different”.13 Depending upon the approach, whether we are looking at the alternativity or the temporal difference, the same paradox of decision appears in different forms. But it is the same paradox; the paradox of the unity of different things, the paradox of the unity of a form with two sides.

On the function of paradoxes Where does this get us, you will probably ask. Practitioners manage perfectly well with a suitable mix of sobriety and mystification. Why push them into the blind alley of a paradox and confront them with the closed selfreference of a paradox: if A then not A; if not A then A. At this point we need to find out more about the possibilities of handling paradoxes. The term is rooted not in logic but in rhetoric. Logic has never been on very comfortable terms with paradox. On the contrary: it has ascribed it to the general category of contradiction and contented itself with postulating consistency. In rhetoric, by contrast, the focus was less on conditions of truth than on conditions of effective communication. Rhetoricians were interested, for example, in the possibility of attracting attention and encouraging people to reflect by making statements that contradicted generally accepted opinion, and which in this sense appeared “para-doxical”. This technique enjoyed a revival in the wake of book printing, the humanism of the Renaissance, religious turmoil, wars centring on questions of truth, and not least the demise in the 16th century of the method of scholastic inquiry. Erasmus’s praise of stupidity and Thomas Moore’s Utopia gave 12 13

Why the plural, when we know that only one decision is possible. To cite a title by Ranulph Glanville (1981).

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the starting signals, and by the end of the century a body of literature, which included drama and poetry, had been written.14 At first glance, this treatment of paradox appears somewhat frivolous, especially the simple listing of examples from antiquity. But obviously their intention was to disturb – for example, a collection of paradoxes was published together with a volume that confuted them.15 It can be assumed that theologians (John Donne, for example) knew that the form of the paradox had succeeded the quaestio or inquiry method: question, opinion, counter-opinion – and no authority to decide the question!16 There can be no doubt, therefore, that the matter was serious. And yet, the scientific movement that was emerging at the same time carried the victory, made history, and stifled rhetoric – along with its use of paradox, which had fascinated readers. Although we still find many examples of such works in the 17th and 18th centuries, which are aimed particularly at the shallow morality and self-righteousness of contemporaries,17 the form had become so hackneyed that in an age that was obsessed with progress it brought no advancement (and indeed this had never been intended). It was not until the 20th century that the problem – or rather the form – of the paradox was rediscovered; partly in the problem of substantiating mathematical logic, partly in the long drawn out death throes of ontological metaphysics – to mention only Nietzsche, Heidegger and Derrida.18 However, we can content ourselves with a very much simpler analysis. It is to be assumed – and who would suggest otherwise? – that all observation and description is an operation that is carried out in real terms and in the here and now and, moreover, that this operation must be able to distinguish what it observes and describes. This applies not only to scientific analysis but also to the internal processes of organizations. It applies both to mental operations and to communications. It applies to experience and action. Observation in this very general sense always requires that we choose one thing as distinct from another; in other words, it requires the use of a distinction, of which only the one side (marked side) and not the other can be used for connecting subsequent operations. Accordingly, observation is necessarily an inherently asymmetrical operation. For this reason, the need to mark both sides of the observational distinction simultaneously results in the paradox of a one-sided and two-sided 14

A comprehensive overview can be found in Colie (1966). Cf. also Lupi (1992); also the hitorical accounts in Geyer/Hagenbüchle (1992). 15 A much cited and translated example is Lando (1545; n.d.). 16 See Malloch (1956). 17 Possibly the most famous example is Mandeville (1924 – originally 1714) – interesting also because it illustrates the mode of solving the moral paradox with the distinction between private and public. Cf. also Bernard (1759). 18 Lawson (1985) sees this as the distinctive feature of 20th century philosophy.

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actualisation. On the other hand, a simultaneous functioning of the distinction has to be presupposed as the “form” of observation.19 The distinction used by every observation is always, therefore, both two-sided and onesided. However, it need not (and cannot) observe this peculiarity itself. In other words, it is rooted in a paradox, nevertheless it remains operational because it conceals – can conceal, must conceal – its paradox with the mere fact that the distinction is drawn. It does not see that it does not see what it does not see, and this is, if we were again to formulate it in terms of transcendental theory, a condition of its possibility. Only an observer of an observer can indicate the paradox in which the observed observation is grounded, but only with a likewise paradoxically grounded observation. On the level of second-order observation, we see the distinction of first-order observation as form. It is only here that we encounter the paradox underlying all observation, by inquiring into the unity of the observational operation, i.e., the unity of its distinction, the sameness of what is being distinguished. The form of the paradox, therefore, only emerges on the level of second-order observation. It simply serves to baffle the second-order observer. It does not prevent what happens from happening; it does not prevent operations and observational operations from actually taking place. Even paradoxes, which is what we have been talking about all along, can be observed and described through operations that are factually taking place. The question is: why? The answer is: there is no other means of ultimate substantiation, neither for recognition nor for taking action and even less for decision making.

Unfolding the paradox Questions of substantiation are best left to philosophy, where they are addressed through esotericism, linguistic minutiae, fast metaphors, transcendental pragmatism or in some other way. But even for the more mundane analysis of organization studies and decision theory, the digression via the paradox might reveal perspectives and issues which would otherwise go unnoticed or which would not be seen in context. We recall that the “paradox shock” in traditional rhetoric was used to challenge common sense and to break established habits. In order to clarify this aspect of paradox management, we use the distinction (distinction!) of paradox and unfolding of paradox (by analogy with problem and problem solving).20 We describe how an observer who asks a question that may only be answered by a paradox copes with that; and the answer is intended as a theory that can be 19 The definition of the term “form” on the basis of the operative practice of an observer can also be found in Spencer Brown’s calculus of form (see footnote 4). 20 Cf. apart from Krippendorff (1984); also Löfgren (1978; 1979).

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empirically verified: he replaces it with another distinction that he considers plausible. To unfold a paradox is simply to shift the observer’s blind spot to a place where it is less troublesome (in family therapy, which is based on constructivism, we say: to a less painful place). Against one’s better judgement new, stable identities are introduced, which can be maintained more easily. A typical example of this approach is Kant’s proof of the antinomies of traditional metaphysics as points de départ for the search for a different metaphysics grounded in the self-analysis of the mind.21 But identities can only be indicated with the help of distinctions; however, these distinctions are also paradoxical. This is something we have to accept whenever we unfold a first paradox. The result can never, therefore, consist in a stable world construction that is without paradox, but in advantages in the way we organize our cognition; or in greater historical plausibility of knowledge in situations in which old distinctions have been exhausted and can be all too easily challenged. We assume that we now have just such a case. Both in terms of how “decision” is generally understood and how hierarchy is generally perceived, we face an integumentum, a moment that defies expression. In the case of decisions, it is a moment of “subjective” arbitrariness which makes the decision a decision. In the case of hierarchy, it is the authority of the position or of superior knowledge, which we assume against our better judgement to proceed from bottom to top. We also presume that these two instances of “mystification“ are connected, that they mutually support one another, that they are anchored in language and that they secure normal operation insofar as nobody objects to following that language rule and speaking that language (whatever he or she thinks about it and whatever people say about it “off duty”). The question, therefore, is: can the paradox of decision be unfolded in any other way? Are there other distinctions that are more plausible in the present day, which achieve the same, which can likewise produce identities and translate the infinite information burdens of patent paradox into finite information burdens? We know that we cannot expect such unfolding to take the form of a logically controllable step. We have to rely on creative “intuition” or, where there is doubt, on the object of research in the respective field. In fact, it appears that appropriate distinctions already exist. We simply have to find them and present them based on a general scepticism towards rationality. 21 Here of course not yet: “against one’s better judgement”. Rather, his idea was that a mind can discover identities in itself, which serve as necessary conditions for its own operations and which can be supposed to have a greater stability than what has been handed down as the conceptual framework of ontological metaphysics.

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Specifically, they are (1) the distinction between decision premises and decision, (2) the distinction between decision and uncertainty absorption, and (3) the distinction between rationality and motivation. We shall restrict ourselves in the following sections to these, although it cannot be ruled out that there may be further appropriate distinctions.

Decision premises The distinction of decision premises and decision stems from Herbert Simon. In older texts we read of “behavioural premises”.22 The purpose of that was to draw attention to the facticity of the decision-making process, as distinct from normative theories of rational decision making23. In other words, this is about actual behaviour, which is observed and described as decision making and which is possibly brought to account. When we speak of “premises”, we have to think firstly of programmes as prescribed ends and constraints (of a factual or normative nature) in the selection of means. We also have to think, for example, of expectations connected with social roles,24 of predetermined communication channels along which a decision is to be prepared and validated, and not least of the qualities (values, skills, social responsiveness) of the people who are involved in decision making. Obviously, the term focuses attention first and foremost on the structural constraints of the particular decisional scope25. Initially the distinction of decision premises and decisions had a very limited meaning. It served to limit the possible scope of decision rationality. This is expressed by the term “bounded rationality”. How large this scope may be is a question of data processing and decision-making technology. From the start, therefore, the theory aims only at sub-optimal problem solutions – just as structural functionalism presents itself explicitly as a secondbest theory. If we wanted to break down the entire world into variables and to correlate each one with all the others, or if we assumed that all prices on the market influenced one another, then knowledge and decision capabilities would obviously be overtaxed. And because this is so, we can always reckon with a world, with a society and with organizations that are geared to constraints on their own capabilities of observation. All markets of all 22

Cf. Simon/Smithburg/ Thompson (1950), especially pp. 57 ff. This is, however, immediately qualified: “… we are concerned primarily with behavior that is conscious and rational.” This is why he subsequently speaks synonymously of “decision premise”. See, e.g. Simon (1957), p. 201. We go along with this terminology. 24 Simon (1957), p. 201. 25 Almost at the same time an epistemological structuralism emerges that limits the scope of variation, which in itself could be relevant, to what is doable by means of a structural definition of objects. We should think here especially of Levi-Strauss and also of Parson’s version of analytical structural functionalism. 23

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organizations are from the outset markets with limited substitutive competition,26 in the same way as public opinion, towards which political organizations gear themselves, is compartmentalised into different topics from the outset. This structuralist assumption of “bounded rationality” leaves two paths open to account for a change even of structures. This question can be considered to be a problem of the evolution of a population of organizations, and accordingly it can be left to evolutionary theory.27 This takes it out of decision theory and simply postulates a certain non-coincidence of evolutionary reward or penalty for decisions – whether they are rational or irrational, though definitely not rationally determinable. However, the chances of the evolutionary selection cannot be included in the decision process as premises for decisions; these remain, in accordance with the self-conception of evolutionary theory, dependent on chance. The counter-concept is to be found in a theory of planning or steering organizations on the basis of decisions on decision premises.28 Depending upon the nature of the decision premises, this may be personnel planning, programme planning, or organizational planning in the narrower sense, i.e., establishing communication channels in the organization. Seen from the viewpoint of rational decision making, the interdependence of these different types of decision premises is obvious. But that in turn implies an open model, in which everything varies with everything else. The tendency in practice is therefore to proceed from the results of prior decisions – especially from organizational objectives, but also from a given (and not readily adjustable) staffing level or a given size of the system, which can only be changed with major internal repercussions. These constraints are manifested in the structural model of the “position”, which is used particularly in public administration.29 A “position” is a principle of identity that enables variation. One can change the incumbent, the job profile or the reporting relationship – but not all at the same time. The 26

A consequence of this, by the way, is that the generalised readiness to accept money assumes a paradoxical form in economic theory (cf. Orléan 1992). This is underlined by the individualism of the (decision theories of) economic classics, but we would get the same result if we omitted the external reference “individual” and merely considered the payment operations of the economic system. 27 Thus Nelson/Winter (1982). 28 Cf. Luhmann (1971a), especially pp. 66 ff. Today, we are considerably more sceptical as regards planning possibilities, which is reflected in the use of the word “steering” rather than “planning” (or also regulative policy). See Willke (1983); Glagow/Willke (1987); Willke (1992); Luhmann (1992b). 29 The private sector calculates more directly with financial resources that are available and/or that could be meaningfully invested because here the financial limitations have an immediate effect. At the same time, these tighter constraints make organizational planning more flexible in those areas that they enable.

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“position principle” therefore also serves to visualise constraints on change by the status quo. Seen from this perspective, a principle of “bounded reality” exists on the level of the decision on decision premises. On the basis of the theory of autopoietic systems, i.e. of systems that reproduce themselves through their own operations, we can give greater significance to the term “decision premises”, which goes beyond the problems relating to the rationality of decisions (but which, of course, does not rule out that these problems continue to be addressed and researched). Every decision is always in effect a decision premise for other decisions, whether or not in the form of a rule, a programme, or a directive. Because once something has been decided, it need not normally be decided again. And if a decision has to be repeated, that decision will not be the same decision but is forced by the very fact of the “procedure” into the form of a repetition. If this applies, it follows that subsequent decisions interpret given premises, in their recursive process of re-actualising their meaning, as decisions – irrespective of whether a choice had explicitly been made and what that choice was. In this sense, we have an operational closure of the system on the basis of its own decisions – regardless of what the psychic systems that are involved experience as decisions. Because decisions are premises for other decisions, the original paradox is transformed into a new form, i.e., into the double meaning of enabling and constraining subsequent decisions: future decisions are only rendered possible by the existence of past decisions. Or, in other words: in the communication, past decisions put future decisions under the strain of expectations, which makes it inevitable that the subsequent decision is marked in the communication as a decision.30 The reduction of complexity, which is achieved each time a decision is communicated, also serves to open up the scope for subsequent decisions. The system constantly oscillates between constraining and extending decision possibilities and in this way secures its own autopoiesis. This may be overlaid with objectives that serve the system as a self-description. But these never lead to the situation where the system heads funnel-like towards a natural end (telos) via increasingly narrower decisional scopes. If this were the case, it would not be an organization but a project (which may be complex to a greater or lesser degree, long-term, and in need of being organized). In any case, the decision on decision premises has to be taken on the level of second-order observation.31 Decision premises are planned for decision makers; i.e., with a view to how these first-order observers observe their decision situations. The same is true of every retrospective interpretation of premises as decisions. In logical terms, this leads to considerable problems. 30 31

For a more detailed account see Luhmann (1984a). For a fundamental account, see von Foerster (1981).

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It requires a multi-valued logic, which is not yet available (or at least not in the form of operational instructions).32 But this does not necessarily rule out that we explicitly use the opportunities inherent on the level of second-order observation. On this level we may especially take into account the constraints of “bounded rationality” (e.g., that the decision maker can neither know nor change himself) and proceed generally from the assumption that the observing observer cannot see that he cannot see what he cannot see.33 As a rule, we associate terms such as planning and steering with the notion that this is done from above and is thus justifiable on the basis of a better overview, though without precise knowledge of details. This may be the case in some instances. However, the theory of the second-order observer is not dependent on the mystifications of the hierarchy. It emphasises that this is a very specific observation in very specific situations; and of course, an observation which has to base itself upon what it cannot see. We cannot evade this fundamental paradox.

Uncertainty absorption We have said that practice is always oriented according to the given results of earlier decisions. This can be formulated in more general terms by distinguishing between decision and uncertainty absorption. Here again, the source is Herbert Simon; but, as before, subject to considerable qualification.34 “Uncertainty absorption takes place when inferences are drawn from a body of evidence and the inferences, instead of the evidence itself, are then communicated.”35 Now this is not exceptional; it happens whenever decisions are communicated. The term “uncertainty absorption” expands the term “decision premise”, taking it from the structural level to the processual level. Uncertainty absorption takes place, we can therefore say, when decisions are accepted as decision premises and taken as the basis for subsequent decisions. In the style of Max Weber’s definition of power we can also add: no matter what this acceptance is grounded in. And the whole point is: it is not the decision operation itself, but a process that connects decisions.36 32

See as follow-up to George Spencer Brown and Gotthard Günther: Esposito (1992). See also Luhmann (1991b). 34 See March/Simon(1958), pp. 164 ff. The qualification mentioned in the text is that with “uncertainty absorption” only one specific variable is identified, which presumably correlates with other variables (especially influence), but which is not explicitly related to the distinction between decision and uncertainty absorption. The theory, therefore, does not sufficiently consider the fact that uncertainty absorption, as the other side of the form of “decision” can never be the subject of decision. 35 March/Simon (1958), p. 165. 36 See also Weick (1979), pp. 142 f. and passim, on the reduction of equivocality as an interpersonal process. 33

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This may be a question of authority in the strict, traditional sense, in other words the assumption that the decision maker is able to adequately explain and substantiate his decision. Authority in this sense depended in older societal forms on (more or less) exclusive access to information, particularly to information with normative relevance (religion and law). When these barriers come down – and this happened with the development of the mass media, which began with book printing – sources of authority have to be replaced. Authority becomes increasingly pretentious, it needs to be “stage managed”, but it is no longer able to prevail over opposing interests.37 Moreover, within organizations particularly there are innumerable functionally equivalent mechanisms of uncertainty absorption which can compensate loss of authority and which can lead to the uncontrolled acceptance of the communicated reductions. It may also be feared that further questions might be seen as a provocation and do more damage than good. The reasons might lie in the responsibility structure and in mutual respect for another person’s area of responsibility; or ultimately in the economy of labour (others might call it the typical apathy) of the organization’s members, because, after all, everybody has enough with his or her own workload. In the field of organization theory there has been a switch from authority to uncertainty absorption as the more general term – though not necessarily using this terminology. On the structural level it is mirrored in a change from hierarchy to heterarchy;38 or in a change from the principle of “unity of leadership”, which is limited by the superior’s “span of control”,39 to the principle of “redundancy of potential command”.40 This certainly does not mean that the hierarchical order has been abandoned. It remains intact as an emergency aggregate, a network to which it is possible to switch when problems cannot be resolved otherwise. But the normal functioning of an organization cannot, and here there is consensus, be described in this way. And management consultants, too, apply different theories today to explain or to make improvements, for example, the (in the meantime outdated) theory of group dynamics which had led to the distinction between formal and informal organization and to “organizational development” programmes,41 or, more in line with the above critique of the classical term decision rationality, the concept of the matrix organization.42 In this way, attempts are made 37

On the assumed effects of television cf. Meyrowitz (1985), esp. pp. 62 ff., 160 ff. With regard to “opposing interests” we should consider particularly the loss of authority of the experts in the ecological debate. Their statements are only believed when they appear on the “right side”. 38 “Heterarchy” in the sense of the term coined by McCulloch (1965). It is inspired by aesthetics, neuropysiology and economics. 39 See, for example, Fayol (1925). Cf. also Gulick/Urwick (1937). 40 Thus Pask (1970), p. 2. Cf. also Baecker (1993): pp. 130–131. 41 Cf. for a critical account Wimmer (1991). 42 See Reber/Strehl (1988).

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to bring the network of organized decision processes closer to the problems and risks of uncertainty absorption. Put somewhat exaggeratedly, it is recognised that the problem of rationality lies in its unattainability and that there is no way of determining how to get to second-best solutions. The inevitability (and thus organizability) of the simple fact of uncertainty absorption cannot be challenged once we have abandoned the idea of viewing the overall system under the maxim of optimal rationality with only one correct decision in each case, which in the final analysis has to be accounted for at the top of the organization. Obviously, no organization could function if all past decisions had to be reviewed each time a decision was taken. Instead, precedents crystallise, which serve as the basis for future decision-making processes.43 This can then lead to subtle techniques of considered inattention with which to avoid the emergence of unwelcome precedents. These considerations also demonstrate that uncertainty absorption cannot be the content of decisions. It is not the task of decisions to apply their decision programme and to absorb uncertainty as well. Uncertainty absorption is neither a primary end nor a secondary end of decision making. It happens automatically whenever decisions are taken in a communicative system. If the theory holds thus far, we can say that the autopoiesis of the system leaves its marks in uncertainty absorption. This means the production (= reproduction) of decisions out of decisions is only possible in this form. Structures, on the other hand, can be introduced and changed through decisions (which from a processual perspective again leads to uncertainty absorption, i.e., they can only be produced as part of the autopoietic process). For this reason, uncertainty absorption is an invariable feature of organizations, while structuring is a variable narrowing down of decision contents. Accordingly, uncertainty absorption takes on a particular significance in relation to the other concepts of organization theory. It is not one of many variables, but rather the organization system itself, as seen in a temporal cross-section. This does not of course mean that no improvements are conceivable here, but they must always be on the other side of the decision, where the decision is actually taken. And, to return to what was said earlier, they come up against distinct boundaries in that they are limited to “bounded rationality”. We have already had the opportunity to point to parallels between organization theory and epistemology. Now, we are able to see that organiza43

The cult of precedents in the legal system can ultimately be ascribed to the impossibility of re-opening closed decision processes, whereby the grossness of this solution in common law has led to subsequent developments of detailed analysis of ratio decidendi and to possibilities of distinguishing and overruling. On the attribution of this development to problems of decision making see especially Heiner (1986).

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tions construct their own reality and how they go about doing so. It has to take place in an unknown world, in a world which exists simultaneously with all decisions and which changes concurrently with all decisions. This can be understood in the sense of functionalist psychology (Brunswik, Bruner) or in the sense of older cybernetics (Ashby) as being overtaxed by environmental complexity, as the absence of “requisite variety”. But we can also formulate it more radically: every organization operates in a world that it cannot know. This world is transformed through uncertainty absorption into a known world; it is replaced by a known world. This requires in retrospect a first decision, which inscribes a distinction into the world, for example, by defining a purpose, by forming a “coalition” of (future) members with a corresponding clientele as environment,44 or simply by establishing another organization. As always, the first decision (and that means: what in the recursive network of subsequent operations is taken to be the first decision) brings about the unfolding of the paradox, obeying Spencer Brown’s first rule: draw a distinction and, by doing so, mark out an area within which decision making can take place. The rest is left to uncertainty absorption. Clearly, this course of action is unavoidable, but it has problematical implications. There is a tendency to cling, so to speak, to the outcomes of years of uncertainty absorption, which validate themselves as a familiar world. This is particularly true where risks have been taken and those risks have paid off;45 but also where people have grown accustomed to conflicts and fail to recognise that those conflicts no longer exist.46 In this sense, there are innumerable organizations that live of their failures because it is precisely these that provide a reliable basis for decisions. Earlier organization theory saw an innovation problem here, carried out research on strategies that promised success for the future, and banked on leadership.47 Today, companies seem more likely to put their money on external consultants who, because they are from outside, probably find it easier to restore uncertainty.48 44

See Simon (1948), pp. 110 ff. Cf. Japp (1992), with further references. 46 Examples can be found particularly in political organizations. Consider the handling of the asylum problem in the Federal Republic of Germany or the education policy controversies in North Rhine-Westphalia. 47 For a typical example see Selznick (1957). 48 Of course, I do not claim that the philosophies of consulting are sworn to this concept and that they dispense with the offer of “superior knowledge” (which often fails because of inaccurate knowledge of the internal organisational environment, or which understandably triggers opposition.) After all, there are numerous connections between family therapy and management consulting, which are inspired by system concepts, or by cognition-theoretical constructivism, or maybe even by the paradox concept of the Milan school (see Selvini Palazzoli et al., 1983). For more recent thoughts on the subject, see especially Wimmer (1992). 45

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Rationality and motivation The distinction between rationality and motivation (or rationality and action), which Nils Brunsson suggests,49 reacts likewise to problems which are brought to light by decisions that are expected to be rational. Rationalisation requires decisions to be broken down into sub-decisions and these in turn into sub-sub-decisions. It is easy to see in this a principle of organizational growth, which at the same time reinforces the mode of connecting decisions through uncertainty absorption. The same applies, incidentally – in the social dimension – to efforts to democratise decision making.50 If we analyse such findings, we shatter the old notion that man is a rational and social being who cherishes and enjoys reason and consensus. This may well be, but the observation of decision making in organizations conveys a different impression, as if man were constantly operating on the other side of his “nature”, in the domain of corruption and vice. But let us not dwell upon such anthropologica – however much they might lend force to the plea for a humane organization. It is sufficient for us to understand that processes like rationalisation or democratisation do not take into account the motivation needed for taking action. Somebody who grows weary of the process of rationalisation (and democratisation, which we will leave aside in the following) will hardly be prepared to commit himself to implementing a decision that could have been taken differently on hundreds of counts. This leads to efforts being made to establish a certain organizational culture, a “corporate identity”, an ideologisation of corporate goals, which refer precisely to this juncture between rationality and motivation; but this effort itself reveals the problem: it simply produces a new mystification at the point where, out of habit, we suspect a paradox. This paradox can be unfolded quite easily by differentiating between social and psychical systems, and understanding such terms as “motive”, “commitment”, “engagement”, and “conviction” psychologically. But this just leads to a repetition of the same problem within the social system “organization”, because “motives” also play a role first and foremost in communication in that they convey, request or recall commitments. Motives in this sense are stage directions in the dramaturgy of action.51 They are also conditions of possible understanding and thus conditions of a possible anticipation of understanding, or ultimately: themes of being prepared to render account.52 And last but not least, we can say that “motives” are the point of 49

See Brunsson (1985). See also Brunsson (1989). On this comparison: Luhmann (1981a), pp. 344 ff. 51 See Burke (1962). 52 Cf. Mills (1940); Blum/McHugh (1971); Zollschan/Overington (1976); Sarat/Felstiner (1988). 50

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connection for structural couplings with psychic systems; in other words, they are those aspects with which communication indicates to itself that it depends on psychic operations which remain alien to it; or vice versa: they are the responses that a psychic system holds in store when it considers what it would reply if it were asked why it does what it does. These thoughts on the term “motivation” indicate that the communication of decisions comes to a bifurcation where it has to choose between the language of rationality and the language of motivation. Rationality is considered to be self-motivating. We need not ask about motives when it is an established fact (or it can be assumed to be an established fact) that the right decision has been taken. It is only in the modern world, which always holds a second-order observation in store, that the question of latent, “unconscious” etc. motives is raised. It is only logical to keep the language of motives on the same level as the language of rationality and to presuppose this distinction as implicit in decision making.53 But in the decision practice of organizations you would get some rather surprised looks if you were to constantly question the decision makers about their motives. The motives are carried along unmentioned, as it were, as an aspect of the mystery of decision making. But the absence of motives becomes noticeable when difficulties arise and people are required to do more than usual. The language of motives is then overlaid in the form of a corporate ideology, not least as a substitute for what failed to work in Taylorism or in group dynamics and “organizational development”. In this way, therefore, the presence of a distinction, a bifurcation of rationality and motivation is simply obscured. Here, too, unity is only to be had in the form of paradox.

Perception and communication Terms like “decision rationality” or “motivation for action” are normally taken to refer to achievements of the people participating in the organization, people working “in it”. Consequently, we ought to subject the corresponding phenomena to biological, neurophysiological or psychological examinations. But this would probably not be very effective. We have, therefore, “deconstructed” the biological or psychical conceptualisations. Here it is helpful to trace back what is commonly understood as decision to a paradox. To unfold this paradox, the social system “organization” employs specific terms: “rationality” means that the decision satisfies specific criteria and “motivation” that the commitment and loyalty of individuals can be 53

This is my understanding of Spencer Brown. Under the definition “Distinction is perfect continence” we read: “There can be no distinction without motive, and there can be no motive unless contents are seen to differ in value” (Spencer Brown 1979, p. 1). But this terminology plays no role in the unfolding of the calculus of indications.

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won through their own behaviour. So far, so good. A by-product of this analysis could be that it clears the vision for tackling afresh the question of what exactly constitutes the mental operations that allow people to participate in an organization without becoming parts of that organization. It must be something that the organization itself cannot be. Here we have to think primarily of perceptions. This may come as a surprise, because a long tradition sees the particular achievement of the individual especially in the ability to think and in the ability to subordinate his will to his ratio (intellect/reason). This emphasis was a result of defining man in distinction to the animal, as a consequence of which the instinctive features of his nature were classified as inferior.54 Regardless of our views on thinking: it is by no means as reliable and peaceful as perception. It is only through perception that the mind experiences the directness of its relation to the world, whereby we mean “directness” in the sense of not being conveyed through distinctions, nor even through the distinction of direct/indirect55. It is only perception that creates the medium “world”, in which all distinctions, including perceived objects and events, are inscribed. How can it be explained that such an important fact has been virtually ignored in organization studies? Is it due to misdirected thinking because of the humanistic tradition? Or is it because it was possible in this way to unfold the paradox of decision by imputing a “subject” to it? The least room for perception is given in public administration. What we find here are core structures of the organized field of society where decision is not only a process but also, and above all, a product of organization. Participants have to be able to talk/listen and write/read. But because all of this takes place in the spoken form, the scope for variation between different individuals is narrow. What is perceived is based on an intention, and in this respect it is a socially verifiable construct or, at least, recognisable as the outcome of a decision. But these are exceptional circumstances. We are able to see more clearly from other organization forms how the directness of the perceived world serves to filter decision operations. This is true, for example, of the eye/hand 54

However, it should be added that the law of nature included animals. Thus, e.g. Ulpian in Digests 1.1.1.3: “Ius naturale est, quod natura omnia animalia docuit.” But the consequence of this was that social development in its entirety had to be represented as a deviation from natural law: marriage as a deviation from the natural reproduction instinct; property ownership as a deviation from the natural accessibility of resources; slavery, servitude, employment etc. as a deviation from natural freedom. 17th and 18th century contractual arrangements were still based on this precondition. Today’s advocates of natural law appear to be unfamiliar with these texts. 55 It should be noted that this directness is an illusion produced in the mind. The central nervous system, of which the mind is oblivious, operates with highly complex processes of discrimination and selection.

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coordination in industrial work, which only occasionally has to report something. It is true above all of the vast, personnel-intensive areas of organization, which, by analogy with Anglo-Saxon usage, we could call “field work”: the activity of teachers, of supervisors of all kinds.56 Here, the sociologist observes a very particular organizational solution of the “interface” problem of perception and communication, namely conceded autonomy.57 Work of this kind is typically unsupervised work, carried out by an individual in accordance with professional standards and – it is expected – with commitment to one’s tasks. Perceptions cannot be repeated and can only be checked with difficulty, by means of time-consuming reconstruction. Directives are either heeded or neglected, followed or deliberately ignored, depending on what the individual case requires due to its perceived complexity. Relations with the main organization are established through written reports or proposals, which seek to meet the requirements but which provide only very selective accounts. In this way one “cools down” the paradox that the granted freedom of working without supervision induces caution with regard to (unexpected) supervisions. This can be avoided by drawing up reports, i.e., by influencing the respective decision-making process in the organization; this at least gives the senior people in administration the chance to feel that they are performing their assigned tasks. There can be no more than a loose coupling with the supervisory bodies, and in the concrete decision situations we will typically find a combination of legality and illegality. The distinction between perception and communication is transformed into an ambiguity that cannot be standardised. In other words, there is no technology for organizing such perception-dependent activities that is sufficiently resistant to outside influences.58 Is it possible to deny the autonomy that resolves the problem and makes it easier to sort out the decisions? This problem is currently being discussed in connection with the supervision of high-risk, large-scale technical plants.59 Alarm signals are installed here, which are coupled with the technical plant in such a way that they are perceptible whenever a breakdown occurs. They are perceptible! But whether they are perceived and how they are interpreted is decided in different systems and, more especially, in systems of a different type. The long evolutionary selection process of the 56

For an example from the field of water protection see Hawkins (1984), esp. pp. 57 ff. There is a host of studies on unsupervised behaviour and self-protection through discrepancies in reporting in the field of police work. See, for example, Rubinstein (1974); Brown (1981); Aaronson/Dienes/Musheno (1984). Cf. also McCleary (1978), esp. pp. 145 ff.; Prottas (1979), esp. pp. 26 ff., 61 ff. 57 On the relationship between unpredictability and autonomy see esp. Prottas (1979), pp. 111 ff. 58 See also Luhmann/Schorr (1982). 59 See, e.g., Halmann/Japp (1990).

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central nervous system has programmed psychic systems to perceive irregularities, movements, and changes, and they keep up the directness of their relation to the world only as a distinction vis-à-vis such irregularities. But irregularities are recognisable because they stand out from what is perceived as normal, and it is in normality that deficiencies may escape observation.60 Moreover, human perceptions are always interpretable perceptions; they construe, they create an abundance of references, they can mean “one thing or the other”, and this makes them unreliable for the organization. Organizations as decision-based, autopoietic systems are not capable of perception. Accordingly, they cannot incorporate perceptions into their own network of structure-determined operations. Perceptions create a different world. Because humans are capable of perception, they tend to underestimate this discrepancy and, as it were, to see themselves as part of the organization. This may be one of the reasons why the paradox of decision has been unfolded towards responsible, rational subjects, who only occasionally do the wrong thing. Today, the analytical tools available to systems theory make such symbiosis appear questionable.

From principle to paradox To sum up, we can say that the changeover from the traditional notions of the ultimate foundation (principles, laws of nature) to paradox has the advantage of allowing for a better systematisation in organization theory. Paradoxically, it refers to the different ways of getting rid of the paradox again. This non-logical, but non-arbitrary procedure can be described as a search for suitable distinctions. We spoke earlier of “unfolding” the paradox. In doing so, the central problem of the organization – decisions – is placed on one side of the distinction. With reference to Spencer Brown,61 we could speak of the “inside” of the form, or with reference to Gotthard Günther62 of the designation value of the binary scheme. The other side of the distinction (the “outside”, the “reflection value”) would remain open to further designations. These other sides need to be filled with designations in order to render the distinction technique theoretically fruitful. If we designate the other side as “decision premises”, we get a structural understanding of the organization. If we designate it as “uncertainty absorption”, we get a processual understanding of the organization. And finally, if, consistently with a normative-rational understanding of decisions, we see on the other side a problem of “motivation”, we get to system/environment 60 Cf. Goffmann (1971). For the ethnological dimension of this distinction, see also Leach (1982), pp. 111–112. 61 See footnote 4. 62 See, e.g., Günther (1980), pp. 140 ff.

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problems relating to employee behaviour. We have used the term structural coupling to mark these problems. On the other side of this system boundary we will primarily find consciously directed perceptions; and the organization has to find ways of accepting that this kind of operation will remain alien and inaccessible to itself. These dispositions build on existing research, but they also enable us to go beyond it. They allow us to describe organizations as autopoietic systems that reproduce decisions through a self-produced network of decisions. Apart from characterising the individual operations as decisions, this requires additional concepts that we already have at hand: (1) a term for autopoiesis itself (= uncertainty absorption), (2) a term for the recursive use of decision outcomes as structures for the selection of subsequent decisions (= decision premise) and, finally, (3) a term that describes how the environment is involved in the internal operations without however being able to contribute operations itself (= motivation). Such a conceptualisation is relevant not only for organization theory. It also opens up new perspectives for social theory and helps us to understand better important societal function systems. This is only partly due to the fact that these function systems are dependent upon organizations for their operations. It is also because in present-day society, relations between past and present have to be explicitly coupled through decisions; they are no longer the result of given necessities and impossibilities, or of history itself, or of the imperatives of “practical reason”. But what does it mean that society has to cope with decisions as paradoxes (which is unfolded in one way or other)? Both in the cognitive and the normative areas of societal communication, i.e., both in science and law, there are signs of an increasing need to react to definitions of situation that can only be described as self-made uncertainty.63 The original idea for this can be found in religion, in the attempt to achieve social discipline among a population, which, in the Middle Ages, was still mainly unconverted to Christianity, by dramatising the certainty of salvation. Significantly, this attempt was based on creeds and confessions, in other words on self-reference that had to be accepted.64 In later times this model was copied and generalised, and today, after a phase of religious enlightenment, we face an analogous societal enlightenment. In science, this is reflected in the postulates of treating all scientifically proven (!) knowledge merely as hypotheses and, more recently, of radically constructivist epistemologies. In the legal system we find similar tendencies in a positivism that is disconnected from all external sources of legitimation, in an 63 For the legal system, see Ladeur (1992), particularly the third part on the interpretation of constitutional rights (pp. 176 ff.). 64 See the seminal article on the subject by Hahn (1982).

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orientation towards interests and values, and in undefined legal concepts that leave the outcome completely open. For both spheres the discourse theory of Jürgen Habermas provides corresponding perspectives: discourses about claims to the truth or norms no longer allow for prefiguration through natural history, moral principles, or transcendental invariants of practical reason;65 they relate to an as yet unknown future, in which a reasonable decision that makes sense to everyone who is affected by it has to be found, yet. The theory of self-referential, operationally closed systems comes to the same result via a different route66. All information and, thus, also the absence thereof, all certainty and uncertainty, is a construct of the system itself and is determined by the distinctions with which it observes the world. Innumerable other examples could be cited, for instance, from the field of systems theory, from the research on risk, or from research on the interdependencies between technology and ecology.67 The intellectual climate of the 1990s seems to be resigned to the fact that the uncertainty of the future is the only invariant on which all decisions will be grounded. But if that is the case, it will be necessary to change decision theory itself from principle to paradox. Because only then will we be able to avoid scenarios of horror and gestures of despair and instead try to cope effectively on the basis of the available insights. A theory of this kind is therefore not restricted to specific areas of organization such as public administration or production companies, schools or banks, political parties or courts of law. It also extends to the individual function systems of society in which organizations have assumed very different roles. This requires a high level of abstraction. But it does not necessarily mean that we have to work with unanalysed abstractions or with vague terms. Rather, we should make the stipulations of our theory as transparent as possible. Because only then can we control what needs to be changed when parts of the theory fail to work. – Translated by Karen Finney-Kellerhoff and David Seidl

Acknowledgements This text was originally published in German in Verwaltungs-Archiv 84, 1993, pp. 287–310.

65 66 67

With all desirable clarity Habermas (1996). See Luhmann (1990c; 2004). Cf. also Luhmann (1998) – especially pp. 75 ff. Cf., e.g., Selvini Palazzoli et al. 1983; Simon (1990); Halfmann/Japp (1990).

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Chapter 5

Displacing the Paradox of Decision Making. The management of contingency in the modernization of a Danish county Morten Knudsen

“When the unclean spirit is gone out of a man, he walketh through dry places, seeking rest, and findeth none. Then he saith, I will return into my house from whence I came out; and when he is come, he findeth it empty, swept, and garnished. Then goeth he, and taketh with himself seven other spirits more wicked than himself, and they enter in and dwell there.” Matt. 12: 43–45

This chapter aims to demonstrate the usefulness of Niklas Luhmann’s systems theory for empirical research. It sets its point of departure in modernization processes in the Danish public sector, where – as in many other OECD countries – such processes led to major changes during the 1980s and 1990s. A steady stream of reforms has transformed the basic structures of the public sector, new technologies of steering have emerged, ideals of change and flexibility have been promoted, and new financial systems have been implemented, just to mention some examples. This process of modernization is further characterized by “decentralization” – the differentiation of the public sector into multiple self-referential public organizations. This chapter will describe some of the organizational dynamics in the modernization process from a systems theoretical viewpoint while focusing on the question of how the organization – in and through a process of selfestablishment – comes into being. The empirical basis for this study is provided by a Danish public sector organization, the Frederiksborg County Health Authority. The chapter focuses on its emergence as an organization and presents a number of observations, which are primarily generated by Niklas Luhmann’s concept of the paradoxical character of decisions. Further, two different types of “deparadoxization” are described and some of their effects analysed. 107

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In the first section, the key concepts used in this chapter are presented and the strategy of analysis is explained. The following section shows how the county’s self-referential Health Authority emerges and in the same process manages the paradoxicality of its decisions. The emergence of the organization and its subsequent deparadoxization is followed by increased uncertainty and instability. This makes it relevant to look for complementary strategies for deparadoxization. The following section demonstrates how these strategies are also accompanied by uncertainty and subsequently discusses the relations between the analysed deparadoxization strategies and the processes of reform in the public sector. The concluding section offers a summary and an evaluation of the pertinence of Luhmanns theory to empirical analysis.

Key concepts In Luhmannian systems theory, social systems are seen as consisting of communication. Decisions, whilst being the central operation of the organization, are but one type of communication. The basic analytical movement of systems theory is to proceed from the assumption that communication is improbable. In so far as we experience the factual existence of organizations on an everyday basis, the conceptualization of organizations as improbable entities may strike one as odd. Nevertheless, this idea forms the point of departure for Luhmann’s analytical strategy. The idea of the improbable decision and the improbable organization is the basic assumption that generates observations. Empirical analysis involves showing how the presumed improbability is overcome and the system is made possible. This section will present the key concepts used here, in order to show what is meant by the “improbability of the organization”. According to Luhmann, social systems consist of recursively connected elements. These elements are seen as communicative events – not as actions or individuals. Communication, however, is only really communication if – as Luhmann puts it – the communicative event is understood and “used as the basis for connecting with further behaviours” (Luhmann 1995f, p. 141). Communication comes into being as communication only when communicative events consecutively connect to each other. Singing in the bathroom is thus not communication, unless, of course, somebody shouts “Quiet!” Luhmann sees decisions as the basic elements of the organization and the organization is thus defined as a network of recursively connected decisions. This means that organizations simply consist of decisions referring to other decisions. Without these connected decisions there is no organization. The organization is self-referentially closed on the basis of its decisions. This means that the organization cannot make decisions outside of itself, in its

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environment, and that the environment cannot make decisions inside the organization. For instance, IBM cannot decide the strategy of Macintosh, and vice versa. In the framework of systems theory, the discussion of how the organization emerges is posed as a question of organizational strategies for the increase of probability for the connectivity between decisions. The problem of connectivity is crucial for the emergence of the organization, but no less for individual decisions. Decisions are “virtual” (Baecker 1999c, p. 139) in so far as decisions are not decisions until other decisions connect to them. If decisions do not gain connectivity they were not decisions in the first place, but – instead – organizational noise, as it were. The connectivity of decisions is thus essential to the constitution of the organization. The necessity of this connectivity is an everyday experience in organizational life. What is really a decision can only be discerned in hindsight; for instance, the approval of minutes at meetings: among the “decisions” of the previous meeting, some are singled out as proper decisions at the following meeting. Further, most members of organizations have witnessed the making of decisions that are quickly forgotten and erased or ignored in subsequent organizational communication, which again means that they turn out not to be proper decisions, but just “noise”. Decisions are continually in danger of decay or failure of connectivity. According to Luhmann, the decision’s paradoxical nature is what threatens this connectivity and thus makes the organization improbable. Let us take a closer look at the concept of decision to see what is meant. Luhmann relates the concept of decision to the concept of observation and to the concept of distinction (Luhmann 1993d, p. 289; 2000c, p. 126). To observe is to indicate within the frames of a distinction, he says. “This is a profitable investment” is, for instance, an indication within the frames of the distinction “profitable/non-profitable”. What transforms an indication into a decision is that it is possible to indicate both sides of the distinction, which means that the distinction has the form of an alternative. Normally, the question of whether to indicate “profitable” or “non-profitable” does not constitute a decision. However, it does constitute a decision when an organization determines which investment to make, because it involves guessing which investment will yield profit and which will not. The decision is only a decision in so far as it has another side (an alternative decision could be made). Thus, it is both the same (the indicated decision) and something different (the distinction). In the centre of this paradox (see Luhmann 1991a and 1993c for a presentation of his general concept of paradox) lies an undecidability (see also Derrida on “the undecidable” in Derrida 2002, p. 31), which makes the decision contingent – that is, neither impossible nor necessary. The reason for this undecidability hinges on the fact that either side of the alternative may be indicated (Luhmann 2000c, p. 133). In other words, a decision is not necessary, but contingent: it is possible to indicate 109

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either side of the alternative. According to Luhmann “something is contingent insofar as it is neither necessary nor impossible; it is just what it is (or was or will be), though it could also be otherwise” (Luhmann 1995f, p. 106). The concept of contingency is used in the Aristotelian sense and designates that something is “neither necessary nor impossible”. The decision must communicate itself as a decision, but by doing that it also communicates its own alternative. A decision cannot help but communicate its own self-critique, i.e. communicate that it could also have been made differently; which is central to Luhmann’s theory (Luhmann 2000c, p. 142). In the communication of a decision lies a self-destructive mechanism, a tendency towards deconstruction. The present cannot help referring to the absent – to use a deconstructive expression. The peculiar thing about decisions is, on the one hand, that they cannot help but express their own contingency, which precisely makes for a problem of connection: why connect to a decision which could have been made differently – and which cannot help but communicate this possibility? On the other hand, it is clear that the factual existence of organizations is dependent on a factual connectivity of decisions. The very existence of organizations testifies to the fact that they evidently have found ways of handling the paradox and contingency of their decisions. Studying how an organization comes into being, then, means considering the ways in which it handles the paradox and contingency of its decisions. And the management of contingency is a central part of what Luhmann terms “deparadoxization”. In Luhmann’s theory, the question of conditions of possibility is central: given their improbability, how do organizations nevertheless emerge and come into being? Now, this general question can be formulated as a question of how decisions are deparadoxized. Deparadoxization is the systems theoretical expression for ways of managing the contingency inherent in decisions, and for making sure that communication is not blocked, so that the autopoietic reproduction of the organization may continue. Deparadoxization can also be described as moving the paradox to a “less disturbing place” (Luhmann 1993, p. 294). This will be demonstrated in our empirical analysis. In order to understand Luhmann – and Luhmannian analyses such as this chapter – it is crucial to understand his basic analytical movement. Contrary to most organization theories, Luhmann’s analytical move consists in reconstructing – not primarily in revealing – the organization. The point can be illustrated by contrasting Luhmann’s strategy of analysis with Mary Jo Hatch’s “Spontaneous humour as an indicator of paradox and ambiguity” (Hatch 1993). The title indicates that Hatch’s aim is to disclose something hidden. But Luhmann takes what is hidden behind decisions and other organizational activity – that is to say, paradoxes and ambiguities – as his point of departure. Luhmann takes for granted that organizations are 110

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paradoxical, contradictory, and contain elements of arbitrariness, and goes on from there to ask how organizations avoid their own deconstruction. This question is seen as a fundamentally empirical question. Here, it is important to understand the manner in which the concept of the paradoxicality of decisions functions as a means of generating observations, rather than as a description of reality “out there”. The central question of this chapter may therefore be formulated thus: in the context of public sector modernization processes, how do organizations handle the paradox and contingency of their decisions? This is a question of current interest, since the modernization processes of the last 20–25 years within the public sector in Denmark and other OECD countries have been characterized by a tendency to form even more independent public organizations making an increasing number of decisions. The basic question is thus reformulated as one of how public organizations emerge, and specifically how they increase the probability of decisions connecting to other decisions. This question is approached by way of an analysis of the Frederiksborg County Health Authority, the empirical case on which this chapter is based.

A self-referential organization emerges The empirical focus of this chapter is the emergence of public organizations, a dominant trend during the last 20–25 years of modernization of the public sector. Words like autonomy, reorganization, and decentralization are frequently used to characterize modernization processes in the public sector (Baldersheim et al. 1995; Bentzon 1988; Brewer 2001; Condrey and Maranto 2001; Petiteville 2000). Individual administrative units are made responsible for their own modernization and efficiency (Corte-Real, Nomden, Kelly and Petiteville 2000, p. 48). The new administrative units themselves determine both the nature of their goals and how these goals are best accomplished, while the individual units of administration are to act as independent organizations. The aim is to make the public sector more efficient and competitive, and this goal is – as it is claimed – best reached by self-conscious and self-motivated public organizational entities. The term “reorganization to reorganization” (Andersen and Born 2000) expresses the pressure on these new organizations to continuously “modernize” themselves. A main thread has been discernible in the indicated development: the differentiation of the public sector into many autopoietic public organizations. This is a complex development in that we witness not only a differentiation of the public sector, meaning that organizations are differentiated into many, smaller organizations, but also the fact that this process leads to the creation of new organizations (sometimes by merging existing ones) making deci-

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sions in new areas. These new organizations do not simply replace existing organizations: they make yet more decisions about still more issues. The result is a public sector with a significantly higher degree of complexity, characterized by a plurality of self-referential organizations. If we combine the systems theoretical assumption of the improbability of decisions with the recent differentiation of the public sector into selfreferential organizations, we may bring into play the question of deparadoxization: how do the emerging organizations deparadoxize their decision making and what effects does this deparadoxization have? This question guides our analysis of a single case: the Frederiksborg County Health Authority. Frederiksborg County is situated in Northern Zealand, Denmark. In 1999 it had approximately 365 000 inhabitants. There are four regular hospitals in the county with 980 beds in total and a budget of approximately 300 000 000 Euro (1999). The Frederiksborg County Health Authority produced its first county hospital plan in 1980 under the name “SP80” (short for “Health Plan 1980”). The plan features descriptions and decisions for hospitals, with the county as its limit of validity. These and subsequent decisions are identified as constituting the organization “Frederiksborg County Health Authority”. The 1980 plan begins thus: According to § 11, subsection 2 in law number 324 on hospital service of 19th June 1974, responsibility for the working out of a plan for the hospital service lies with the specific county, as does responsibility for necessary revision of the plan as dictated by development. (SP80, p. 9; my translation)

The similar health plan in 1997 (Sund97) begins in this way: In connection with considerations of the 1996 budget of the 25th of September 1995, the Frederiksborg County health committee decided to take an initiative to start a revision of the health plan, so that such a revision could take place through preliminary work by the health committee and the involvement of all its collaborators. (Sund97, 1.1, my translation)

Seventeen years separate these two introductions – seventeen years and a self-referential organization. SP80 legitimizes itself with reference to § 11, subsection 2 in law no. 324, whereas Sund97 does the same with reference to a decision taken by the county health committee. Comparing the first pages of the two plans reveals the following differences:

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SP80

Sund97

Time

The timetable makes reference to the circular on time limits from the Ministry of the Interior.

The timetable makes reference to a timetable proposal worked out by the Area Health Board in Frederiksborg County.

Themes

Refers to the circular from the Ministry of the Interior on schemes for registration and calculations.

Refers to a) the discussion of conditions and themes found in the plan itself (Sund97) b) a number of work groups that focus on a number of specific themes determined by the health committee.

Legislation

Refers to laws and circulars as given entities.

The legislative frame is open to discussion.

Approving body

The approval by the Ministry of Interior is mentioned.

The acceptance of the County Health Committee (among others) is mentioned.

Institutions referred to

Reference to Hovedstadsrådet (the Committee of the Capital) and to the Ministry of Interior.

Reference to a “broadly composed steering-group”, to the Area Health Board, to work groups and accountancy groups.

In the space of twenty years, we see an ever-increasing degree of reference to the county’s own decisions and plans. Another notable change is a considerable growth in possible areas for decision making in the county health services. Frederiksborg County Health Authority makes increasingly more decisions and thus emerges as an organization in its own right. These decisions refer to other decisions made by Frederiksborg County Health Authority itself, rather than to external premises such as laws or directives coming from the central governmental authorities. Let me outline some of the areas in which the organization expands. Here I refer to Luhmann’s three types of decisions premises: programmes, personnel, and organizational structure (Luhmann 2000c, pp. 256 ff.). From around 1990 onwards, the county increases its production of programmes. Programmes have the shape of plans (Health plans, Capacity plans, plans for specialist practices, a general psychiatric plan, a plan for physiotherapy etc.), but also consist of decisions concerning the placement of specialist practices, the placing of the obstetrical wards, the number of beds, and different kinds of policies (research policy, senior policy, staff policy, waiting-list policy, etc.). In the 1990s, hospital staff also became an object of decision making. 113

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Decisions were made concerning not only which persons were to be members of the various committees, councils, clinics, and boards, but also the staff’s more “personal” qualities. The county is concerned not only with its staff’s formal qualifications, but also with “social qualifications”, and the personalities of individual staff members are issues for decision making. The County Health Authority also discusses desirable employee competences, as well as which images of and views on the organization the staff should preferably hold. Staff development and in-service training are discussed and practiced. From 1980 onwards, more and more extensive decisions about the organizational structure of the county are made. In 1980 structural planning was primarily carried out by representatives of hospitals and hospital-related professions. By the mid-1980s, the planning groups had assumed a more permanent status, and from 1992 onwards, three “visible and competent levels of management” are referred to: the county, the hospital, and the ward (Sund92). In this way, the county as an independent entity gains in organizational importance. From the 1992 (Sund92) Health Plan onwards, a common and united management of the county’s health service is mentioned. Towards the end of the 1990s, the Health Plan of 1997 (Sund97) appears, which fully accomplishes the move away from a principle of representation towards the differentiation of a separate management: three directors, vicedirectors, and chiefs of staff are hired and work councils that fit the management structure are established. Local hospital leadership is weakened and administrative spheres moved to the County Health Authority. Speciality medical committees are also established across the boundaries of the individual hospitals. A common motto for the Health Plan 1997 is coined: “the cooperative health services”. This new structure is the culmination of a series of decisions, which have gradually built up the county’s ability to make decisions about its own structure. At the same time, the new structure enables a significant acceleration in the number of decisions made. To sum up, over a period of less than twenty years, a County Health Authority effectively creates itself as an organization in the shape of recursively connected decisions and decisional premises. This may be described as a double closure (cf. Chapter 1 in the present volume) of the organization: the organization reproduces itself on the basis of its own decisions and in the process also produces its own structures (in the shape of decision premises). More and more issues are seen as relevant subjects to be determined by the Health Authority, as issues that it can make decisions about. And to an increasing extent these decisions refer to other decisions also taken by the County. It is no longer sufficient to administer by pre-given premises – the county now creates its own premises. Health Plans and similar County decisions refer less and less to the outside, the other, and more and more to self-made plans, goals, means, and decisions. The County no longer 114

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administrates by given premises; the Health Authority itself decides the premises. More and more areas that used to be on the “outside” are relocated to the “inside” of the county’s boundaries, so that they may become objects of decision making. General categories for county decisions include capacity, aims, programmes, organizational structure, and staff, and the county attempts to manage and control these by means of decision premises. This means that one layer of decisions is built on top of the other; there is a set of basic decisions, and on top of that a set of decision premises that guide and limit decision making in the county. Let us have a closer look at these decision-premises in order to relate this description to the problem of deparadoxization. Above, not only the emergence of an organization was described, but also a way of managing the paradox of decision making. In Luhmannian theory, the establishment of decision premises is one form of deparadoxization – a way for the organization to manage its own contingency by imposing limitations (Luhmann 2000c, p. 222). The limitations consist of decisions concerning other decisions in the form of decision premises. These decision premises impose limitations by demarcating the possible space for further decisions. By delimiting the possible decisions, the probability for the connection of decisions to other decisions is increased. The organization then creates decision premises, limitations in the form of structures, programmes, and plans for staff development. The decision premises function by increasing the probability of acceptance of decisions by means of other decisions (Luhmann 2000c, p. 145). One deparadoxization strategy is thus delimitation. And since the decision premises are themselves decisions, the organization emerges from its own self-limitation. If we relate the transformations in the County Health Authority to the general tendencies in the modernization of the public sector in Denmark, we may describe the emergence of the Frederiksborg County Health Authority as a success. The establishment of a decentralized and autonomous public organization has been accomplished in this specific case. And this process was a leitmotif in the modernization programmes in the early 1980s and after. This county may thus be seen as an example of the successful implementation of central elements in the strategies of modernization. But, as we shall see, this transformation is not without problems – problems intimately connected with the deparadoxization of the decisions constituting the organization. The next section will demonstrate some of the unintended effects of the aforementioned deparadoxization strategy.

Deparadoxization and uncertainty (1) In the time-dimension, decisions fixate contingency and absorb uncertainty (Luhmann 1993d, pp. 291, 299). Before a decision is made, the alternative 115

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is open and the decision is neither necessary nor impossible, but contingent. After a decision has been made, contingency has been closed or fixated. The emergence of the Health Authority as an organization means that uncertainty is absorbed and contingency continuously fixated by means of decisions. But as will be demonstrated in the following, our case shows that the gradual establishment of new spheres of organizational decision making and the increasing amount of decision premises also create increasing uncertainty. The absorption of uncertainty takes the form of stabilization of expectations (Luhmann 2000c, p. 151), i.e. the establishment of decision premises, and so we end up in a paradoxical situation: the creation of certainty itself creates uncertainty. Let me present four empirically important ways in which uncertainty is produced.

Increasing areas for decision making, increasing uncertainty Decisions may open up contingency as they open up new areas for decision making. As more spheres of organizational life are turned into areas for decision making, as they become more plastic, less remains solid, static, untouchable. What used to be given (as obvious goals, as rules, legislation, routines etc.) becomes ever more contingent. This goes both for the Health Authority as a whole, but also for hospitals and wards. Even individual staff members must now see themselves as “strategic resources” whose competencies are to be developed, formed, and reshaped. A large number of decisions now need to be made. Yet it is not clear what forms the premises of the decisions – simply because these premises are also issues for decision making. Contingency is limited by decision premises that establish structures of expectations; but when new areas are opened up for decision making, contingency is brought into play along with them. Consider the following example: the County decided to establish a new functional unit intended to cut across hospital borders. When its structure was discussed by the County Health Authority, uncertainty was notoriously present. I interviewed ward managers, representatives from the board of directors, representatives from the unions, as well as the head clerk who wrote the proposal. They all had different interpretations of the reasons why the functional unit was set up, different views on how it was to be organized, different ideas of where the physicians were to work, which type of relation to the various hospitals was to pertain, etc. This example shows not only ways in which the structure – the explicit object for decision making – was unclear, but also that the premises on which the decisions were to be made were opaque. This uncertainty led to the circulation of a number of rumours and conspiracy theories. These, in turn, only further increased the general experience of uncertainty. Furthermore, the simultaneous absorption and creation of uncertainty calls attention to an important dynamic in the development of the organiza116

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tion: the way decisions tend to call for each other. A decision made in 1995, to ensure that the Health Authority hospitals were more cooperative and used what was called “work sharing”, called for a new management structure and new types of cooperation. This again called for a decision to promote “staff development”. We see here how the organization – as it emerges – needs to create the preconditions for decisions it has already made; the organization emerges in a “stumbling” movement, as it were. The premise for the decisions is incomplete and only determined after the decision has been made. In this way, the organizational self becomes a future self. So, confronted with its own contingency, the organization reacts with growth as it tries to make more decisions, which may function as premises for subsequent decisions. To ensure the proper functioning of decisions already made, further decisions must be made – and so on. The organization fails to stabilize itself completely – it wavers.

Complexity The decision premises delimit the space for possible decisions and increase the probability that the decisions made actually connect to other decisions. But as the number of premises grows, a new openness emerges in the form of a surplus of decision premises. Selection becomes necessary and a choice must be made between premises. The organization may react to this new openness by making more decisions. A contradiction inherent in the establishment of decision premises is readily apparent: the decision premises – intended to increase connectivity – evidently also increase the complexity of the organization, making it uncertain which of the many limiting premises the county is to connect to. In an attempt to manage the growing complexity, a number of committees, councils and other minor units are established. The wards are upgraded. For instance, they get their own budgets and formal managers. This development further increases the complexity of the organization – but now on a structural level. The mere existence of committees etc. emphasizes the need for further selections, choices, and decisions: an organizational carpet interwoven with contingency. It becomes still more complex and unclear who can make (or has made) particular decisions. The exact distribution of responsibility for decision making between hospital managers, ward managers, the Health Authority board, the various teams and work groups, the specialist committees, the councils etc., becomes unclear.

The simultaneous existence of opposite decision premises The more complex the county’s decisions become, the greater the risk that they do not all point in the same direction. Here, three examples of the simultaneous existence of opposite premises will be presented: 117

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1. Decentralization/centralization. On the one hand, we see a development towards a centralized organization, inasmuch as an ever-increasing number of decisions are made that concern the county as a whole. However, on the other hand, the wards are turned into self-managing entities. These two principles do not necessarily exclude each other, but the simultaneous presence of two contrasting ideals leads to uncertainty, for, which ideal are the employees to connect to? 2. Cooperation/competition. The formal motto in 1997 for the Frederiksborg County Health Authority was “the cooperative health-care system”. Yet at the same time a particular hospital, Hørsholm, was made “independent” and given a “separate board” with the explicit aim of becoming “more competitive”. The subsystems were suddenly both to cooperate and to compete. Further, these ideals have changed over time. In the 1980s, the subsystems were to cooperate, whereas from the beginning of the 1990s, they were to compete. From the mid-1990s, they were again to cooperate. The competitive ideal is at this point not clearly pointed out in the plans from the period, but later plans mention it as a fact. Some of the leading physicians interviewed remembered it as a verbally promoted ideal, others believed that a plan of functional differentiation had been agreed upon – but never really enforced. 3. Small/large organizational units. In relation to the establishment of Hørsholm hospital as an independent unit there was a reference to “the advantages that small organizational units have when staff members have a sense of clarity, common aims, influence and a close management” (the official newsletter: Nyt om sundhedsvæsenet no. 36-2001, my translation). At the same time, the official ideal advocated was that all the county’s hospitals were to be run as one, uniform organization; that is, not as small, individual organizational units.

Changing decisions Rapid changes of decisions within a relatively short frame of time have also contributed to the experience of uncertainty. For instance, Hørsholm Hospital was merged with Helsingør Hospital in 1992. But it was already made independent in 1998. In 2002, the county decided to sell Hørsholm Hospital. This decision was cancelled in 2003, as it turned out that no one wanted to buy the hospital. Another example (among many) is hip surgery: before 1998, hip surgery was carried out at four different hospitals, but in 1998 it was assigned exclusively to Frederikssund Hospital. However, in 2000 it was assigned to Hørsholm Hospital. The department of obstetrics was moved from Helsingør to Hørsholm in 1992, while in 1995 it was moved from Hørsholm to Helsingør, and in 2003 it was moved to Hillerød. In 1998, it was decided to merge three orthopaedic wards at three different 118

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hospitals. This decision was followed by many decisions related to the placement of functions, placement of staff, the organizational structure of the new unit, new practices of visitation etc. In the spring of 2000, however, the merger was cancelled. All of these rapid changes had significant impact on the working life of hospital staff. Further, we may include the great number of suggestions for changes, which were never realized, but which still rumble on as possibilities. For instance, ideas were voiced in 1995 about turning Frederikssund Hospital into a purely elective unit by closing the emergency services section. The idea was formulated in a memorandum labelled “confidential”. This episode hardly lessened the general feeling of uncertainty or eliminated any conspiracy theories.

Summing up In the section entitled “A self-referential organization emerges” we saw how expectations in the shape of decision premises are one of the ways of limiting contingency and thereby deparadoxizing decisions. In this part we have seen another side of the story: the establishment of new spheres for organizational decision making creates uncertainty, as does the increased complexity, the simultaneous presence of opposite ideals, and changing decisions. The limitations imposed increase contingency while managing it. The organization emerges from the ongoing absorption of uncertainty, forming a structure of decisions, which are recursively connected. But the decision premises do not exclude contingency – on the contrary. The organization encounters new problems while attempting to stabilize itself, and contingency grows with the organization. Let us now change perspective for a moment and see how the paradoxical nature of decisions is handled – in supplementary displacement strategies.

Displacements Let us recapitulate the problem of the paradoxical nature of decisions: the contingency inherent in the decision means that it is possible to indicate either side in the distinction. This openness makes it improbable that decisions will connect to other decisions, for decisions cannot help but communicate their alternatives. This, then, raises the question of connectivity, for why would we connect to a decision that could have been made differently – and which also communicates this option? One way to increase the probability of connection is, as demonstrated above, the establishment of limitations in the form of decision premises, which create and structure expectations. We may say that the paradox is displaced from the distinction of the decision to the distinction between the decision and the decision premises. This is what Luhmann calls “unfolding the paradox”. 119

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The combination of the idea of deparadoxization as displacement with the above observation – that the displacement of the paradox from the decision to the decision-premises sometimes seems to allow uncertainty to grow faster than it can fix it – shows us how this case study provides material for a discussion of possible functional equivalents, i.e. other mechanisms of displacement. Apart from displacement by decision premises, Luhmann mentions many other types of displacement or ways of “unfolding the paradox”; e.g. attributing the decision to a decision-maker or to environmental demands (cf. Becker and Haunschild, 2003). However, which types of displacement can be found in an organization in the end is a question that can only be answered with respect to a single empirical case. The analysis presented here shows how the County Health Authority displaces contingency related to the factual dimension (what is decided and why), the social dimension (who actually made the decision) and the temporal dimension (when the decision was made). Now to some examples, followed in the next section by a discussion of the effects and causes of such displacements.

Deparadoxization by reasons The health plans and the decision proposals in the 1990s share a common trait: they get started by offering reasons for their own existence. This is done partly by reference to goals to be accomplished, partly by listing external challenges and demands that must be met (demographical changes, medico-technological developments, growing expectations, political demands for retrenchment etc.). These reasons displace contingency from the decision itself to its reasons. Reasons, then, are simply ways to displace contingency: the decision could be different, but when a reason is given, the contingency is displaced to this reason. In Frederiksborg County, the reasons are primarily presented within two topoi. Decisions are legitimized by external demands, but they are also legitimized by aims, purposes, visions, and values. An example can show how this works. The example is “Notat om fremtidig ledelses- og samarbejdsstruktur, udkast den 11/2 1997, Sundhedsforvaltningen” (“Memorandum on the Future Management and Cooperation Structure”, sent out as a proposal by the Health Authorities 2/11/1997). The memorandum proposes the establishment of an independent management for the entire health service in order to minimize hospital managements, increase the competencies and responsibilities of the wards, and transfer the main administrative functions from the hospitals to the County Health Authorities. The memorandum lists more than thirty purposes and positive effects of the suggested restructuring; however, some of the purposes are only very loosely coupled to the suggested structure. The overwhelming number of purposes indicates that contingency is really a problem, because it shows that connectivity to the decision120

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proposal cannot be taken for granted. Therefore, an abundance of reasons is ascribed to it – ascriptions which are expected to increase the probability of connectivity. What happens, then, is that the contingency of the decision is displaced to the purposes and the contingency of the purposes is displaced among all the purposes, using a large number of chains of means and ends, which the reader cannot survey. Yet a fiction of rationality is maintained by listing the purposes in such a way as to indicate a hierarchy among them. Some of the purposes and the proposals are coupled in a very loose way. The connections between the proposals and the purposes are often so tenuous that the text seems to be a juxtaposition of otherwise unrelated items gambling on the fact that readers will add the necessary reasoning themselves.

Deparadoxization by hearings A further characteristic of decisions is that they are first virtual (Baecker 1999c, pp. 132 f.), or proposals, as it were. Such a decision-proposal is a kind of test-decision: will this decision gain connectivity? Hearings may be seen as one way of testing such virtual decisions. Decision-proposals are typically sent to various groups in the organization for hearings. After the hearings, the proposal is revised and sent to further hearings, until it is finally confirmed. The hearings related to the general four-year plans, for instance, prove to be very extensive undertakings. Groups involved in the hearings are, among others, work councils, unions, wards, and municipalities. The report of hearing-response résumés concerning the 1997 general plan contains several hundred pages from eighty-eight different respondents. Luhmann describes how the mystery of the decision is dissolved by personalization or consensus. The decision is ascribed to a person. So a tautology replaces the paradox of decision making: the decision-maker makes the decisions (Luhmann 2000c, pp. 136 f.; Chapter 1 in the present volume). This case study – especially in relation to hearings – shows supplementary means for displacement. Contingency is displaced from any identifiable actor or institution to “less disturbing places”. This, however, contrary to what Luhmann appears to presume, does not mean that there is “a situation of counterbalance” (Luhmann 2000c, p. 139). The decision – and its contingency – is spread all over the organization, something that, naturally, obscures its source, but does so without obtaining any consensus.

Deparadoxization by changing decision-proposals A well-known phenomenon in the processes of writing, negotiating, and rewriting proposals, is that the subject of the decision becomes increasingly vague. In 1999, a head clerk and member of a small committee, who was to make a draft structure for a new type of organizational unit, said: 121

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The closer we get to the finishing line the less clear the papers become – in order for people to connect to them. It is a well-known situation; it is often like that. It doesn’t make it any easier for the rest of us when we have to follow up on the decisions with the unions – for what exactly have they agreed to? (Interview 10/11/1999, my translation)

The decision emerges, and its contingency is displaced by obscuring what the decision is actually about. A decision is made, but what it means exactly is left for the future to decide. In this way, contingency is displaced to the future. To sum up: In the present case the following types of displacement are common: the why of the decision is displaced by the presentation of reasons, the when and the who by hearings, and the what by emptying the decision (obscuring what it is about). These types of displacements correspond to the three dimensions mentioned above (the factual, the social, and the temporal), and – as we have seen – they are routinely built into the typical decision processes. Now some of the effects of these kinds of displacements will be described.

Deparadoxization and uncertainty (2) “Displacement” refers to the various ways in which the contingency of decisions is displaced to what Luhmann calls a less disturbing place. The section above describes such displacement mechanisms: the ascription of causes, which displaces contingency to a claimed system-exterior requirement or to different types of reasons etc.; hearings, which displace the author(s) of a decision to all participants in the hearing activities; time displacements, which postpone decisions to the future or obscure the point in time when a decision was made. The end result is a situation in which no one can determine who made a given decision, when it was made, or why it was made – whether it was a means or an end – or, finally, what it was really about. The different kinds of displacements displace indeed the paradox in so far as they place the paradox out of sight. But in the process, the displacement strategies create uncertainty as to what the decision is actually about, when it was made, who made it and why it was made. The decisions just seem to come into being without anybody knowing why or when or how. The most widespread reaction to this phenomenon among the staff is the ascription of hidden motives and secret plans. Someone must have a plan, and if we cannot see it, it must be secret. The effect is, simply, a flourishing of conspiracy theories. Secret motives are ascribed to top-managers, and the top-managers themselves ascribe secret plans to other groups of employees. The effects of displacements are felt at all levels of the organization. One of the problems is that the hearings create expectations concerning 122

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influence, which are, however, almost always disappointed, for it is simply not possible to take all the comments into consideration. This, however, gives the impression of pseudo-hearings, in which an unspecified group already knows what it wants anyway, even though “they” do not say it. The impression spreads that the board of directors wants something, but that they nevertheless will not say straightforwardly what it is. Suggestions and proposals are met and interpreted with the expectation that “someone is up to something”, something unsaid, unclear, secret. All the reasons listed come to act as blinds or smokescreens for the real reasons – seen in the light of the current conspiracy theory. The mixture of openness and opaqueness (for what is really the purpose?) leads to distrust. The overabundance of purposes creates the suspicion that the real purpose is deliberately hidden behind a smokescreen. Motives understood as intentions are always invisible and that is why they can be discussed forever, for they are not communicatively accessible. Hearings, the ascription of causes, and the other strategies displace the paradox, but the effect of the displacement is that the contingency is spread rather than relocated to a “less disturbing place”. It seems that what we have is a case of unstable deparadoxization, since the paradox is not “properly” displaced: the paradox is not deparadoxized in a stable way. The contingency of the single decision is displaced to the whole organization, which is thus permeated by uncertainty and suspicions of hidden motives. Thus, mistrust is brought into play as a method for reducing complexity (Luhmann 1979) – no wonder, then, that in the case of Frederiksborg County the board of directors introduced trust as a value in 1998 … Uncertainty is a sine qua non for the organization as such. Luhmann puts it this way: “Autopoiesis is therefore only possible if the system is in a constant state of uncertainty about itself in relation to its environment and if the system can produce and control this uncertainty by means of self-organization” (Luhmann 2000c, p. 47, my translation). Nevertheless, the above analysis points to three problems related to the uncertainty inherent in the organization, problems that are specific to our case of a young organization in a continuous process of reform. First, what was intended as a de-bureaucratization of the public sector appears to lead to re-bureaucratization; a rebureaucratization not in the form of formal rules, but in the form of activities related to decision making. As the organization grows it spends more and more time on decision-related activities – compared to the amount of time spent on actual health-care work. Second, the staff is fatigued by the constant reforms, and a combination of resignation, frustration and conspiracy-theories proliferates as a reaction to increasing complexity, uncertainty and constant changes, or, in other words, to decisions that do not have connectivity. Third, it appears that those deparadoxization-strategies that were intended to enable decision making in fact risk blocking the 123

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decision-making process. The result is rapidly changing decisions (when a decision is overruled, it has lost its connectivity) and decisions that are dropped even before they are formally confirmed. Making decisions becomes more and more difficult even as the organization increases the amount of areas for decision making. Deparadoxization has paradoxical effects: the various deparadoxization strategies, intended to aid the organization in its emergence, simultaneously hinder its emergence.

Why displacements? In the present case, the displacement strategies only seemed to make matters worse for the organization. Why, then, are they used? A more workable strategy intuitively seems to be to “hierarchize”, i.e. to displace the paradox “upwards”, to appeal to hierarchical structures, instead of attempting to involve all parts of the organization in the decision-making process. The reason why this strategy is not used is probably that at least some of the decisions, which need deparadoxization, are decisions about the (hierarchical) structure of the organization. This makes it difficult to use those same structures as deparadoxization strategies. This point may be generalized. The reason why this particular organization has a need for supplements to its decision premises is that the decision premises are themselves issues for decision making. Since the decision premises are themselves decisions, they too involve a paradox – which needs deparadoxization. Thus, the organization is forced to use supplementary strategies of deparadoxization, since it cannot adequately handle its contingency by recurring only to the network of its decisions. Another line of argument is connected to the differentiation of the organization. We saw above how the system differentiates itself internally in reaction to its increasing complexity. In the present process of reform, internal differentiation of the county effectively transforms conscientious officials and hierarchical organizational units into self-managing, flexible, ready-to-change, enterprising subsystems. Significantly, such transformations do not happen as the result of explicit orders, for only when the subsystems rediscover themselves as enterprising systems full of independent initiative do they become exactly that. When the aim is to create an organization differentiated into self-referential, self-modernizing subsystems, then top-down management must limit itself in order not to overrule, and thus paralyse, the self-reference of the subsystems. This is a fundamental contradiction in contemporary management. On the one hand, management gains importance as a symbol of the organization’s unity and “self”. On the other hand, management cannot fill this place authoritatively and issue hierarchybased orders, for that would block the subsystems’ self-reference. This is also why management is inclined to use deparadoxization strategies such as hearings and reasons – instead of hierarchical orders. 124

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Reforms and self-reference Luhmann’s notion of paradoxicality provides a framework of sufficient generality to analyze all types of organizations. According to this notion, all organizations must deparadoxize the paradox of decision making in order not to block the reproduction of the organization. Even though the present case study attested to this general mechanism in organizations, it also seemed to suggest that the insecurity described here is somehow specific. What is special about the case? The answer to that question is that we are witnessing a process of reform. The organization is fairly new and moreover the analysis focused explicitly on its process of emergence. This is probably part of the reason for the instability in its decision premises, or what we may call “self-reference with an insufficient self”. This lack in the organizational self only seems to consolidate the contingency inherent in the decisional paradox. The emerging organization must, as it emerges, simultaneously create its own self, its structures – while it must also presuppose itself as a self. As the organization refers to itself, it refers to a self that does not exist prior to this reference. The organization must presuppose itself in order to create itself. This is true for all organizations, but in a situation of reform where this self is not developed yet, the system’s self-reference is, of course, very fragile. What is special about the present case is thus that contingency is doubled: the organization faces the general contingency of decisions as such, but also the contingency of the emerging organization which transforms itself by a process of self-reference without having a very developed self to refer to. The problem of self-referentiality combined with an insufficient self is repeated when sublevels of the system become self-referential. The internal differentiation of the organization may be described as a multiplication of its self. This is also, however, an increase of the uncertainty of the insufficient self, or better – the multiple insufficient selves. “All that is solid melts into air …”.

Conclusion Using the basic framework of Niklas Luhmann’s organization theory, this chapter has analysed the emergence of a self-referential public organization and discussed strategies of deparadoxization in relation to decision-making processes. The Frederiksborg County Health Authority formed the empirical basis for the study, and different ways of deparadoxization were examined. The case-study pointed out a central mechanism in the emergence of public organizations, namely that the very same strategies, by means of which paradox and contingency are handled and uncertainty absorbed, simultaneously co-produce even more contingency and uncertainty – a situation which the organization can only respond to with more decisions. 125

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Key concepts in Luhmann’s organization theory functioned as guiding lines for the analysis of this specific case. Based on relatively few concepts, the theory proved effective as a means of generating observations. The improbability or paradoxicality of decisions, which formed our point of departure, allowed us to reconstruct concrete empirical phenomena related to organizational reproduction. However, other deparadoxization strategies than those described by Luhmann were found in the empirical material. This does not show the inadequacy of Luhmann’s theory, since Luhmann never intended to present a complete list of methods for deparadoxization. Instead, it shows how his systems theoretical concepts and analytical strategies may be used to generate empirical observations. And for that they have proved fruitful. The present analysis has not resulted in abstract statements of the type “the decisions made in Frederiksborg County are paradoxical”, but instead in an analysis that has shed light upon well-known concrete phenomena: the increasing amount of decisions, the proliferating conspiracytheories, the increasing uncertainty, the rapidly changing decisions etc. These are phenomena often explained by their attribution to persons, not to systemic mechanisms. In this way, Luhmann’s concepts generated a new perspective on decision-making processes in a public organization undergoing a process of reform.

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Chapter 6

On Gorgon Sisters: Organizational Action in the Face of Paradox Barbara Czarniawska

Homer adorned the shield of Agamemnon with “the blank-eyed face of the Gorgo with her stare of horror” (Iliad 11.36). The later Greek poet, Hesiod (8th–7th BC), increased the number of Gorgons to three – Stheno (the Mighty, or the Strong One), Euryale (the Far Springer, or the WideStepping), and Medusa (the Queen, or the Guardian), and made them the daughters of the sea god Phorcys and of his sister-wife Ceto.1 The Gorgons, as Niklas Luhmann (1991a, p. 58) has pointed out, have the same effect as paradoxes: staring at them results in immobility, and therefore in an inability to act. Thus, one should avoid observation if action is intended. The reason Luhmann brought the existence of the three, not one, Gorgons to the attention of social scientists is that there is more than one problem with paradoxes. Medusa was mortal, and could be killed by Perseus; but Stheno and Euryale are immortal, and cannot be eliminated. This chapter appropriates Luhmann’s idea and applies it to studies of organizational practice. It is claimed that although the traditional mode of operation in the Swedish public sector – the erstwhile model of welfare organization – was characterized by an astute awareness of a need for constant deparadoxization, the present mode is more and more influenced by the private-sector mythologization of manager-heroes who resolve all paradoxes once and for all – until the next Gorgon’s head is raised.

Protecting paradoxes The usual criticism of paradoxes and the urge to “solve them” is connected with the fact that they violate logic. This is correct: two opposing statements within the same utterance are not logical, but paralogical. After all, logic is 1

www.britannica.com/eb/article?eu=38185&tocid=0&query=gorgons; www.theoi.com/Pontos/Gorgones.html; [Accessed April 13, 2002].

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but a linear, one-dimensional set of rules, which came into being through the praxis of the Indo-European languages. The fact that we adhere to and roughly agree upon such a set of rules makes it easier to communicate with one another, or so we believe. Logic is a conventional way of describing one’s image of the world, which can then be discussed and negotiated with other people. Logic is a device. Consequently, as Luhmann (1986b) points out, paradoxes are not attributes of social systems but the result of using the logical analysis as an observation tool. A static two-dimensional picture like a map or a photo has serious defects compared with the dynamic three-dimensional reality that it propounds to represent. Yet we accept it without protest (its stands to reason that we did not spend our three-week holidays sitting and smiling in front of a hotel), because we realize the conventional character of such “representation”. We start to rebel only when some smart constructivist tells us that it is not a representation, but itself a part of reality. Exposure to linguistic paradoxes rouses a protest much more quickly. Words are, after all, devices with which we shape our reality.2 In everyday life we take for granted that language reflects reality, or at least that it represents reality as it is. A pragmatist perspective reveals, however, that there are no grounds for assuming correspondence between language and “reality”, be it iconic, symbolic, or whatever. As the new pragmatist Richard Rorty points out, “no linguistic items represent any nonlinguistic items” (1991a, p. 2). Paradoxes are irritating, not because they go against the “essence of things”, but because they ruin the conventional order of the surface that is our life. Essentialists of various denominations are opposed to paradoxes because reality (“as such” – a favorite essentialist expression) cannot possibly be paradoxical. However, there are – and always have been – voices which insist that a paradoxical image of reality is “truer” or simply more practical. The paradox of the existence of humankind would then lie in the fact that a social system can reflect upon itself only within its own frame of reference. The existence of God was the traditional solution to this paradox; otherwise people could not judge themselves objectively, because they are and remain themselves even in the act of judgment. Science offered to replace God, but being human-made, it cannot claim and maintain the same legitimacy. If metaphysical solutions are unacceptable, then paradox itself must be accepted. As Hofstadter (1980) pointed out in Gödel, Escher, Bach, mathematicians, painters, and musicians were always aware of this paradox. Instead of being threatened by it, they toyed with many variations on the theme immortalized by Escher: a person who sees himself reflected in a mirror that he holds, and so on, and so on … no resolutions, only further 2

It is being claimed increasingly often, however, that images are beginning to prevail over words (see, e.g., Godzich 1991) – that one language is encroaching upon the other.

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reflections. The catastrophists in social science were traditionally worried about this aporia: will these reflections never end? Certainly they will, says Ashmore, in his brilliant self-reflective thesis (1989): the commonsense, aesthetic criteria and the diminished “meaning added” set the limits. Thus paradoxes can be seen as a property of life itself (an existential perspective), a perspective taken by an observer of autopoietic systems (a cybernetic perspective which can take both a metaphysical and a metaphorical shape), or as a phenomenon occurring within language (a postmodern perspective). While Niklas Luhmann represents the second take, Jean-Françoise Lyotard stands for the third perspective. These two perspectives sometimes coincide, and sometimes part ways. In general, Lyotard is more enthusiastic about paradoxes than Luhmann is. Logic is a language that is universal but not consistent, as it allows formation of paradoxes, says Lyotard (1986). Indeed, says Luhmann (1995f, p. 95), the logic is possible only because the world of meaning encompasses all the contradictions: “Otherwise, the minute one first encountered a contradiction, one would fall into a meaning gap and disappear.” But paradoxes are the houseflies of logic: although they undoubtedly have a place in this world, the prescription for dealing with them is clear. Paradoxes must be eliminated. People refusing to do so must possess one of two special licences: either they are mad or they are artists. The urge to dissolve paradoxes does not come only from the aesthetic unpleasantness of encountering a logical error. No matter how reflective their attitude toward paradoxes, actors necessarily engage in the more or less creative process of “deparadoxization”3 (Luhmann 1991a). Complaining that “the paradoxization of civilization did nothing to civilize the paradoxes” (which supposedly thrive in the wilderness; 1991a, p. 60), in his essay on the three Gorgon sisters Luhmann criticized the postmodernists, declaring that their call for a celebration of the paradox is like encouraging us to look straight in the face of one of the Gorgons – which, as we know, would turn us into stone. Reflectivity paralyzes. Paradoxes paralyse an observer, continues Luhmann, but not an actor (in his language, an autopoietic system). Buridan’s ass will survive, because it will react, even if by stating that it cannot decide. “Contradiction puts a stop to observation (…) precisely this can be sufficient grounds for doing something” (1995f, p. 360). Lyotard focuses on the evolutionary possibilities inherent in paralogy (1986). There are two kinds of “progress” in knowledge, he says. One 3

I am not using Social Systems’ “deparadoxicalization” here, because it is impossible to pronounce. I am also abandoning the term recommended to me by my English editor – “deparadoxification” – in favor of “deparadoxization”, used in Luhmann, 1986b.

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amounts to innovation – a new move, or a new argument within the established rule. This move could be interpreted as a dialectic move, as the third step, the synthesis, comes from the same repertoire as both the thesis and the antithesis. The other is an invention, a move that introduces different rules, thus turning the paradoxical into the accepted. “What used to pass as paradox, and even paralogism (…) can (…) acquire a new force of conviction and win the acceptance of the community of experts” (ibid. pp. 43–44). This kind of evolution is close to Hegel’s idea of dialectics, observes Luhmann (1995f, p. 373). This might be correct, yet Lyotard does not see it as a play of historical forces, but as the semantic work of human beings. He suggests that the legitimization of knowledge should, or may be, based on paralogy. Opposing Habermas, Lyotard says that it is not consensus but dissension that moves knowledge forward. Here, Luhmann joins him again, indicating the necessary instability of the systems. Language, through the appearance of paradoxes, is forced to change its rules; but because it permitted those paradoxes to appear in the first place, the challenge and the change occur within the same system. Many attempts have clearly demonstrated that language cannot be changed from the outside, either by order or by force. History has demonstrated equally well that changes in language cannot be prevented either, no matter how many ministries of language the purists establish. But a change within a language does not take place without battle. On the contrary, it seems that language change must consist of a battle against rules and principles that are taken for granted. As Thurman Arnold, a Harvard lawyer, a New Dealer and a keen detector of paradoxes said, “[i]t seems to be the eternal paradox of the human mind that principles and faiths which are so essential to its comfort and to the orderly organization and transmission of ideas should at the same time always stand as the greatest obstacle to discovery” (1935, p. 24). The image of human beings as rational decision makers controlling the environment requires a linear vision of the world, in which conflict and ambiguity are temporary aberrations to be removed by the next rational action. Much can be said about the practical advantages of such a vision of the world; as usual, however, focusing on certain aspects forces us to gloss over others. In this case, the inherent paradoxicality of human and social life is the victim.

Organizing as deparadoxization In organization studies, as Van de Ven and Scott Poole (1988) pointed out, a quest for coherent and consistent theory led to the neglect of organizational paradoxes. The observed paradoxes in field studies, for example,

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were taken to be cases of “anomalous communication” (Manning 1992). And yet this anomalous communication lies at the heart of modern institutions as we know them. “Having determined what action to take by logic of appropriateness, in our culture we justify the action (appropriately) by a logic of consequentiality”, observed March and Olsen (1989, p. 162) with unerring acuteness. When facing action, we judge its kind and context from the perspective of our own identity, and accordingly choose an appropriate action from the accessible repertoire. When questioned, we justify the action in terms of rationality (logic of consequentiality): motivated by personal gains (premises that everyone can accept), we choose the best way of achieving them (steps that can be followed by anyone) and arrive at the best possible result (conclusions and evaluations that must be universally accepted [Hanna Pitkin, 1972]). In other words, the two rhetorics (or two kinds of logic, as March and Olsen call them) behind a reflective account and a justificatory account are usually at odds. Usually, but not always: there are contexts in which the two accounts can be safely separated. Also, the organizational narrative smoothly accommodates both of them through the device of direct and indirect speech. In a study by Jansson (1992), a decision about the kind of energy to be provided for a town was reached by using the logic of appropriateness, and was both justified and questioned within the logic of consequentiality. The decision makers claimed that their decision was based on calculation of comparative costs, whereas a “serious counter-calculation” was demanded from the critics of the decision. Such tension, say March and Olsen, is typical of political institutions; therefore, I might add, it is not surprising that we find it in public administration organizations as well. “It can be seen as resulting in a kind of healthy charade of hypocrisy in which reasons and actions are not tightly linked but place pressure on each other in a way that strengthens each” (1989, p. 162) – what Brunsson (1989) dubbed “a necessary organizational hypocrisy”. In a study in the same tradition concentrating on Swedish public sector organizations in the late 1980s (Czarniawska 1997), I noticed that the existence of paradoxes in everyday organizing seemed not only to paralyze action, but also to stimulate it. My findings were corroborated by Luhmann’s suggestion that “… because the paradox cripples observation, it can be understood as an inducement, even as a compulsion to solution” (1998, p. 112). Thus it can be claimed that the existence of paradoxes incites action4 – at the minimum that of deparadoxization. There exist at least three 4 I am falling back on a more traditional dichotomy “action-reflection” because following Luhmann’s differentiation between action and communication (1995f, Ch. 4) would unnecessarily complicate my reasoning.

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deparadoxization strategies, well known and practiced in organizations: temporization, spatialization, and relativization. Temporization, says Gumbrecht, Luhmann’s follower and a comparative literature theoretician, amounts to narrativization (1991a). The conflicting elements are detached in time and the conflict is resolved in the future. Thurman Arnold claimed that “[t]his technique is as old as the parables of the New Testament. It is only its dialectical formulation that is modern” (1935, p. 30). He noted also that such a temporized series of observations is at odds with conventional science, understood as a logically formulated set of principles that are valid at all times. And he added, aptly for my purposes, that “[i]f this point of view must have a name we prefer to call it an anthropological approach towards social ideas” (ibid., italics added). Arnold also stressed the need to dramatize the reconciling narrative. In a letter (quoted by Samuels, 1979), he presented his dramatist theory of society: A workable philosophy [of action] it seems to me, is necessarily a maze of contradictions so hung together that the contradictions either are not apparent or else are reconciled by a mystical ritual … the unity and the rhythm of an institution requires people dancing in different directions and alternately coming together and apart. (Arnold 1937, as quoted in Samuels 1979, p. 1001)

Conflicting issues can be decoupled not merely over time but also in space; thus another strategy – spatialization (March 1988; Manning 1992): “This committee deals with the technical problems, and that committee deals with the psychosocial aspects of the proposed change.” The antitheses are simultaneously present, but not in the same place.5 Sometimes, however, neither temporization nor spatialization work. The promise of a synthesis in the future is not convincing; the committees meet in the corridor by mistake, and no longer stick to the issues in their domains. Decentralization is perceived6 by the people subjected to it as centrally ordered – a paradox that is a source of frustration and a cause of apathy for them. The deparadoxization strategy used in such a context consists of explaining different perceptions by the different levels of observation, where the first-level observer is assumed to be blind to his or her own position and role in the system (“… if you were in their place, you would see it differently…”). It should be added that even this strategy fits the possibilities of the narrative perfectly well. It is a matter of actorial shifting operations (Latour 5

Brunsson (1989) distinguished four strategies, all variations of temporization and spatialization: decoupling over time, between issues, between types of relevant environment, and between suborganizational units. 6 “A paradox is of course always a problem of an observer”, Luhmann 1991a, p. 62.

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1988), whereby the reader or listener can see the world through the eyes of one or another first-level observer, but by virtue of being a second-level observer, can also understand the limitations of that “native” point of view. This means, in Umberto Eco’s (1981) vocabulary, combining the stances of a semantic and a semiotic reader. In a political context, a mediator can be called in and can claim the position of second-level observer (a consultant, watching from outside, might be able to see the points of view of the management and the unions at the same time, and also understand why they are as they are). Thus, as Russian literary theoretician Mikhail Bakhtin pointed out, social science should aim not for empathy but for extopy, an “outsidedness” (Roberts 1994, p. 250).7 In a hierarchical context the higher level claims the position of a second-level observer: “Down at the local office you cannot see the whole picture, and so you fail to observe that what the management is doing is actually decentralization!” These variations of deparadoxization by relativization are also well known in organizational life, but even they do not always work. Management and workers are locked into a stalemate, in which two points of view cannot be reconciled, as neither party wants to acknowledge the relativity of their position.

When deparadoxization does not work, or the tragedy of action Gumbrecht (1991) points to the tragic aspect of paradoxicality, defining the tragedy of action as a situation in which an actor, in the role of first-level observer, perceives another actor as ambiguous (“What is management really trying to achieve?”). Such perception breaks the unity and causes a rupture – sometimes just an “interruption” (Silverman and Torode 1980), sometimes quite literally the breakdown of a person. In other words, one of the first-order observers (an actor) suspects other actors of perceiving the situation as non-paradoxical but communicating misleadingly. Again, there is nothing peculiar about this situation – “… it is impossible to imagine a reality constructed without paradoxes”, as Gumbrecht (1991, p. 487) says, or as completely deparadoxized. And although it is easy to agree with Luhmann that the contemplation of paradoxes excludes action, it is impossible not to notice with Gumbrecht that deparadoxization strategies frequently fail to work, and that action – individual and organizational – reveals its tragic side. This tragic side is especially clear in cultural contexts 7 Bakhtinian exotopia, or outsidedness, is amazingly close to the notion of “observers of the second order”.

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of organizing that are far from the complacent pragmatism of the Swedish public sector. My studies of public administration in Poland and Italy (Czarniawska 2000; 2003) revealed situations in which paradoxes were perceived as absurd, the efforts at deparadoxization did not work, and the actors-cum-first-level-observers treated other actors not merely as ambiguous, but as downright untrustworthy (“Whatever it is that they really want to achieve, it will be at my expense”). One could almost say that public administrators in those countries agreed with Luhmann’s opinion on the incommensurability of systems;8 but it is the illusion of a possibility of communication that prompts communication. One reaction to such a situation can be an oscillation between the levels of observation. After all, one way to see a blind spot metaphorically is through self-reflection. True, this is like meeting a Gorgon by request, but perhaps people do not turn to stone at the first encounter, but become more “resistant” (which, after all, means “thing-like”). The mirror is directed not at the Gorgon but at oneself; it does not kill the Gorgon, but neither does it kill the watcher, who is not a Gorgon and is temporarily shielded from the monster by the mirror. Again, having the examples of Polish and Italian public administration in mind, one should add, with Luhmann, that “[t]he freedom, gained by self-reflection, can be used only if its constraints are sufficiently close at hand. Otherwise the autopoietic system simply will not know what to do next” (1986b, p. 187). Self-reflection, or “saving differences” (Luhmann 1991a, p. 71) seems to be a way of dealing with the Gorgon sister Euryale, whom Luhmann associates with the rhetorical tradition. Thus the way out of the vicious circle of public administration reforms in Poland and Italy would lead through a reflection on actual practices constrained by the requirements of the desired model (whereas at present the model is introduced in blatant disregard of the actual practices). Another, in fact opposite, reaction is to make a paradox invisible through action. When deparadoxization strategies do not work, plunging blindly into action might. Such a plunge requires the creation of a blind spot, a jump into one part of the paradox, into a distinction, therefore losing sight of the site on which the distinction must be made. This is, perhaps, the best way of getting rid of the third Gorgon, Stheno, whom Luhmann associates with the theological tradition, dealing with such distinctions as the difference between Good and Evil. Acting might produce “a difference that makes difference” (Luhmann 1991a, p. 69). It is a reverse of relativization, a move from the second-order observation to a first-order observation (and therefore accessible only to the second-order observers, the “observers of the systems”). 8

As systems are able to communicate only self-referentially, they cannot “understand” other systems.

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Many of the Swedish officials I talked to and observed in my study seemed to have mastered the art of oscillation between action and reflection, and between observation on the first level (an actor acting) and observation on the second level (observers observing the actors acting, including themselves). Here is a striking example: a Municipal Finance Manager prepared a thorough basis for a decision concerning a housing development in an area that, as he knew through his role as a member of the local Emergency Committee, was a part of a secret military plan.9 Baffled by this situation, I asked whether the work did not feel like a waste of time? And wasn’t the whole situation absurd? “Not at all”, he countered. His role as public servant required a loyal following of political decisions, including those of which he did not personally approve, and he was often called to fulfill this requirement. His role as a member of the Emergency Committee required the protection of confidential information. He regarded himself in a mirror and saw himself split. It was then that he chose to create a blind spot by taking a point of view of only one first-order observer: the public servant’s. The work did not, in fact, feel absurd, he further explained, because in the time needed for the proper implementation of the decision, the military might change their plans – perhaps even as a result of a municipal decision. Not only might the Gorgons go away while the mirror is directed at oneself, but a blind action might contribute to the removal of the paradox. After all, autopoietic systems resolve their paradoxes themselves – it is a problem only for the observer. “The autopoiesis does not stop when confronted by logical contradictions: it jumps, provided that possibilities of further communication are close enough at hand” (Luhmann 1986b, p. 180). Herein lies the difference between this Swedish example and the Polish and Italian practice: in unstable political organizations, it is not certain when and with whom the next opportunity to communicate will arise. Jumps might prove suicidal. The example of the Municipal Finance Manager is not to be interpreted as yet another optimistic managerial solution, however; it simply corroborates Gumbrecht’s observation that, outside of Greek tragedy, “there is no general rule which posits than in certain conditions an experience of a paradox must lead to rupture” (1991, p. 492). The common belief, however, is that it must, and the Swedish officials’ past mastery of “reflective action” has been, under the 1990s, submerged under the heavy impact of another mode of dealing with paradoxes, more typical of the action-prone private sector.

9

Observe that it was not a simple coincidence. He was a member of the Emergency Committee because he was the Municipal Finance Manager.

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Slaying the Medusa, or the manager-hero On Perseus’ feet were the flying sandals, and across his shoulders was slung the black-bound sword, suspended on a sword-belt of bronze, and he hovered like a thought in the mind, and all his back was covered with the head of the monster, the dreaded Gorgo, and the bag floated about it, a wonder to look at, done in silver, but the shining tassels fluttered, and they were gold, and the temples of the lord Perseus were hooded over by the war-cap of Hades, which confers terrible darkness. (Hesiod, Shield of Heracles 220–237)10

Perseus (by Fredrick Pomeroy 1898, Cardiff) Foto: B. Czarniawska.

This paragraph describes a triumphant hero, very much like the heroes described in Fortune: “There is, believe it or not, some academic literature that suggests that leadership doesn’t matter,” we are told by the astonished Fortune writer. Well, this academic is no less astonished: there are, believe it or not, some business magazines so mesmerized with leadership that nothing else matters. “In four 10

www.theoi.com/Pontos/Gorgones.html; [Accessed April 13, 2002].

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years Gestner has added more than $40 billion to IBM’s share value,” this magazine wrote on April 14, 1997. Every penny of it! Nothing from the hundreds of thousands of other IBM employees. No role for the complex web of skills and relationships these people form. No contribution from luck. No help from growing economy. Just Gestner. (Mintzberg, 1999)

Hesiod actually agrees with Mintzberg more than with Fortune. Continuing with Shield of Heracles: The son of Danae, Perseus himself, sped onward like one who goes in haste or terror, as meanwhile the rest of the Gorgones tumbled along behind him, unapproachable, indescribable, straining to catch and grab him, and on the green of the steel surface gibbered the sound of their feet on the shield running with a sharp high noise, and on the belts of the Gorgones a pair of snakes were suspended, but they reared and bent their heads forward and flickered with their tongues. The teeth for their rage were made jagged and their staring fierce, and over the dreaded heads of the Gorgones was great Panic shivering. (ibid)

The second paragraph of Hesiod’s description was forgotten. Yet, beautiful and triumphant as he was, Hesiod’s Perseus was flying in terror from the remaining two Gorgons (for Percy Barnevik, the ex-CEO of ABB, one of them must have had the Chairman of the Board, Martin Ebner’s, face). Medusa can be killed, because she represents the logical tradition of dealing with paradoxes.11 The other two Gorgons, standing for rhetoric and theology, are immortal.12 But the myth of the paradox-slayer persists, and the immortality of Gorgons – and paradoxes – is refused. Let me illustrate it with an excerpt from my “shadowing” in the Finance & Accounting Department of a Swedish municipality that I studied twice: once in the late 1980s, and again in the late 1990s (Czarniawska 1999). As the excerpt is anonymized, I may permit myself a dose of irony and present the three interlocutors as The Hero, The Wise Guy, and The Young Guy.

11

In a feminist reading, Medusa stands for female rage and creativity (Pegasus was born from her head). This reading is reinforced by the historical development – from the 5th century BC onward, Medusa is represented with a beautiful face. It is also speculated that the Greeks borrowed Medusa from Libyan religion, where she was one of three goddesses representing wisdom – thus the snakes around her head (www.arthistory.sbc.edu, accessed 14 April 2002). 12 In Luhmann’s opinion, “our society offers the choice of trusting religion or working off our own paradoxes without becoming aware that this is religion” (1986b, p. 188).

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Excerpt: A meeting of three managers in the Finance & Accounting Department The head of the department (Hero) and his two subordinates, the head of the budget unit (Young Guy) and the head of the accounting unit (Wise Guy) are editing a document concerning the budgeting and budget follow-up procedures. Young Guy has written the draft of the document, but Wise Guy produced a preparatory sketch that is often mentioned now: Hero: Let’s now talk about what Young Guy has written about budgeting and budget follow-up procedures. Young Guy: I think exactly the same as Wise Guy wrote on the first page of his text – the really important question is the division of responsibility … Hero: When I look into Wise Guy’s notes, I see that he has written about responsibility. This is right. This is how it should be. Young Guy, can this part be written like the text Wise Guy wrote? With concrete points? Young Guy: But these are concrete points. Wise Guy: It’s only bullets instead of numbers … Hero: Well, I do not like the phrase “The group makes a decision …” I cannot understand how a group can make a decision. Afterwards, somebody is going to ask: “Who made this decision? Ah, it has been decided …” Young Guy: I intended to say that you, or whoever is the boss, makes a decision. But I am prepared to clean it all out; I do not want to provoke anybody. Hero: We shall provoke! We can then retreat, but we must begin by saying how it is. It is extremely dangerous to say that a group should make a decision. Young Guy: I shall try to avoid this in the future. (…) Hero compares Wise Guy’s and Young Guy’s drafts: What does “cooperate” mean in this context? Wise Guy: That I operate, and you see to it that it works. [They all laugh]. Wise Guy: I think that we should have some bit of paper from the City Office that justifies what we are concocting here. Hero: And then we can say directly: “As a task given to us by the City Manager…” Because, you know, I do not believe in collective decisions. … Wise Guy, we must stand for what we are saying. We cannot accept anything that we know is stupid. If they decide otherwise, we can always say afterwards: “Didn’t we say so?”

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Wise Guy: Well, there are more of us than there is of them! Young Guy: I do not want to live in a continuous conflict. Hero: It’s the other way around. If we say nothing, the conflict will continue. The City Manager must say it clearly: this is the way it’s going to be. Wise Guy: But will he? Hero: I imagine so. He is the City Manager. He is the boss. Wise Guy: Well, I mean – does he share our view? Hero: No. But then he must say just that. Wise Guy: I am afraid that it’s going to end with “we shall see”. Hero: I for one am not going to sit quietly. We cannot wait. Our existence is at stake. Young Guy: If we have responsibility we have to have authority. Wise Guy: I do not think we have either. Hero: I am in a learning situation. But I become very angry when this kind of trash shows up. Perhaps I do not always show how angry I am, but I am angry. I think that it is peculiar when my collaborators – nothing personal against you, Young Guy – write a memo that I know nothing about. Young Guy: It is equally peculiar for me. I am torn between Councilor X and you. I do not want sit on this fence any longer! Wise Guy: I want this document to state clearly what my unit may and can do. I know that various bits and pieces can be put together in various ways, but I want to know in which.

The Hero represents, in a nutshell, the attitude typical of managers brought from private sector to public sector organizations in the 1990s. He stands for individual decisions, and is squarely facing his responsibilities. He wants to provoke, and is not shy of conflicts: he is not going to sit quietly, and he can become angry. He is also quite ignorant of most of the technical aspects of his work. But the main point is that he is unable to entertain the possibility that they are given an opportunity to formulate their own work rules, which subsequently might or might not be considered valid. For him, ambiguity is an aberration that must be fought against. His subordinates are pulling his leg, but gently – after all, he is their boss. The Wise Guy reveals long experience and full awareness of many a paradox in municipal practice. His tactic is not to enter confrontation, but to secure and deparadoxize those bits that can be so treated. The Young Guy is nervous; he is on the side of the Wise Guy, but he does not want to sit on a fence, of any kind. The times are a-changing, but in what direction? The reader may think that this is an insignificant episode from a life in a 139

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big organization, but it is precisely such insignificant episodes that eventually constitute great transformations. The early 2000s reveal, however, a picture that is even less clear than before. After a period during which the decisive heroes celebrated their triumphs almost daily, the dot.com death and its various concomitant financial scandals swept a chill over the initial wave of enthusiasm. As usual in times of crises, a reflection is necessary, and action paralysis is actually welcome. When in doubt, do nothing. Such immobility is, however, always temporary; modern organizations are action-oriented units. It is difficult to say what the future will bring. The capacity for forgetting is enormous; after all, the financial sector was shaken in the early 1990s by the junk bonds scandal (Corbridge et al. 1994), which did not save it from falling in a similar way for dot.coms. Still, a comparative study of General Directors (heads of public agencies that in Sweden are autonomous from the respective Ministries) showed an interesting difference between their views of the world in 1984 and in 1999 (Czarniawska 1985; Genell 2000). In 1984, the GDs were fully aware of an identity crisis in the Swedish public sector, which practically overnight turned from Savior to Villain. Unwillingly, they admitted that the private sector was the obvious source of inspiration and imitation. Consultants should help to imitate concrete solutions, but a direct import of managerial personnel was also necessary (the Hero was one of the imported). In 1999, the GDs saw the public sector as clearly and importantly different from the private sector. In their opinion, the public sector was much more complex, and built around the central concept of democracy, which cannot and must not be subordinated to efficiency. Consequently, they saw no clear role models for their organizations. They believed in the growing role of information technology and in the development of locally defined competence. Luhmann was right: practitioners abhor reflection and escape into action, hoping for its deparadoxizing effects. But Lyotard was also right: no renewal without rupture, without a pause in routine action.

Observers of institutions: Paradoxes and organization theory Hans Ulrich Gumbrecht (1991) reconciled Luhmann’s caution and Lyotard’s enthusiasm in the face of paradox. As a rupture of individual experience in a real-life tragedy, he said, the paradox reveals a culture’s failure to solve its problems (which is why the same tragedies on stage are so instructive, without being threatening). As an object of reflective observation, the paradox indicates the possibility for a culture to surpass itself, to create new solutions and to build new institutions. The increased visibility of paradoxes signals an epistemological crisis within a tradition (MacIntyre 1988), which in an 140

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organizational context usually takes the form of a legitimacy crisis or an identity crisis. The direct experience of paradox is threatening to people and institutions; as a topic for reflection – when the experience is indirect – it seems to lead to renewal. May one extend it to a case of organized reflection (to wit: organization theory) and see that it also opens possibilities for institutional renewal? Ruptures in unity are culture’s windows on chaos – both chaoswithout-culture and chaos-as-prelude-to-cultural-renewal (Czarniawska 2001). Paradox can thus be seen as an opportunity for the renewal of language and the transformation of institutions. And as Jerome Bruner, who introduced the narrative approach to psychology, pointed out, the force of the narrative is that it can accommodate paradox: it serves the purpose of social negotiations by positioning the exceptional alongside the conventional and rupture alongside unity, and by offering a variety of linear plots (1990). Paradox destroys the rational decision model, but only makes the narrative more interesting. Paradox is an enemy of the paradigmatic mode of knowing, but at home with the narrative (syntagmatic) one. Thus, if we, researchers, “catch” actors in contradictions – even collective actors, like the public administration – it does not mean that we are ”unmasking them” due to the superiority of the logico-scientific mode over the narrative. It may merely be that we have failed to observe how temporization has been employed – perhaps because it was done tacitly. Perhaps we forgot to “relativize” – to relate ourselves to the actor’s standpoint – or, in Latour’s words, we glossed over an actor’s meaning and imposed our categories instead of deploying the actor’s own (Latour 1993, p. 140). If an actor does not regard something as a contradiction and we do, it is then our task to see how this is possible, rather than solve our own paradox by “pulling rank” of the ourselves-as-observers-of-the-second-order (the word “meta” is usually rolled on scientific tongues like the sweetest candy). It is a sobering thought – and one that should always be present – that in our own practice, which is research, we remain blind to our own role and position, like any other first-order observer. Making distinctions, we cannot see ourselves making distinctions. This applies not only to us as individual researchers, but also and above all to the disciplines we represent and obey. In the ironic eye of that arch-pragmatist Thurman W. Arnold, researchers were at the center of the business of deparadoxization. This is what he wrote in Symbols of Government in 1935 (p. 18): To accomplish this task of keeping alive faith that institutions are somehow rational, the study of government is divided into three separate sciences in order to conceal the fact that the symbols (…) are contradictory. Law proves that good government is achieved by constantly refining and restating rules.

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Economics convinces us that everything will work out all right if we only leave it alone. Sociology, a loose and cloudy way of thinking, provides us a shelf on which we may put the humanitarian ideals which run counter to the eternal rule-making of the law and the eternal automatism of economics. This makes the intellectuals happy because they can toss facts inconvenient to one science over to another science for cataloguing and classification. Unthinking people are comforted by the belief that somewhere in books which they never have time to read there is an absolute proof of the rationality of their symbols.

When the unthinking people – intellectuals included – start thinking, they notice the paradox, and this can lead to frustration or to a new attempt at deparadoxization, and consequently to innovation. Blurring the genres in the social sciences (Geertz 1980) is one possible way of going beyond the disciplinary division of labor in academia. This is certainly an innovative move, although it causes frustration among young novices in the social sciences, who want to know what is what and take notes. One of the central paradoxes in the important cultural narratives is the simultaneous presence of convention and exception, of tradition and change. On a personal level, “the Self … stands both as a guardian of permanence and as a barometer responding to the local cultural weather” (Bruner 1990, p. 110). On a societal level, “the culture … provides us with guides and stratagems for finding a niche between stability and change” (ibid.). Therefore, “… the viability of a culture inheres in its capacity for resolving conflicts, for explicating differences and renegotiating communal meanings” (Bruner 1990, p. 47). Bakhtin (1981) was thinking along these lines when he pointed out the dangers of a monologic discourse, in which some kind of authoritarianism – political, literary, scientific – smoothes out tension and conflict. In his view, all knowledge development emerges from a “sharpened dialogic relationship” between concepts and meanings that already exist (Kelly 1992). Thus, the much-discussed “danger of incommensurability”13 pales in comparison with the danger of flying from reflection. Not that it is possible, according to Luhmann, who saw modern society as a society of observers of systems, a society that was forced, therefore, to resign from authority and to espouse ignorance. As we cannot kill all the Gorgon sisters, we may want to learn to live with them – in the theory as well as in the practice of organizing.

13

See the special issue of Organization, 1998, 5(2).

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PART III Organization, Interaction and Society

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Chapter 7

Organization and Interaction David Seidl

Introduction Niklas Luhmann distinguishes in his theory three types of social systems: society, organization and interaction. While the functioning of each of the systems (as an autopoietic system) has been described fairly well (for society, see e.g. Luhmann 1993j, Part II; 1995f, Chapter 10; 1997a; for organizations, see e.g. Luhmann 1992a; 1993j, Part III; 1993d; 2000c; and for interactions, see e.g. Luhmann 1995f, pp. 405–436; 1999b; or Kieserling 1999), the relation between the systems has received comparatively little attention. Particularly unclear remains the relation between organization and interaction. Apart from a few remarks here and there (e.g. Luhmann 2000c, pp. 25, 255, 373) Luhmann himself has not written anything on that issue. The only serious contribution comes from André Kieserling (1994; 1999, Chapter 11), who is not, however, very explicit on how to conceptualise the relation in the “technical” terms of Luhmann’s theory. Luhmann’s systems-theoretical perspective initially seems to oppose the idea of organizational interactions: organization and interaction are conceptualised as two systems that are operatively closed with regard to each other; i.e. they cannot take part in the autopoiesis of each other, as, for example, they take part in the autopoiesis of society. Thus, what can be observed empirically – that there are interactions that make organizational decisions and in this way contribute to the reproduction of the organization – seems (at first) theoretically impossible. While the theory indeed excludes the possibility of interactions becoming part of the organization, there are other, more complex ways of conceptualising the contribution of interactions to the organizational reproduction in terms of Luhmann’s theory, which will be explored in this chapter. In the following we will first explain Luhmann’s concepts of organization and interaction as two autopoietic systems that reproduce themselves on the basis of different operations. We will then explore ways of conceptualising organizational interactions using the concepts of re-entry and interpenetration. This will be followed by an exploration of functions that interactions might serve in organizations, and the ways in which organizations can condition interactions for their purposes. We will close with a brief reflection on 145

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the advantages of the proposed conceptualisation of organizational interactions.

Organization and interaction as two types of social systems According to Luhmann’s theory organizations and interactions can be conceptualised as two types of social systems that reproduce themselves on the basis of different types of communication: organizations on the basis of decision communications, and interactions on the basis of communications among people present. Both systems are perceived as operatively closed in the sense that they can only operate in the context of their own operations (Luhmann 2000e, pp. 51–52): organizations can only reproduce themselves through (their own) decisions and interactions only through (their own) communications among people present. Organizations are conceptualised as autopoietic “systems that consist of decisions and that themselves produce the decisions of which they consist, through decisions of which they consist” (Luhmann 1992a, p. 166; my translation). Three concepts are central to this understanding of organization: the concept of decision, the concept of decision premise and the concept of uncertainty absorption. Decisions constitute the elements of the organization. They are a specific kind of communication: they are communications that communicate their own contingency (Luhmann 1993h, p. 339). That is, they communicate the decision as such and the alternatives to the decision. In this sense decisions are paradoxical communications: every decision communicates that there are alternatives to the decision – otherwise it would not be a decision – and it simultaneously communicates that since the decision has been made, there are no alternatives – otherwise, again, it would not be a decision (Luhmann 2000c, p. 142). Because of their paradoxical nature, decision communications at first may appear as extremely improbable phenomena – they call for their own “deconstruction” (Luhmann 2000c, p. 142). Empirically, however, one can observe that decision communications do succeed; in fact, in organizations decision communications are normality. How does the organization prevent the constant deconstruction of its decisions? Firstly, this happens through the totalisation of decision expectation (Luhmann 2000c, p. 145; Kieserling 1999, p. 352). Any communication reproducing the organization is forced into the form of a decision. Thus, even the deconstruction of a decision would itself have to take the form of a decision. Secondly, an organizational decision takes place in the context of other decisions which it refers to in order to stabilise itself as a decision. In other words, every decision communicates also a “metacommunication”, which says that the “decision maker” had the right, authority or other good reasons for deciding the way he did (Luhmann 146

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2000c, p. 142). In general terms, decisions are stabilised through reference to organizational structures. With the concept of decision premise Luhmann captures the structural aspect of organizations. Every decision constitutes a decision premise for later decisions as it defines the structural conditions for it. Decision premises here serve a double function in that they both create and restrict the decision. They create the decision situation in the first place: without decision premises there is no occasion for decision making. At the same time, decision premises restrict the decision situation by restricting the decision possibilities. Decisions not only serve as decision premises for succeeding decisions, but can also decide on decision premises that are binding for a multitude of later decisions. Luhmann distinguishes between three types of such far-reaching decision premises: programmes, communication channels and personnel (Luhmann 1992a; 1993d; 2000e). With the concept of uncertainty absorption Luhmann captures the processual aspect of organizations; the question of how one decision leads to further decisions and thus to a reproduction of the organization. That is, uncertainty absorption describes the autopoiesis of the organization (Luhmann 1993d, p. 308). In the transition from one decision to the next one the uncertainty involved in the original decision disappears. In other words, a connecting decision takes the result of a preceding decision as given (the decision was made!) and uses this result as a premise for itself. One could also say, the first decision “in-forms” the decision following it only about the result of the original decision but not about the uncertainty involved in the decision making. To bring the two concepts together one can define: uncertainty absorption takes place when earlier decisions are accepted as decision premises for later decisions (Luhmann 1993d, p. 299; 2000c, p. 193). The system of face-to-face interaction, in contrast to the system of organization, does not consist of decision communications but of communications that are based on reflexive perception of the physical presence of its participants. Analogously to the communications of organizations, interactional communications contain a meta-communication communicating that it is a communication amongst people present (Kieserling 1999, p. 67). In other words, the communications carry the code presence/absence. With this code, interactions refer to their system/environment distinction. Whoever is considered present is treated as a participant in the communications (if not as speaker then as listener) and whoever is considered absent is treated as environment (Luhmann 1997a, p. 815). The difference of presence and absence in this sense marks the difference of self-reference and hetero-reference for the operations of the system (Luhmann 1997a, pp. 815–816). Like all social systems, interactions are complex systems, which means that they are forced to make selections. Luhmann (1995f, p. 415) distinguishes 147

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between factual, temporal and social structures (on these three dimensions of meaning generally see Luhmann 1995f, pp. 76–81): interactions usually produce topics for communication; they place communications in a sequence and, more particularly, they also take the end of the interaction into account; they develop rules for taking turns in the communication – in particular, when somebody speaks the others have to remain quiet. Analogously to the organizational reproduction, where every decision creates the necessity for further decisions, every interactional communication necessitates further interactional communications. Reflexive perception in the interaction enforces a continuation of the communication. It is almost impossible to evade communication in an interaction. As Luhmann writes: “Even the communication of not wanting to communicate is communication. […] In practice, one cannot not communicate in an interaction system; one must withdraw if one wants to avoid communication” (Luhmann, 1997a, p. 413; original emphasis). In interaction systems the person (defined as a bundle of social expectations; see Luhmann 1995a) plays a very prominent role. While in organizations decisions are largely justified by reference to earlier decision premises – mostly decisions are presented as a direct consequence of earlier decisions – in interactions, communications are primarily attributed to persons; the reasons for particular communications are primarily sought in the person and his particular intentions. In interactions the person as such is held responsible for what is communicated – more so than in organizations. Ensuing communications take the personal aspect of earlier communications into account and very often address that personal aspect explicitly; organizational decision communications, in contrast, tend to focus on the result of the decision and only in exceptional cases address the particular (personal) circumstances of the earlier decision situation.

Conceptualising organizational interactions Organization and interaction are two types of social systems that reproduce themselves in very different ways. Nevertheless, the (theoretical and empirical) literature speaks of interactions taking place “within” organizations. How is one to conceptualise the relation of organization and interaction in such cases? “Within”, first of all, could be meant in a local sense: for example, meetings take place in the offices; two workers at the conveyer-belt talk about the new working hours. From a Luhmannian perspective the locality of the interaction would not matter. Organization and interaction are two different systems that constitute an environment for each other; that is to say, the systems are operatively closed to each other. This interpretation, however, is problematic, when we take into account that such interactions might produce decisions for the organization; that is to say, 148

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interactions seem to play a role in the organizational reproduction – and in this sense could seem to contradict the idea of operational closure. An alternative solution to this problem could be to conceptualise the relation between organization and interaction analogously to that between society and organization or society and interaction. Society constitutes the all-encompassing system of communication in which organization and interaction differentiate themselves on the basis of specific communications (Luhmann 1997a). The operations of organizations are decision communications, while those of interactions are interactional communications. Thus, organization and interaction reproduce with every operation both themselves and the society, as their operations are decision communications or interactional communications, both of which are communications. Society can thus be found both inside and outside the organization or interaction (Luhmann 1995f, p. 405 ff.; Luhmann 2000c, pp. 59, 383). Analogously, one might try to conceptualise organizational interactions as social systems that take place in organizations in the sense that they reproduce themselves by “interactional decision communications”; that is to say, as social systems that reproduce themselves by a specific kind of decision communications. In this sense they would reproduce both themselves and the organization simultaneously. Such a conceptualisation, however, would not be compatible with the empirical observation that decision communications within “organizational” interactions are relatively rare. Most communications – even in formal meetings – are non-decision communications. In fact, it is particularly the non-decision communication that is typical for (organizational) interactions; decisions constitute a kind of “foreign matter” to the interaction (cf. Kieserling 1994a; 1999, pp. 355 ff.). Often no decisions at all are made in such interactions. Furthermore, sometimes part of an interaction is related to the organization while other parts have nothing to do with the organization: a business meeting ends in bed; during a board meeting some members of the board discuss the latest results of the Football World Cup; after their coffee break together colleagues make their way back to a meeting (cf. Atkinson et al. 1978). In all these cases it is not that one interaction is terminated and a new interaction starts but it is one and the same interaction. Thus, the relation between organization and “organizational” interaction has to be conceptualised differently from one of inclusion. Before we attempt a conceptualisation of “organizational” interactions in terms of Luhmann’s theory we will first give a short overview of the different empirically observable forms of interactions “in” organizations. Firstly, there are “deciding” interactions in which decisions for the organization are made; one might think of board meetings, strategy meetings etc. Secondly, there are “decision-preparatory” interactions in which the conditions for later decisions are laid. That is to say, in the interaction itself no decisions are made but later decisions are prepared: for instance, during interactions 149

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in which relevant information for later decisions is exchanged the participants may deliberate later decisions without making decisions. Thirdly, there are “semi-detached” interactions with a merely loose relation to decision making; that is, interactions that communicate about decisions without focusing directly on influencing decision making. One might think of informal interactions between members of an organization, such as gossiping about organizational issues (cf. March and Sevón 1989; Drew and Heritage 1992; Boden 1994; Fuchs 1995; Kurland and Pelled 2000). Fourthly, there are interactions unrelated to organizations, in which topics that are unrelated to the organization are communicated; e.g. members of an organization talk during work about their night out together. These different forms of interaction differ in the degree to which they contribute to the organizational reproduction: from a direct involvement in decision making to complete detachment from the organization. To start with we can exclude the fourth type of interaction from the list of possible forms of “organizational” interactions. It can be treated as a normal interaction in the environment of the organization (cf. Kieserling 1997, p. 360). Its location within the physical boundaries of the organization and the involvement of members alone does not grant this type of interaction a specific status with regard to the organizational reproduction. The other three forms of interaction, however, have an organizational significance. If one cannot conceptualise the relation between organization and “organizational” interaction as one of inclusion, there remains only the possibility of treating it as a special kind of structural coupling; that is to say, the structures of two systems are adjusted to each other in a way that allows mutual influences on their respective reproductions (Luhmann 1995e). Organizational interactions reproduce themselves on the basis of their interactional communications but take the organizational operations into account. That is, organizational interactions allow for a conditioning of their own operations through the organization – in social, factual and temporal respects. In other words, interactional communications orient themselves not only according to their interactional structures but also according to organizational structures, that is to say, their environment. In terms of systems theory this has to be conceptualised as a re-entry (Spencer Brown 1979) of the interaction/organization distinction (as the system/environment distinction) into the interaction (as system). The interaction observes its own communications with regard to their significance for the interaction and for the organization. Of course, the interaction can only observe this distinction according to its own logic, its own construction: the re-entered distinction is not the original distinction; it is a “mark” and not a “cross”, as Spencer Brown (1979) would put it. This means that the distinction is reconstructed with regard to the interacting persons: as a distinction between their organizational roles (and generally: membership) and interactional roles (cf. 150

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Kieserling 1999, pp. 360 ff.). In other words, interactional communications take into account that the persons involved in the interaction have other roles outside the interaction in the organization and that these roles have to be taken into account in the interactional communications. Or, put the other way around, the interaction treats the difference between the interactional and organizational roles of its participants as the distinction between itself and the organization. Interactional communications in this sense can be observed with regard to interactional roles and with regard to organizational roles. In Heinz von Foerster’s terminology (1981, pp. 304–305; 1993b), the interaction uses the (re-entered) interaction/environment distinction, in the form of a difference in roles, as programme. The re-entry of the organization into the interaction does not, however, mean that organizational structures – the organizational logic – are introduced into the interaction. First of all, due to the different forms of reproduction, organizational structures cannot serve as interactional structures – they belong to different domains. The interaction, however, can reconstruct the structures in interactional terms. For example, the hierarchical structure of decision communications can be translated into a stratified order of respect with regard to persons in different positions, a differential treatment of persons with regard to their contributions to the communication, e.g. with regard to turn-taking, granted speaking time, or with regard to possibilities of criticism. Apart from that, the re-entry does not mean that the interaction is trying to translate the organizational structures into interactional structures – attempting, that is, a representation of the organization. Even the opposite could be the case: the interaction could counter the organizational structures, e.g. by a perhaps explicit suspension of the hierarchical order of positions. The important point, however, is that the interactional structures, whether imitating or contrasting the organizational structures, refer to the organizational structures. Without explicit reference to the organization, the interaction could not be treated as “organizational”. Although the re-entry of the organization into the interaction is accomplished through the reference to the participating persons (thus the social dimension is ultimately central) the organization can be reflected in the interaction in all three dimensions of meaning (Luhmann 1995, pp. 75–81). In the social dimension – as already discussed above – the interaction takes the participants’ personal experiences and actions as members of the organization (which largely result from the organizational roles of the participants) into account. In the factual dimension, the interaction structures its communications according to organizational themes, e.g. the interaction might communicate about new strategies for the organization or the official organizational self-description (cf. Seidl 2005). Again, this does not mean that these themes have to be dealt with in the same way as they are dealt with in the organization. The participants might treat the relevant theme 151

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cynically, i.e. communicate about the “other side” of the theme; that, which the official version of the theme disguises (cf. Luhmann 2000e, pp. 430 ff.). What organizational themes are dealt with and how depends on the participating persons. As with all interactions, the personal relation to the topic is decisive and contributions to a topic are attributed personally. In the temporal dimension interactional communications might reflect the temporal structures of the organization; for example, by scheduling the interaction so as to coincide with external organizational events. The interaction might be terminated because the participants are needed elsewhere in the organization, the participants in a meeting might wait for a latecomer who is held up in another meeting, an important topic at the top of the agenda might be moved to the end in order to allow for additional information to be provided by the organization (e.g. the results of a parallel meeting); or, vice versa, a topic might be dealt with early in a meeting in order for its result to be available to other organizational communications. An interaction might also be intentionally protracted in order to obstruct certain organizational processes. Again, more than anything else, the reflection of temporal structures of the organization in the interaction is accomplished through the focus on the persons participating and their organizational roles. The structuring of the interaction is very much oriented according to the time available to the participants; the participants can bring the interaction to an end by referring to other organizational obligations that coincide temporally. In contrast, references to extra-organizational obligations – e.g. one has to pick up one’s children from the kindergarten – are accepted as an orientation for the temporal structuring of the interaction only in exceptional cases (cf. Kieserling, 1999, p. 360). Of course, the “organizational” interaction – to the extent that it takes place during “working hours” – can count on the exemption of its participants from any other extra-organizational obligations for the time being; that is to say, the availability of the participants is guaranteed by the organization and only organizational obligations can thus count as reasons for participants’ terminating their presence.1 Even if the temporal structuring is not oriented directly according to the temporal availability of participants, temporal structures of the organization are still “transported” into the “organizational” interaction through the 1

In the case of “after-hour” meetings the situation is somewhat different. Whether or not one can claim other obligations depends very much on the organizational “arrangements”. In many contemporary organizations, for example consultancy firms, working hours are not really pre-defined but depend on the particular tasks at any given time. In other words, members are expected almost always to be available for the organization. This does not mean that they will always be available, but that reasons for their non-availability have to be formulated as “organizational reasons” – e.g. one has to take a weekend off to keep a clear head for an important meeting on Monday.

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participating persons. For example, an agreement has to be reached by a certain time because one of the managers had promised so, or because the career of one of the participants depends on it, or because it would make it easier for the participants to continue their ordinary work. Or an informal meeting in the corridor is terminated because the participants have to get back to their desks to avoid being reprimanded for being lazy. So far we have described some features of organizational interactions, in particular the re-entry of the organization into the interaction. One could also say that the re-entry of the organization into the interaction is the defining criterion – a re-entry pertaining to the interactional structures and not to the autopoiesis of the organization (cf. Kieserling 1999, p. 79): to the extent that such a re-entry takes place it is an “organizational” interaction. But how can this re-entry be explained? Why would an interaction orient itself according to an organization? An easy but somewhat unsatisfactory answer would be that an interaction as an autonomous system – autopoiesis implies autonomy (Luhmann 2000c, p. 51) – is free to select its own structures and if it thus selects its structures with regard to an organization, then it does so – it is its own selection; and if it does not, it does not. In this sense only the interaction itself can determine whether or not to orient itself according to the organization; in particular, according to the organizational roles of its participants.2 It is the interaction itself that sees itself as “organizational”. It has to be understood as a “self-attribution” (Kieserling, 1999, p. 79; see also Luhmann 1999b, p. 64) of the interaction to the organization. In order to ascertain whether an interaction attributes itself to the organization one has to observe the interactional communications – whether or not the interaction/organization distinction serves as a guiding difference for the communications. What is of specific interest here is how the interaction describes itself, i.e. what self-descriptions it uses in its communications. Interactions, in contrast to organizations (Luhmann 2000c, Chapter 14; Seidl 2002, 2002b) or societies (Luhmann 1997a, Chapter 5), usually do not possess very elaborate self-descriptions. Nevertheless, some (at least rudimentary) self-descriptions can always be found. An interaction might describe itself as “strategy review”, “crisis meeting”, “board meeting” or as “chance encounter”, “flirt”, “class reunion” etc. The self-attribution of an interaction to an organization would normally be reflected in the self-description, as is evident in several of the above examples.3 2

Or, put the other way around, whether to disregard any extra-organizational roles of its participants. Alternatively, the interaction could include, for example, all the other roles of its participants and in that way create an “intimate interaction” (cf. Luhmann 1995f, pp. 224 ff.), rather than an organizational one. 3 One can also find explicit dissociations from the organizations in interactional selfdescriptions (e.g. “This is not a business meeting”) where the “vicinity” (in physical or temporal respects) would otherwise suggest a self-attribution to the organization.

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The interactional self-attribution to an organization – as we indicated above – need not refer to the entire interaction.4 In the course of their communication processes interactions can change their focus. An interaction might start as organizational and end as intimate (cf. Kieserling 1999, p. 162). Any change of self-attribution – this cannot be emphasised enough – is the interaction’s own “decision”. This, however, means that the interaction first has to free itself from the organization-related structures (from its guiding difference interaction / organization) before it can switch to the structures of intimacy.5 Or an organizational interaction might suspend its organizational self-attribution for a tea- or lunch-break (during which the participants stay together) and resume its organization-related communications afterwards (cf. Atkinson, Cuff and Lee, 1978). Beyond the mere establishment that an interaction attributes itself to an organization, we can also try to answer why an interaction might attribute itself to an organization. One reason is that for many interactions the reference to the organization is close at hand – in terms of Goffman’s concept (1975) the organization offers a “frame” for the interaction. Often, participants of an interaction know each other only as members of an organization. They might even just know that the other person is a member of the same organization. As such the orientation according to the organizational roles of the participants might be close at hand. This provides the interaction with a point of reference for establishing its structures. Most importantly, it provides the interaction with topics of communication (cf. Kieserling 1999, pp. 181, 205). Where participants who hardly know each other would otherwise struggle to find topics for communication, the orientation according to the organizational roles might provide an almost unlimited source of possible themes.6 In this sense the self-attribution to the organization might serve as a way of facilitating the reproduction of the 4

See, analogously, the change of self-attribution of interactions to functional systems of society (Kieserling, 1999, p. 80 ff). There is, however, a difference in that in the case of a selfattribution to a functional system of society through the specification of structures the interaction also uses the function-specific code as a guiding difference for its communications; that is to say, the interactional communications (partly) take place in the functional system of society. In contrast to the above, in the case of the organizational interaction, the organization remains the environment of the interaction. 5 One of the greatest obstacles to such a switch is the coordination of the change of structures. The changeover of structures has to take place simultaneously (in order to avoid a conflict between structures) if a breakdown of the interaction and thus the end of its reproduction is to be avoided. In order to accomplish the switch, the interactional communications might have to use their reference to the organization; for example, one might refer to the end of working hours in connection with the suggestion of having a drink together in a nearby pub. 6 Organizational interactions, however, mostly would present the situation as if the topic were the reason for the interaction even where it was the other way around, i.e. where the interaction came first and had to look for a topic (cf. Kieserling 1997, p. 195).

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interaction. In interactions among people who only know each other as members of the same organization this self-attribution to the organization might even serve as a kind of safety net when no other topics are close at hand. For instance, one might start talking about the weather but after a while this topic might be exhausted and a supply of other topics may not be readily available when one does not know the other person. In this case, the common organization (i.e. the respective memberships) might serve as an orientation for the continuation of the communication (e.g. “What do you think about the new CEO?”). Often interactions form as a “response” to organization-related situations of double contingency. For example, instead of asking their superior, two workers who have to coordinate their interdependent tasks might resort to a mutual interaction as a means of coordination. In such cases the reason for the interaction seems to precede the interaction, although it ultimately depends on the interaction (as it is an autonomous, autopoietic system) whether it forms at all and what structures (in particular: what themes) of communication, it selects. Nevertheless, the organization almost forces itself onto the interaction. The self-attribution to the organization is so close at hand that the interaction almost cannot ignore it and would have to “justify” not focusing on the organization. What one might find, rather, is that such interactions may start as “organizational”, i.e. attribute themselves to the organization, and may later change their self-attribution to something else – with the difficulties described above.

Deciding interactions In the following we want to focus on one of the forms of “organizational” interactions described above: the deciding interaction. The important point about such interactions is that they produce interactional communications that can be treated by the organization as (organizational) decisions. That is, the deciding interaction can contribute to the organizational reproduction. A particularly pressing question in this context is how to conceptualise the status of these communications with regard to interaction and organization respectively. Are these communications elements of both systems, in the way interactional communications are also communications in the societal system (Luhmann 1995f, Chapter 10)? Or are they something completely different in each of the systems – for example, in the way “one and the same” communication constitutes a legal communication (as a contract) in the legal subsystem but a payment-related communication (as a transaction) in the economic subsystem of society (Luhmann 1993a; Lieckweg 2001). In order to answer this and other related questions we will apply to the rela-

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tion between organization and deciding interaction7 the concept of interpenetration, which Luhmann used for describing the relation between social and psychic systems8 (1995f, Chapter 6; 1995j). Luhmann speaks of interpenetration between autopoietic systems, if the systems reciprocally presuppose the complex achievements of the autopoiesis of the respective other system and treat them as part of the own system (Luhmann 1995a, p. 153). If, that is to say, systems reciprocally make their own “complexity (and with it indeterminacy, contingency, and the pressure to select) available for constructing [the] other system” (Luhmann 1995f, p. 213; original emphasis). Luhmann’s classical example is the relationship between psychic and social system: social systems can rely on psychic systems being stimulated by communication and processing “parallel” psychic operations that allow them to “irritate” the social systems at “suitable” moments in order to trigger further communications that reproduce social systems.9 Vice versa, the psychic system presupposes complex achievements of social systems, though it is somewhat less dependent on social systems as it can also reproduce itself (for a certain time at least) without social systems (Luhmann 1995j, p. 39). The important point in this respect is that both systems are operatively closed with regard to each other. It is not that the systems overlap in any way – psychic operations cannot become part of social systems and vice versa. As Luhmann writes: “This means that the complexity each system makes available is an incomprehensible complexity […] that is, disorder – for the receiving system” (Luhmann 1995f, p. 214). In this sense, social systems can presuppose the contributions of psychic systems to their autopoiesis without comprehending the functioning of psychic systems – and vice versa. Analogously, the relationship between organization and deciding interaction can be described as one between two operatively closed systems, in which the interaction makes its own complexity available to the organization and vice versa. That is, the organization can rely on “its” interactions to fulfil tasks necessary for the organizational reproduction, although the organization cannot comprehend the logic of the interactional reproduction. Luhmann writes, for example: “Work processes that cannot be ‘technisized’, 7 Another concept for analysing the relation between organization and organizational interaction is that of medium and form by Fritz Heider (1959). For an application see Seidl (2003a; 2005) and for applications to the relation between social and psychic system see Baecker (1992a) and Luhmann (1995j). 8 Apart from that, he described also the relation between organizm and psychic system, the brain and the nervous system (e.g. Luhmann 1995f, p. 214, endnote 7), but not the relation between social systems. 9 One of the most important achievements that the social system presupposes the psychic system will accomplish is perception – in particular the perception of uttered sounds (Luhmann 1995f, Chapter 6).

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for example lessons at school or preaching in church, […] force the organization to displace its performance conditions into interaction among people present and to entrust it to inscrutable processes” (Luhmann 2000c, p. 373; my emphasis; my translation). In order to fully understand the concept of interpenetration in this context we have to have a closer look at the decision communications that come about in the course of deciding interactions. These communications (in some way) take place in both systems – they are elements in the interactional communications to the extent that further interactional communications connect to them, and they are organizational communications to the extent that they serve as decision premises for further decisions. Luhmann writes about interpenetration in general: To be sure, interpenetrating systems converge in individual elements – that is, they use the same ones – but they give each of them a different selectivity and connectivity, different pasts and futures. Because temporalized elements (events) are involved, the convergence is possible only in the present. The elements signify different things in the participating systems, although they are identical as events: they select among different possibilities and lead to different consequences. Not least, this means that the convergence to occur next is once again selection, that the difference of the systems is reproduced in the process of interpenetration. (Luhmann 1995f, p. 215; original emphasis)

If we look at decisions in organizational interactions this is exactly the case. We have a communication that is used in both systems, but has a different meaning in each. In the interaction it has to be understood in the context of other interactional communications: in reaction to what other interactional communications did the communication come about, and what other interactional communications can follow? In the interaction one is interested in who said what, in response to whom, with what reactions from the others. In this sense the “content” of the decision might be only of secondary importance. For the organization, the communication has a very different meaning. It has to be understood in the context of other decisions, which might even lie outside the interaction: earlier decisions that served as decision premises and later decisions for which this decision serves as a decision premise. For the organization the meaning of this communication results from its implications for connecting decisions, while for the interaction it results from the meaning for further interactional communications that connect to it.10 As Huisman (2001, pp. 75–76) shows, what is taken as a decision by the organization often corresponds to a whole series of 10

For Luhmann the elements of a system are only defined through their integration into the system, i.e. their relation to other elements (Luhmann 1995f, pp. 20 ff.). In this sense the “same” communication is for interaction and organization a different one, as it relates to other elements of the respective systems in different ways.

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communications in an interaction, in which the decision as such is never explicated. We may illustrate this relation between organization and interaction with an example: a university has decided to create a new position and in a later staff meeting a particular candidate is chosen for it. For the organization the decision on the candidate connects directly to the earlier decision to create the position. In order to understand the relevance of the decision for the organization it is enough to relate it to this decision as its decision premise (and of course to other decision premises, e.g. who has the authority to decide what etc.). For the continuation of the decision process (e.g. further decisions on concrete curricula etc.) it is only relevant which candidate has been chosen (and which ones have not). It is completely irrelevant who was for or against the candidate (for what personal reasons), how long it took the participants to reach the decision etc. What counts for the further decision process is the decided alternative, while the process culminating in the decision, and the uncertainty involved in it are irrelevant or absorbed (cf. Luhmann 2000c, p. 193). For the interaction, in contrast, it is exactly these personal aspects of the communication that are important and in the continuation of the interactional communication this personal aspect will be referred to (cf. Kieserling 1999, pp. 385–386). The autopoiesis of organizations – as we explained above – can be described with the concept of uncertainty absorption. In the transition from one decision to the next decision the original uncertainty of the initial decision is absorbed – the ensuing decision only orients itself according to the chosen alternative. With regard to our argument above, this means that the “interactional circumstances” – the pros and cons, the doubts etc. – which represent a great part of the uncertainty involved in the decision making are left out in the ensuing decision communication. In other words, the decision does not “in-form” later decisions about these issues – these issues, as Bateson points out (1972, p. 315), do not constitute differences that make a difference for the further reproduction of the organization. In contrast, within the interaction, these issues are the differences that make a difference. The interactional communication of a decision does “in-form” ensuing interactional communications in these respects. Thus, in the interactional context such interactional decision communications (usually) do not absorb the uncertainty involved in the decision making. Even if the decision is not openly challenged, the particular circumstances under which the decision was made will have a great influence on further communications. We have to distinguish between two different foci of “interactional” decisions. “Interactional” decisions may refer exclusively to the organization outside the interaction; for example, a decision on a new strategy. Or they may refer to the interaction itself; that is, they may concern the structures of the interactional communication: for example, decisions about the topics on 158

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the agenda and their order, decisions to close or interrupt a meeting. In the first case the content of the decision communication (i.e. the chosen alternative) does not have any implications for the interaction. What is important for the interaction is that the decision has been made, but not what decision has been made. In such interactions, as Kieserling (1999, p. 372) writes, the decision is declared an “output category” that has to be delivered to the interaction’s environment. In the second case the interaction treats its own communication processes (partly) as decision processes. The communications are “stylised” as decisions and other communications connect to them as if they treated them as decision premises. The interaction, however, cannot but take the personal aspects of the communication into account as it is the basis of its autopoiesis. Thus, even where the interaction presents its communications as decision processes, the communication “in reality” is reproduced differently. Thus, in order to understand the interactional communications one has to understand the “interactional meanings” behind the façade of decision communications (cf. Goffman’s distinction between front and back stage; Goffman 1959): for example, who decided what against whom and how does one react to it. The interaction puts its own communications into an “artificial” (for the interaction) form (Kieserling 1999, p. 373), but this artificial form is only the surface behind which different information is latently processed.11 Apart from that, interactions can never present all their communications as decisions. A great part of the communications resist being put in the form of decisions – an example of this would be the expression of surprise about particular opinions etc. (cf. Kieserling 1999, pp. 355–358; Luhmann 2000c, p. 255). Interactions stylise (some of) their own communications as decisions in order for the organization to integrate them into the organizational decision process. That is to say, the interaction observes its own operations both with regard to their implications for the interactional process and with regard to the organization. This also means that, to a certain extent, the interaction can regulate what kind of communications become available to the organization and what do not; or, in other words the interaction can (to some extent) influence the organizational boundaries. In order to understand the influence of organizational interactions on the organization it is important to understand how the boundaries of interaction and organization relate to each other. Luhmann writes about the boundaries of interpenetrating systems – referring in particular to the relationship between social and psychic system, which can, however, be applied analogously to our question: 11

This does not mean that the interactional communication is “more” than a decision communication, i.e. decision communication plus the interaction-specific communication. Rather, as we said before, the reproduction of decisions follows a different logic from that of the interactional communications. Or, as Kieserling (1999, p. 358) puts it, between organization and “its” interactions there exist considerable differences in information.

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Decisively, boundaries of one system can be included in the operational domain of the other. Thus the boundaries of social systems [analogously: organizations] fall within the consciousness of psychic systems [analogously: the communications of interaction]. Consciousness [analogously: interactional communication] intervenes and thereby acquires the possibility of drawing boundaries for social systems [analogously: organizations] precisely because these boundaries aren’t, at the same time, boundaries of consciousness [analogously: interactions]. The same holds conversely: the boundaries of psychic systems [analogously: interactions] fall within the communicative domain of social systems [analogously: organizations]. In the course of orienting itself, communication [analogously: decision communication] is constantly forced to use what psychic systems [analogously: interactions] have already assimilated in their consciousness [analogously: interactional communications] and what they have not. This is possible because the boundaries of psychic systems [analogously: interactions] are not also boundaries of communicative [analogously: decisional] possibilities. (Luhmann 1995f, p. 217; original emphasis)

Organizational interactions can deal with the organizational boundaries in a differentiated manner. Not everything that is communicated in the interaction has to be put in the form of a decision and thus made available to the organization. On the contrary, interactions very often intentionally prevent communications from being interpreted as organizational decisions. In this way interactions often distinguish between official communications (which are presented as decisions) and unofficial communications, which often are (explicitly) kept from being interpreted as decisions. The organizational boundary often becomes an explicit topic of interactional communication: what is to be made available to the organization and what not – this communication is itself, of course, not intended to become an official communication. The boundary is often even drawn retrospectively; initially official (decision) communications are retrospectively withdrawn as illegitimate contributions – this is usual practice, for example, in courts (see Kieserling 1999, p. 373). Apart from interactions “offering” communications as decisions to the organization there is also the possibility that the organization interprets communications as decisions although they had not been originally intended as decisions. The interaction can only make “suggestions” to the organization but cannot determine what communications are observed and how they are observed. In any relationship of interpenetration there have to be specific signs that indicate to the systems (potential) points of coincidence. That is to say, the “shared” elements have to be marked in some way in order for the respective other system to be able to recognise them. In the case of the relationship between psychic and social system this function of coupling is served in the first place by language (and writing; see Luhmann 1995f, p. 272; Luhmann

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1995j, p. 41). Articulated communication stands out from mere noise and captures the attention of psychic systems (Luhmann 1995f, pp. 142–143). And the other way around, if a psychic system wants to “contribute” to the autopoiesis of a social system it tends to cast its utterance in linguistic form, although there are, of course, also non-linguistic forms of communication (Luhmann 1995f, p. 151). Such a marker for “shared” elements can also be found in the case of the relationship between organization and organizational interaction. The interaction can highlight certain “culmination points” (Luhmann 1993h, p. 339) in the flow of interactional communications in order to signal to the organization possible points of connection. Such markers could be an explicit declaration of a communication as decision – “I thus conclude: we have reached the decision to…”. One can sometimes find that there exists a specific format for such “declarations”, as for example the announcement of a verdict at court or awarding a doctorate at university. One of the most prominent markers, however, is the record (cf. Weber 1978); if a communication is put on record this is a strong signal for the organization that the communication lends itself to being treated as an organizational decision. Many organizations will only recognise something as an organizational decision if it is put on record. For the interaction this means that it can regulate its relation to the organization – or better: the boundaries of the organization – by distinguishing between communications “on record” and “off record”.12 What is to be put on record and what is to be kept off record is often an explicit point of discussion in the interaction (Boden 1994, p. 85; Kieserling 1999, p. 385). Sometimes specific points can be erased from the records even retrospectively.

Functions of organizational interactions Interactions, as we argued above, can make their complexity available to the organization and in this way contribute to the fulfilment of organizational functions. In the following we want to discuss three functions in particular: complexity reduction, deparadoxification and memory. (1) The possibility that a system may resort to the complexity of another system – as the concept of interpenetration suggests – has implications for the system’s way of handling its own complexity. At first, one could say that this enables the system to increase its own given complexity by the complexity that the other system makes available – in the sense that more elements and relations between elements are involved in the processing of information (cf. Luhmann 1980a). On the basis of Ashby’s (1956, pp. 12

The distinction “on record/off record” is the second order observation according to which the interaction observes its relation to the organization.

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202 ff.) “law of requisite variety”13 one could expect organizations with – for them – turbulent environments to increase their complexity by enlisting the complexity of organizational interactions. Thus, the more complexity is “required”, the more organizational interactions would be initiated by the organization. One might interpret the empirical studies by Burns and Stalker (1961) and Lawrence and Lorsch (1967) in that respect, if “organic structure” is understood as the use of interactional communications for coordinating operations. Furthermore, one can find that organizations initiate interactions when problems arise that cannot be handled on the basis of organizational decision processes (cf. Schwartzman 1986, Schwartzman 1989; Weick 1995, p. 187; Kirsch 1992, p. 278). One could think, for example, of crisis meetings and similar interactions. However, in order to understand the mechanism by which the complexity of the organization is increased through interpenetration with organizational interactions we have to look at this issue from a slightly different angle. On the basis of the notion of complexity as “pressure to select” (Luhmann 1993f; 1995f, pp. 23–28) one can say that the more a system can use the complexity of another system for reducing its own complexity the less it has to deal with that task itself.14 That is to say, a system that can instrumentalise the complexity of another system for making selections amongst its possibilities does not need to make the selections itself; or, in other words, it needs less structure. In this respect, Luhmann writes with regard to specific cases of interpenetration between social and psychic systems: [A]n empirically proven hypothesis fits these considerations: social systems that can enlist more complex psychic systems need less structure. They can cope with greater instabilities and quicker structural change. They can expose themselves to chance and thereby relieve their internal regulation. This is comprehensible if one correctly understands complexity and interpenetration, namely, as a pressure to select that increases with size and as the ability to condition this pressure in an open way. (Luhmann 1995f, p. 217; endnote omitted)

This hypothesis can be applied analogously to the relation between organization and organizational interaction. The greater the complexity of organizational interactions that an organization can enlist, the less does it need decision premises. This line of argument finds support, for example, in the literature on team coordination in contrast to hierarchical coordination, which is also inherent in much of the literature on lean management or flat hierarchies – if we understand teams as a succession of organizational 13

Variety can be understood as the number of possible system states, which is another expression for the number of elements and possible relations between them. 14 On the necessity of complexity for reducing complexity see Baecker (1999a).

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interactions.15 The more an organization can rely on interactions to “guide” organizations in their decision making, the less does the organization need to develop its own decision premises, or the less detailed do they have to be. For instance, no elaborate rules about communication procedures, no detailed decision programmes, no detailed personnel planning will be necessary. Apart from that, one can often find that particularly at the apex of an organization (in business organizations: among the top-management team) decision processes are only to a very minor degree pre-structured in the form of formal decision premises. Instead, the organization mostly relies on organizational interactions for “guiding” the organizational decision process. On the basis of this second interpretation it becomes clear how the complexity of the organization is increased by organizational interactions. The complexity of an organization requires the organization to select decision premises and in this way reduce its complexity. With the selection of structures the “variety”, i.e. the number of possible relations between elements, is reduced. Reduction of complexity, however, is necessary in order for the system to be able to operate – otherwise the system wouldn’t have enough “internal guidance” to make self-reproduction possible (Luhmann 1995f, p. 283). By relying on organizational interactions to make the selections, the organization can do without a pre-selection of possible relations in the form of decision premises and in this sense allow for a greater variety. In other words, organizational interactions increase the complexity of an organization by relieving the organization of having to reduce its complexity. To go back to our examples above, organizations with “organic structures” possess a greater variety as the possibilities of relations between elements is less restricted by (formal) decision premises. Instead, the organization initially allows for a greater variety of relations, which are limited only in the concrete decision situation through interactional processes. (2) Organizations, more than any other types of social systems, have to deal with paradoxes. As explained at the beginning of the chapter every single operation of an organization constitutes an “explicit” paradox. In order for a system not to get paralysed by its paradoxes the paradoxes have to be deparadoxified. The main mechanism of deparadoxification of ordinary decisions within the organization is the attribution to a “decision maker” (Luhmann 2000c, pp. 136; 147). The paradox of decision is in that way shifted from the operative level to the structural level. Instead of the “undecidability of the decision” (Von Foerster 1992, p. 14), the structures entitling the decision maker to make a specific decision come to the fore; instead of asking about the form of “the alternativity of the decision” (Luhmann 1993d, p. 289) one is led to ask about the decision premises that 15

To be precise, teams may be defined as a succession of organizational interactions with identical composition, which are perceived and expected as a unity (cf. Kieserling 1999, p. 221).

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justify the decision – in particular the hierarchical orderings of positions (cf. Luhmann 2000c, p. 138). While any such question, if consequently investigated, ultimately ends up again at the paradox of decision (i.e. the decision to put certain structures in place16), usually the organizational complexity inhibits such investigations – as Luhmann (2000c, p. 139; my translation) writes: “the paradox is concealed by complexity”. Thus, this basic form of deparadoxification in most cases is enough to prevent a paralysis. There are, however, cases where the shift of the decision complexity onto the level of structures is not enough as a means of deparadoxification; where the shift does not prevent the exposure of the paradox. This could be the case where the structures themselves are contradictory (e.g. where there are unclear decision competencies); thus, instead of the operative paradox the organization would have to deal with a structural paradox. It could also be the case where no clear decision premises exist: for example, in connection with decisions on “fundamental” decision premises (in the context of business organization one also speaks of policies or strategies) or during major turbulences in the organization. Closely related to this is the case where decisions pertain to the very structures that serve as their decision premises. These are primarily decisions on fundamental organizational change – this could be a change of fundamental decision premises. In these cases the attribution to decision makers and their respective positions (as a combination of the three general decision premises) cannot serve as a means of deparadoxification. In such cases organizations often use interactions as a means of deparadoxification. Decisions are not attributed to individual decision makers but to a “deciding” interaction. This could either mean that the interaction is perceived directly as the “decision maker” (one could think of a jury at court that announces its (!) verdict) or corporate boards announcing their (!) decision on a new strategy. Alternatively, it could also mean that one decision maker in an interaction is centrally held responsible for a decision but as other participants have assented, the decision ultimately is attributed to the interaction. The attribution of decisions to interactions can serve as a means of deparadoxification to the extent that the interactional processes – for the organization – are incomprehensible. This means that the concrete processes leading to the decision making remain obscure – for the organization, not the interaction. In this sense, the decision paradox is shifted to the “mystery” (Luhmann 2000c, pp. 135–140) of an interaction: the interaction has decided the undecidable but from outside one cannot say how (cf. Schwartzman 1987, pp. 285–286). Usually one cannot even ask the interaction, in contrast to individual decision makers, as it cannot be 16

And beyond that, the ultimate decision that creates the organization in the first place – implying the paradox of its existence before its existence.

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addressed as a unity (Kieserling 1999, pp. 383–384) – the participants can, of course, be asked but every participant might tell a different story. Furthermore, interactions often actively contribute to the “mystery” by withholding any information on the concrete processes involved in the decision making (cf. Kieserling 1999, p. 382; see also Goffman 1959 on “secrets” of and in interactions in general). Again, one could think, for example, of juries at court, which disclose at most the number of votes for or against a particular judgement but no concrete reasons; or of corporate boards that might disclose the reasons for a decision but keep their statements so general that they do not really say anything about the factual decision making. Decisions defy in this way any criticism; they are stabilised by reference to the incomprehensible complexity of the interaction. The only points for potential criticism are the (starting) conditions of the interaction: who participated in the interaction, what was the official agenda etc.; in other words, criticism is redirected toward the decisions and decision premises involved in “setting up” the interaction. This, again, can be evaded by drawing the decision premises as much as possible into the interaction (i.e. participants and topics are chosen from within the interaction) and by presenting the interaction more or less as spontaneously formed, so that the official justification for the initiation of the interaction can be provided retrospectively from within the interaction. Organizational interactions not only serve as a means of deparadoxifying and thus stabilising decisions after they have been made, but they can also serve in a similar capacity in the decision situations themselves. In other words, interactions can provide an orientation in decision situations where such guidance cannot be provided by the organization itself (this is just another perspective on the point made above). Thus, where the organizational decision premises are ambiguous or conflicting, or where decisions pertain exactly to the decision premises that could provide guidance, that interaction can take over the lead; the decision process is pressed ahead by the dynamic of the interaction. Decision making, in this sense, is less oriented to organizational and more to interactional structures. Retrospectively, however, the decision premises for the decisions can be – and probably have to be – sought, reconstructed, reinterpreted or even invented. In other words, decisions can be presented retrospectively as if they had been guided by decision premises – decisions are “post-rationalised”. To some extent, this line of argument runs counter to Kieserling’s hypothesis (1999, pp. 368–369) that, normally, interactions guide the organizational decision processes, while in crisis situations the decision processes guide the interactions. We would say, rather, that under crisis situations – in particular, situations that lead to a fundamental ambiguity of the organizational structures – interactions take the lead. Which system takes the lead under normal conditions can be left open here. 165

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(3) “Organizational” interactions can function as a memory in the organization. With “memory” Luhmann 1997a, pp. 567 ff., 2000c, pp. 192 ff.17 refers to the fact that systems discriminate between forgetting and remembering: the memory selects what to forget and what to remember.18 In contrast to traditional conceptualisations, memory is not understood as “storage of information” (Walsh and Ungson 1991, p. 61) but as a function that relates present situations to earlier operations of the system. One could say that it defines the system-related “reality” of the concrete situation. In this sense, the organizational memory determines in every concrete decision situation what earlier decisions to relate to. In other words, it remembers other decision situations and interprets the concrete decision situation in their context. In order to understand why certain situations or aspects of situations are remembered and others forgotten one has to understand the conditioning of the organizational memory. Luhmann writes about the organizational memory: When it comes to organizations the memory is linked to the uncertainty absorption, which connects decisions with decisions. It forgets the generally underlying uncertainty, unless it has become part of the decision in the form of doubts or reservations. But it forgets also the numerous contributing decisions (the invitation to a meeting, the unsuccessful attempts at pushing through a request); it represses also most of what contributes to the autopoiesis of the system. By and large […] it only retains what later decisions draw on to form their decision premises. (Luhmann 2000c, p. 193, my translation, footnote omitted)

In this sense organizations tend to remember only the results of decision processes and to forget the concrete developments. This radical forgetting – although a lot of potentially “useful” references to earlier situations get lost – is necessary for the organization so that its capacity for information processing does not get clogged up (Luhmann 2000c, p. 192). One could also say that the memory serves as an important form of complexity reduction. An organization cannot, however, dispense completely with all that the organizational memory forgets. Often it needs to remember, for example, information that had been gathered in connection with a decision, or the concrete developments of a decision process, or the concrete arguments for and against particular decisions by particular members of the organization

17 Luhmann here draws on the neurophysiological and general cybernetic studies of Von Foerster (1949; 1950; 1969; 1985, pp. 133–172). 18 As Luhmann writes, the main achievement of the memory is forgetting; consequently, “remembering” has to be conceptualised as the inhibition of forgetting (Luhmann 2000c, p. 192).

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(and to remember that it has forgotten what it has forgotten). Such references might be of particular importance in cases where the organization experiences inconsistencies between its decision premises or where new decision situations are difficult to make sense of. Or it might just be that such references make specific decision situations easier to handle. In such cases – and it might indeed be so in almost all decision situations – the interaction can “provide” the organization with an appropriate memory. This is the case because the memory of (organizational) interactions is conditioned in a different way. The interactional memory, in contrast to the organizational memory, is not connected to the organizational uncertainty absorption. Kieserling writes in this respect: The memory of the organization remembers only decisions and forgets everything else. In contrast, the memory of the interaction and its participants is conditioned in a totally different way. They might remember the process more than the result and the defeated more than the finally victorious candidates. (Kieserling, 1999, pp. 385–386, my translation)

The interactional memory thus seems to be conditioned almost in the opposite way to that of the organization. What the one tends to forget the other tends to remember. Because of their relationship of interpenetration, the interaction can make its own memory available to the organization. This does not mean, of course, that the organizational memory is expanded by the interactional memory. The interactional memory does not become part of the organizational memory, in the same way that the interactional complexity does not become part of the organizational complexity, as argued above. The organization does not have direct access to the memory of the interaction, but it can expose its decisions to the interactional memory by having decisions take place within interactions. If a decision is discussed within organizational interactions, the participants are likely to draw on past experiences in connection with similar decision situations – for instance, arguments they may have had previously about similar things. Although these communications are inconceivable for the organization they have an effect on the communication that will be ultimately interpreted by the organization as its own decision and will thus have an effect on the organizational autopoiesis. Organizations might, in this sense, instrumentalise interactions for remembering what they themselves have forgotten. This memory function of organizational interactions can also be described as a form of complexity reduction – to be precise: reduction of temporal complexity. By making their memory available to the organizational reproduction, interactions serve a function of complexity reduction for the organization. Analogously to our argument above, we can say that organizations can use organizational interaction to select relations between the present decision situation and earlier decision situations of the organization. 167

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To the extent that the organization can rely on interactions fulfilling this task in concrete decision situations, interactions do not have to establish structures that pre-select those relations. Apart from the fact that, due to their particular mode of reproduction (i.e. uncertainty absorption), organizations are always dependent on interactional memory (without that they would not be able to reproduce themselves), there are different degrees to which the interactional memory is drawn on. Analogously to our argument above, we can say that the more an organization can rely on interactional memory, the less elaborate are its own memory structures (e.g. written documentation etc.) and vice versa.

Possibilities for conditioning organizational interactions So far we have discussed functions that organizational interactions might serve for “their” organization. We have not, however, asked how interactions can be brought to serve these functions. It probably would not be enough for organizations to rely on interactions to form spontaneously and by chance at the “right” moment when they are “needed”. Rather, although interactions are operatively closed vis-à-vis organizations, they can be nevertheless conditioned (cf. Luhmann 2000c, p. 373). That is to say, organizations can create certain context factors that make it likely for interactions to reproduce themselves in ways that are of benefit to the organization. This conditioning can be temporal, social and factual. Conditioning in the time dimension is particularly focused on beginning and ending an interaction. The organization can decide to start an interaction and it can also decide on a certain time limit, after which the interaction is to come to an end. For example, a meeting can be scheduled for a certain time – from three to four o’clock. The organization could also decide on a sequence of interactions – for instance, every Monday from three to four o’clock (cf. Luhmann 1997a, p. 818). However, as the organization has no direct access to the interactional operations, it cannot start or terminate them directly;19 only the interaction itself can produce its own beginning and its own end. Yet, organizations can condition participation and thus indirectly “stimulate” interactions to produce a beginning and an end. That is to say, the organization can decide on a certain time span during which members are to come together. The beginning of the interaction can be conditioned insofar as the organization can arrange for members to come in 19

Unless the organization decided, for example, to blow up the interaction with a bomb, in which case the interaction would not be terminated by the interaction itself, but by the elimination of its (necessary) environment of psychic systems (cf. Luhmann 1995j, p. 45).

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face-to-face contact on the basis of which an interaction is likely to form.20 The end can be conditioned through the decision to withdraw the participants after the time has run out. The interaction can observe this prospect of its participants being withdrawn after a certain time, and in expectation of that produce its own end. When the time has run out, the participants of the interaction say “good bye” to each other. In the social dimension the organization can condition the interaction by deciding on its participants. That is to say, the organization can influence the interactional communications by deciding who is to participate and thus, what perspectives become available in the interaction (cf. Kieserling 1999, p. 378). Especially important in this context are the perspectives given through the particular organizational roles of the participants. For example, if the organization decides that senior managers are to participate, the interaction is likely to be different from a meeting between shop-floor workers only. Again, by deciding on the composition of the interaction the organization can condition it, but it does not have any direct control over it. It is ultimately left to the interaction to determine who is treated as present and who as absent. In this sense, even people physically present might be considered absent by the interaction. Similarly, the formal organizational roles of the participants might not be referred to by the interactional communications. Conditioning in the fact dimension concerns the organization’s influence on the selection of topics. An explicit conditioning in this dimension would be a decision on the agenda of a forthcoming interaction. The selection of topics can also be indirectly influenced through decisions on the participants. For example, if many marketing managers are involved in the interaction, the communication is likely to focus on marketing issues. Another way of conditioning the selection of topics is to set in advance certain output categories for the interaction; state, for example, that certain decision have to be made. An important form of conditioning concerns the constraining of the range of possible topics. Instead of influencing the interaction in a way that makes the selection of a specific topic more likely, the organization can also make the selection of certain topics more unlikely; for example, by withholding information. Although we have treated the different dimensions of conditioning separately, here they are to a large extent interdependent. For example, by starting an interaction for discussing recent sales figures, the organization might condition the interaction in all three dimensions. In the object dimension the interaction is conditioned because the topic of the communications is preselected: the sales figures. In the social dimension the interaction is con20

In this respect, Kirsch 1992, pp. 271 ff.), speaks of the “creation of necessary and sufficient initial and contextual conditions” for the emergence of interactions.

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ditioned because particular persons might have to participate in the interaction – e.g. marketing managers. In the time dimension the interaction is conditioned as a certain timing for the interaction is decided.

Conclusion In this chapter we have suggested a specific conceptualisation of “organizational” interactions, based on Luhmann’s social systems theory. The basic idea was to treat organization and interaction as two different types of systems that remain operatively closed with regard to each other. In other words, “organizational” interactions take place in the environment of the organization. Although this strict distinction runs counter to our intuitions, which would see interactional communications as part of the organization, it has important theoretical advantages. Firstly, it is a perspective that allows perceiving (organizational) interactions whereas other theoretical perspectives would not even have concepts for referring to them – which is probably one of the reasons why interactions in organizations so far have received relatively little attention by social scientists (Schwarzman, 1986). Secondly, the strict separation between organization and interaction allows analysing organizational and interactional phenomena in their own right. This must not be misinterpreted as disregard of the role of interactions in organizations. On the contrary – and this is our third point – through the differentiation between organization and (organizational) interaction it can be clearly shown that, and in what way, both systems depend on each other. This conceptualisation forces the researcher to be explicit on the achievements of each system and on the mechanisms through which they become available to each other. In this sense this conceptualisation can also help discipline the researcher.

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Chapter 8

Organization and Society. On the desideratum of a society theory of organizations in the work of Niklas Luhmann1 Thomas Drepper

Introduction and problem exposition The interrelation of modern organizations and modern society has been a major topic of interdisciplinary organization theory in recent years. Bringing Society Back In (Friedland/Alford 1991) means bringing theory back in and especially bringing theory of society and social theory back in. Hannan and Freeman point out the missing connection between organizational theory and sociological theory and stress the relevance of overcoming “the partial intellectual isolation of the field of organizational sociology from the rest of the discipline” (Hannan/Freeman 1989, p. 11) and of broadening the limited intra-organizational perspective. The following approaches are contributions to this theme: • the New Institutionalism in organization theory (Scott 1995, Powell/DiMaggio 1991) • organization theory applying the structuration theory of Anthony Giddens • the theory of corporate actors (Coleman 1982, 1990) • some aspects of the population-ecology approach (e.g. Stinchcombe 1965, 1991) All these approaches converge to some degree in the challenge of defining the societal embedding of organizations without referring to a diffuse notion of environment as a residual category. On the other hand, it seems that theories of society do not spend much energy on conceptualizing the factor termed “organization” in a systematic manner. To quote Hannan and Freeman once again: “Although organizational processes figure prominently in social change, most macrosociological theory and research make little 1

The author would like to thank Kai Helge Becker and David Seidl for their helpful comments and great support editing this text.

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reference to systematic research on organizations” (Hannan/Freeman 1989, p. 10). How could this mismatch be interpreted? Two dominant paradigms are standard references in the sociological diagnosis of modern society but stand rather unlinked beside each other. The first consists in the concept of modern society as a highly differentiated unit consisting of several societal sectors, fields, subsystems, value spheres or life worlds with special patterns of meaning, normative and cognitive rules and role expectations. This paradigm refers to the differentiation theory in macro-sociology (as discussed by Durkheim, Simmel, Parsons, Eisenstadt, Weber, and Luhmann). The second type of diagnosis focuses on the enormous pervasion of modern society by formal organizations that characterize the face of The Asymmetric Society (Coleman 1986) and dominate the life courses of modern individuals. From this point of view the Society of Organizations (Perrow 1991) is an organizational society and the modern individual is The Organization Man (W. H. Whyte 1956). Both the argument on differentiation theory, and the argument on organizational society in the tradition of Max Weber’s thesis on bureaucracy are part of sociological mainstream. Taking these recent theories of modern society into account, it becomes clear that organization theories examining the societal embedding and the non-organizational preconditions of organizational performance beg the question of whether a linkage between these basic analyses is possible. In the concert of social theories that offer the theoretical equipment for systemizing the reciprocal relationship between modern society and modern organizations, the sociological system theory of Niklas Luhmann seems to be a good candidate for tackling this question. Three major parts of Luhmann’s theory are most relevant for dealing with the problem of correlating society and organization: on the level of a general social theory, the theory of social systems introduces the distinction between interaction, organization and society (Luhmann 1982c) as well as the late concepts of autopoiesis and communication (Luhmann 1990a, 1990j, 1990f, 1995). The general theory of organized social systems connects the sociological tradition of Talcott Parsons with decision theories that go back to the works of Simon and March. Finally, the theory of society distinguishes various forms of differentiation (segmentation, centre/periphery, stratification, functional differentiation) as the primary structures of societies, and of society in the process of sociocultural evolution (Luhmann 1977a, 1982d, 1992c). Nevertheless, Luhmann’s efforts towards a systematization of the stated topic are few, despite all those elaborated theoretical elements. Luhmann addresses this problem explicitly only in some of his last publications. These works deal with the connection between the internal differentiation of functional subsystems on subordinated levels (segmentation, centre/periphery, stratification) and the role of organizations within this process. In this 172

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context, Luhmann discusses not only new theoretical concepts (structural coupling, external communicability, medium/form, centre/periphery), but also rather classic notions (e.g. meaning, complexity, generalized media, breaks of interdependency, congruent generalization of expectations). Luhmann’s theoretical work is very promising with respect to the analysis of the relationship between organizations and society, however, Luhmann himself did not elaborate this issue much further. This chapter contributes to filling precisely this gap and aims at discussing and bundling up the various contributions that Luhmann made to this topic in his long academic career. Furthermore, it will attempt to show that it is necessary to combine older theoretical concepts with newer ones in order to elaborate some basic elements of a societal theory of organizations (see Drepper 2003). The chapter is structured around seven topics that can be found within Luhmann’s work and are central to a better understanding of the relationship between organizations and society. The first section presents Luhmann’s critique of the classical organization theory and the differentiation concept of the ontological system model. Here, the dominance of the means/end-scheme and the rationality-concept, as well as the system model of a-whole-and-its-parts are examined critically. On the basis of that critique, Luhmann proposes a twofold theory of differentiation that combines a theory of different types of social systems (interaction, organization, and society) with a theory of structural differentiation of complex systems. The second section puts forward the argument that this kind of twofold differentiation theory serves as the theoretical background for interrelating organization and society. This line of argumentation can also be found in some of Luhmann’s early writings, in which he formulates the theory of formal organizations against the background of a functional-structural theory of society. In the third section, an important topic of Luhmann’s societal theory will be discussed: the repraesentatio identitatis phenomenon of modern society. The repraesentatio identitatis phenomenon refers to the impossibility of representing modern society, which has neither “centre” nor “top”, from a superior standpoint within itself that coincides with this society’s leading self-description. For that reason there are several possibilities for describing and characterizing modern society, for example from a political, scientific, pedagogical, technical, economical or juridical viewpoint. And these descriptions and interpretations are so controversial that it is nearly impossible to draw a consistent picture of the structure, processes, problems and main issues pertaining to society. Every social sector claims to be most relevant. Luhmann argues that organizations are able to compensate the uncertainty that arises on the societal level, partially because they are based on the modus of decision making, which absorbs uncertainty. But this uncertainty absorption is of course limited to the level of organization systems and cannot undo the authority deficit and uncertainty that exists on the soci173

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etal level. Further on in this section this argumentation will be linked to the topic of corporate or collective actors. This section also includes some methodological remarks on the phenomenon of collective or representational action and the attribution of organizations as collective or corporate actors (Dan-Cohen 1986). Some theoretical and methodological differences between Luhmann and the action theory in the tradition of Max Weber and Talcott Parsons will also be discussed in the same section. The fourth section deals with Luhmann’s attempt to define the function of organizations in relation to the various differentiation forms of modern society, segmentation, centre/periphery stratification, and functional differentiation. This conception presents his very first approach to work on the relationship of organization and society consistently. The theoretical concept of interdependency break is the main theme in the fifth section. This very abstract notion forms part of the cybernetics and systems-theory tradition and marks another attempt to define the societal function of organizations. Luhmann conceptualizes organizations as breaks of interdependencies within broader systems; more particularly societal function systems. Structural coupling is the topic of the fifth section. This notion goes back to Maturana’s and Varela’s theory of living systems and refers to the structural embedding of autopoietic systems within their environments. Even autonomous systems are always environmentally embedded. Luhmann follows this concept, uses it for supplementing the better-known term of interpenetration (Luhmann 1995f) and introduces it into his differentiation theory. He analyses the structural couplings that link the autonomous function-systems of society, and – crucially in the context of this chapter – examines the function of organizations with relation to the structural coupling of function-systems. This discussion will be elaborated in the sixth section. All in all, this chapter tries to give a comprehensive overview of the possibilities of clarifying the relationship between organization and society from the standpoint of Luhmann’s theory. To this end, various parts of Luhmann’s oeuvre will be brought together and several aspects of the relationship between these two types of social systems will be discussed.

Critique of the classical organization theory and the differentiation concept of the ontological system model The critique of the classic theory of organizations and the concept of instrumental rationality, or means/ends rationality of organizational functioning, are important topics of Luhmann’s early organization theory (Luhmann 1968). Ever since his early writings, Luhmann has always been critical of the “overestimation of the means/ends orientation as a structural law 174

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of social systems” (1982, p. 25) and its idée directrice of organizations as systems “that have the capacity for making rational decisions”, “pursue objectives and are in control of their instruments” (Luhmann 1996a, p. 341). In the classic model, organizations are treated as rationally performing instruments of goal-attainment that seem to be a necessary feature of the modern division of labour. Luhmann is critical of this concept because it proposes the increase of societal rationality via organizational performance. This stage in Luhmann’s work is characterised by two main theoretical concepts: the displacement of the means/ends schema, as the dominant model for describing organizations as a rational mechanism (Luhmann 1982b), and the turning away from the system model of a “whole-and-itsparts” towards the system model of “systems and their environments” (Luhmann 1995f, pp. 1–12, pp. 176–209). Luhmann combines these critiques and argues that the “whole-and-its-parts” system model is merged with the concept of means/ends-rationality, and that this “joint venture” promotes an ontologically inspired container metaphor of organizations: “Organizations were seen as systems. A system was understood as an ordering of relationships through which parts are bound into a whole. And the relations of the whole to its parts were interpreted through the means/ends schema” (Luhmann 1982b, p. 25). Luhmann argues that the system model of the whole-and-its-parts ignores the structural relevance of environments to systems and creates a static picture of systems and their structures. He rejects the idea of subsystem-formation as a process of decomposing a broader system into smaller parts. Subsystem-formation is not “simply a decomposition into smaller chunks“ (Luhmann 1977b, p. 31), but a multiplication of system/environment boundaries within an existing system/environment-boundary. System differentiation is the reflexive form of system building that is based on the reduplication of system/environment boundaries within systems. This process increases the internal complexity of a system (Luhmann 1995f, pp. 176 ff.). Moreover, Luhmann argues that the means/ends schema should not dominate the understanding of organizations, because goal- or end-orientation is only one possible structure of system rationalization besides other possible functional structures in an organization – for example, the form of conditional programming as a decisionpremise (Luhmann 1982c). On the basis of the above argument, Luhmann proposes a twofold theory of differentiation. On the one hand, we find the differentiation of the various types of social systems: interaction, organization, and society (Luhmann 1982c). And on the other hand, we find the internal differentiation of subsystems as a mechanism of reducing complexity within complex systems. The following section will discuss both differentiation theories in Luhmann’s approach and demonstrate how they interconnect. Combining these two

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theories is the crucial first step for conceptualizing the relationship of organization and society.

Types of social systems and the logic of internal system differentiation According to Luhmann’s concepts, interaction systems are social systems that are based on the reciprocal perception of the physical presence of at least two participants in a social situation. Interactions are structured around topics of communications to which the participants contribute alternately (for details see Chapter 7). Organizations are member-based, decision-processing communication systems that are structured around decisionpremises (programmes, personnel, and communication paths). In contrast to interaction systems, organizations transcend the mode of successive alternate contributions in interaction systems: a structural feature of many communications is that although several communications with different subjects can take place at the same time, it is not necessary that all organizational members are present when a decision is made. For that reason, organizations are able to process more complexity than interaction systems, which explains why Luhmann refers to the latter as “simple systems” in his early writings. Society is the communication system that encompasses all communications and includes all other forms of social systems. The different types of social systems are nested within social reality. Every interaction and every organization belongs to society and, furthermore, an interaction can, but does not need to, belong to an organization. This context could be seen as indicative of the differentiation of subsystems within broader systems. The inclusive system offers structural premises and a pre-selected order to the system it encompasses. In other words, it provides “specific structural premises on the basis of which a self-selective process can occur while limiting this process in its possibilities” (Luhmann 1982c, p. 86). In doing so, it imposes “order on the proximate environment of the subsystem. In this double effect of incorporating on incorporated systems lies the condition for the freedom of system developments” (Luhmann 1982c, p. 86). The function of society as the system that encompasses all other social systems can be seen in enlarging and reducing “the complexity of external and internal environments to the effect that other systems will find enough structure to support boundaries and structures of higher selectivity. The process continues at the level of subsystems, repeating the same mechanism, and it arrives at organizations and interactions of high specificity” (Luhmann 1977a, p. 31). According to this line of reasoning, organizations have to be conceptu176

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alised as substructures of broader systems. They cannot be understood as goal-attaining agents or instruments of rational domination, in the way Talcott Parsons understood them, for instance. Parsons defines the development of organizations as “the principal mechanism by which, in a highly differentiated society, it is possible to get things done, to achieve goals beyond the reach of the individual and under conditions which provide a relative maximization of effectiveness, in Chester Barnard’s sense” (Parsons 1960, p. 41). For Parsons, organizations are – as a type of collectivity – “the essential operative units of social system”, the performing centres of goalattainment through which the universalistic values and norms of a society become specific and concrete orientations of action. In this view organizations are the transformers of universalistic and normative patterns. Luhmann does not follow this concept of collectivity, because it is based on the methodological idea of social systems as a collective or corporative aggregation consisting either of individuals or actions, which become corporatively, consensually or territorially integrated (see Drepper 2003, pp. 254–284). According to Luhmann – in contradiction to Parsons’ approach – organizations do not serve higher ends or interests, as they are not the centres of societal rationality. Organizations are not simply dependent subsystems of broader subsystems that fulfil the tasks commanded by a higher level (Luhmann 1982c): they “only” use the possibility of building boundaries in a self-selective way. Following this presupposition, organizations cannot be understood as performing agents of functional values, norms, or role scripts. Organizations have to be conceptualized as selfreferential and self-determined systems with a specific logic of meaningful reproduction (Luhmann 1990a and 1995f pp. 437–477). And this logic cannot be understood in terms of a cause-and-effect relation that imposes the expectation-patterns of a higher system level on a lower one in a unilateral logic of hierarchical control. Organizations are too uncontrollable for such a downward causation. On those grounds, Luhmann dismisses Parsons’ LIGA-logic of structural components and subsystem nesting; he dismisses, that is, the way Parsons conceptualizes the function of organizations within broader systems (Drepper 2003, pp. 262–272). According to this theoretical conception, neither the relation between society and organization, nor the relation between function-systems and organization, must necessarily be thought of in a hierarchical way. The means/end-schema, in concert with the ontological system model of a wholeand-its-parts, can explain neither the mutual conditioning of society and its function-systems nor the correlation between functional subsystems and organizations. Function-systems are not the means for higher societal ends or values, and organizations are not the means for attaining functional ends or goals. Function-systems are not equipped with organizations which enforce interests or realize ends in a top-down logic. Although organizations 177

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have been introduced into almost all functional domains, the central functions of modern society cannot be realised as membership-based social systems. Functionally differentiated societies “cannot be ruled by leading parts (elites) as stratified societies could, to some extent, and […] cannot be rationalized by chains of means and ends as a technocratic conception would suggest. Their structural complexity can be formulated only by models that take into account several system/environment references at once” (Luhmann 1977a, p. 37). Organizations respecify the complexity of function-systems. This “requires a displacement of problems from the level of the society to the level of subsystems. This is not simply a process of delegation or decentralization of responsibilities and not simply a factoring out of means for the ends of society” (Luhmann 1977a, p. 39). Luhmann gives the following examples for this theoretical argument: “Given our economic system, for instance, production and consumption choices could never be yoked together into an organizationally unified decision-making process […]. Likewise the functions of education will remain divided up between the school system and the family, although the emphasis may shift” (Luhmann 1982c, p. 81). This leads to the conclusion “that societal function cannot be integrally delegated to a single or unified organization. Instead, such functions must be parcelized and respecified before being assigned to specific organizations. […] The function of law is certainly not a norm. The function of politics is not a standard of legitimacy. The ‘limits to economic growth’ is a possible conference topic, but it cannot help entrepreneurs and enterprises decide what they ought to do” (Luhmann 1982c, pp. 81–82). Neither modern society as a whole nor the individual function-systems can be realized through organizations. Luhmann states a very simple but precise structural condition for this fact: the “motivational mechanism of an organization presupposes voluntary and contingent membership – a realistic chance for entrance and exit” (Luhmann 1982c, p. 77). In contrast to this, modern society is based on the principle of total inclusion of almost everyone in the functional domains: for example, everyone must participate in economic activities and be educated, and everyone is influenced by political decisions and is subject to the law. In other words, while the functionsystems of modern society are based on the principle of inclusion of the whole population, modern organizations are grounded in the principle of exclusion and the exchangeability of persons. The members of modern organizations are recruited and selected by decision, and membership roles embrace only a fraction of possible individual behaviour: “only on this condition can the decision-making process of organizations be regulated in their smallest details. The structurally enforced inclusion of the whole population in the function-systems is therefore precluded by an equally indispensable exclusion of almost everyone from all concrete organizations. […] Whereas 178

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the corporations of the old world were institutions complementing the stratified household’s structures, modern organizations are parts of the functionsystems, but with the inclusion/exclusion relationship inverted” (Luhmann 1996b, p. 67). This argumentation is part of what Luhmann means when he talks about the simultaneity of structural dependency and independency of different social systems, and even of different types of social systems. And this idea of the simultaneity of two seemingly contradictory processes – the autonomy and discreteness of social systems and the structural dependency as a result of environmental embedding – can already be found in some of Luhmann’s early writings. Even Luhmann’s early concept of formal organization goes beyond the narrow analysis of internal organizational structures to include the link of organization theory, theory of society and social system theory. However, it is important to point out that he does not connect the organization theory with the insights of a differentiation theory of society in a particularly systematic manner. In his theory of formal organizations, Luhmann draws on the functional-structural theory of society and merges a functionalistic view with institution theory (Luhmann 1964, 1965, 1968). For the early Luhmann one can state: Arnold Gehlen meets Talcott Parsons! From this theoretical point of view, organizations appear as civilizing mechanisms, which formalize and stabilize improbable expectations. In this early approach Luhmann conceptualized the organization as a formal structure of social systems that “free the system from a concern with the motivational structure of its members, and thus with all its own personal and social conditions. Generalization and separation of roles are the social mechanisms that allow bureaucratic systems to focus one-sidedly on their demarcation from non-members” (1982b, p. 45). Formally organized social systems are clear-cut social orders producing congruent expectations in the social, temporal and material dimension of meaning (Luhmann 1990e). Formal organizations are those social systems in complex social orders which institutionalize continuing motivation. A societal relevance of formal organizations arises from the separation of motives and ends, and from the generalization of motives through membership. Impersonal membership-rules make it possible “to stabilize highly artificial modes of behaviour over a long stretch of time” (Luhmann 1982c, p. 75). This relevance refers to the course of sociocultural evolution, because it “is beyond question, in any case, that only organizations are capable of producing the motivational generalization and the behavioural specification required in several of modern society’s most important functional domains” (Luhmann 1982c, p. 76). At the same time, organization building is dependent on specific societal conditioning structures that preselect the communicational possibilities and make expectations probable, insofar that organizations can attach the programming of specialized expectations which then function as decision-premises (decision programmes, personnel, reporting 179

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lines). Those societal structures that are preconditions for the building of organizations are the symbolic generalized media of meaning (Luhmann 1976b), the various forms of differentiation (segmentation, centre/periphery, stratification, functional differentiation) and the form of modern citizenship (Marshall 1950). These ideas will be examined more concretely later on in this chapter. In modern society, the functional differentiation of meaningsystems preselects and pre-patterns the specific spheres of functionallyoriented, meaningful reproduction in such a way that the formation of organizations can be linked to the reduced complexity of the predefined functional domains. Organizations are then able to define specific economical, political, religious, educational, scientific ends and goals that refer to their dominant societal environment.

The repraesentatio identitatis phenomenon of modern society – Organizations as communicators, communicative addresses and communicable systems The repraesentatio identitatis phenomenon is a concept that gives a good example of the combination of organization theory with the theory of society in Luhmann’s model. His thesis is that organizations are able to compensate partially for the uncertainty and complexity of the societal level by means of their specific modus of operation, i.e. their decision-making. In this case, Luhmann borrows the concept of absorbing uncertainty from the organization and decision theory and applies it to the theory of society. The functionally differentiated society is characterized by a heterogeneous and decentralized structure that makes it impossible to represent and describe it in its entirety from an exclusive standpoint within society. The change from the stratified and feudalistic societies, which were represented by elites at the top or the centre, to the modern polycontextural society is what causes the problem of representing society within society. Modern society cannot be described or legitimized by a major self-description (Luhmann 1982h, 1990h). According to Luhmann, however, organizations are capable of filling this gap to a certain extent. By means of their structure they can partially compensate for this deficit in authority and representation that is typical of modern society. Organizational decisions allow and demand the attribution of communications to visible roles and persons who act as decision-makers and are embedded in manifest authority and hierarchy structures. Luhmann posits that organizations function in the communication processes of modern society as relevant attribution points and addresses for uncertainty absorption. But this uncertainty absorption is strictly temporal and limited 180

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to the level of organizational operations. Decisions are events and, as such, they are transitory in a radical way. On the operational level of basic selfreference they have to be reproduced permanently if the organization system wants to “survive”. And on the structural level all organization structures (programmes, persons and communication paths) are decision-premises and as such can be changed by further decisions (see Luhmann 2000c and Luhmann 1995f, p. 278 ff.). This implies that organizations cannot guarantee stability on the societal level. Unlike society, which is subject to sociocultural evolution, organizations can be shaped and altered by decisions. The topic of organizations as communication addresses refers to the discussion about corporate actors as action units. Luhmann adopts some important arguments of evolution theory and differentiation theory, but dismisses fundamental methodological presuppositions of action theory in the tradition of Max Weber and Talcott Parsons. The concept of an organization’s ability to act collectively goes back to Weber’s ideal type of bureaucracy and Parsons’ concept of evolutionary universals – if not to earlier theories – and here in particular, to the idea of official and representational action “in the name of” a collectivity. Talcott Parsons connects the capacity to act officially or “in the name of” with the concept of power, that is, “the capacity of a unit in the social system, collective or individual, to establish or activate commitments to performance that contributes to, or is in the interest of, attainment of the goals of a collectivity” (Parsons 1964, p. 347). Luhmann does not adopt this concept of collectivity, because it is based on the idea of social systems as aggregates and containers consisting of concrete human beings or of their actions. Individuals are not the basic elements of any social system (Luhmann 1990a, 1995f). Following this methodological presupposition Luhmann rejects the argument that the capacity for collective action is mainly needed for the internal coordination of a system, and for producing binding forces and commitment. Instead, the capacity for collective action has to be understood as a boundary function of complex systems with respect to their environment. From an evolutionary point of view systems that are able to constitute and institutionalize the capacity for action “in the name of” benefit from an increase in complexity. As Luhmann makes clear, “the problem of specifying environmental contacts as constraints and extensions of the system’s general location in the environment […] is a central problem of all complex systems, a kind of threshold in the evolution of greater complexity. On the level of social systems, this problem concentrates on the capacity for collective action and the subsequent arrangements necessary for it […]. The organization of the collective capacity for action must be viewed as one of the most important early evolutionary achievements of social systems, because it can improve decisively the external relationship of these systems by internal restrictions” (Luhmann 1995f, pp. 198 ff.). In his late works, after his so-called “autopoietic turn”, Luhmann replaces 181

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the term “action” with the term “communication” and changes his basic theoretical concepts accordingly (Luhmann 1995f, p. 137). His central perspective on the collective “nature” of organizations, however, does not change. In fact, from the point of view of his late theoretical framework, Luhmann characterizes organizations as the only social systems that are structurally equipped for external communication, that is, for crossing their boundaries by communication. Neither the heterogeneous modern society as a unit nor interactions as simple systems have the capacity to communicate with their environments, so they cannot be addressed as collective actors. Organizations are the only social systems in modern society that can be addressed in communication processes as collective actors. This feature makes organizations comparable to persons as authors and addresses of communication. Persons are expectation-structures of and for communication. In Luhmann’s understanding they are not complete human beings in the biological sense. They belong – in an order of various levels of generalization and identification – to the order of structural components of social systems: person, role, programmes (norms and goals), and values (Luhmann 1995f, pp. 278 ff.; 1996b): “These different levels of identification can be ordered on a dimension from abstract to concrete” (Luhmann 1977a, p. 46). A person can be understood in its traditional sense “as a mask put on for purposes of communication. A person is a speaker and an address required for the reproduction of communication” (Luhmann 1996a, p. 343). The reference points for personalization vary historically, because what “can be symbolized as a person depends on the societal system of communication and its autopoiesis and not on specific ontological properties of its environment” (Luhmann 1996a, p. 344). From this point of view, the fact that organizations are commonly referred to as “collective” or “corporate” actors is an evolutionary effect of the development of the modern Western legal tradition (Berman 1983). In the legal sense organizations are juridical persons or corporate bodies (Dan-Cohen 1986). However, from the viewpoint of sociocultural evolution this attribution routine is an “evolutionary improbability”. Hierarchy is a feature of particular importance to external communication and representation, because it allows attributing decisions to programmes, roles and persons (deciders). And in modern society, hierarchy is predominantly institutionalized on the level of organizations. It is a structural feature of modern society that it is flooded by representational communication. This always refers to organization systems and their representational roles, but never to the function-systems or to the entire society. What we hear every day are the voices of spokespersons who hold key positions in organizations and whose boundary roles are heavily promoted by the modern system of the mass media: representatives of modern states, representatives of trade and labor unions, representatives of medical unions and so on. The process of becoming a communication address 182

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and of developing professional and organizational structures and standards can often be noticed in cases of social movements aiming at political goals. The anti-globalization movement ATTAC is a recent example for such a development, as is the German party “Die Grünen” (The Green Party), which started as an alternative, ecological movement in the seventies, and was later on structurally transformed into a regular political party. The relevant functional and organizational environment (states, parties, NGOs, and corporations) “provokes the system to unified action. Then the question is whether adequate preconditions for that action exist or whether they can be developed quickly enough” (Luhmann 1995f, p. 199). The social movement is forced to become a visible body in the political communication process, if it wants to be accepted as a serious address in the world-wide system of political communication. This suggests that adopting an organizational structure seems to be the common modern way of becoming a corporate address for communication.

Subordinate forms of differentiation and the role of organizations In this section the societal function of organizations will be discussed in relation to the various differentiation forms of modern society. This argumentation presents Luhmann’s first thorough attempt to conceptualize the relationship of organization and society on the basis of his advanced theory of societal differentiation. Primary forms of societal differentiation presuppose the conditions of all further differentiations, in that they define their conditions and limitations within a differentiated system. Whereas archaic societies selected communications under the conditions of equal segmentation, and aristocratic societies did so via the conditions of unequal strata, functional differentiation is based on the selection of communications along specific functions (economy, law, education, arts, politics, religion, sports etc). In this latter setting, communications, contribute to the reproduction of those functional domains. Structurally, it is always possible that primary differentiation forms also include other differentiation forms. Temporal stratification and rudimentary role-differentiation took place even within segmentary societies, and bureaucratic structures fulfilled important functions in the centres of early high cultures and political empires (Eisenstadt 1963). Nevertheless, such forms of differentiation should be regarded as subordinated forms, which now and then appeared as pre-adaptive advances of further steps of sociocultural evolution (Luhmann 1977a). This structural logic can also be shown in the functional differentiation of modern society. Functional differentiation as a primary structure is also compatible with all other forms of

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differentiation: “Societies are not able to dream up arbitrarily new forms of differentiation” (ibid., p. 33), but evolve by decomposing and reconstructing already existing structures. This means that even in the functionally differentiated society – though no longer on the primary level – there exist segmentary, polarised (centre/periphery), as well as stratified differentiations. The variety of internal differentiation within the overall setting of functional differentiation counterbalances the complexity of modern society. As already mentioned, societal functions as such cannot be organized. This, however, does not mean that organizations may not have a function on subordinated levels of differentiation. In fact, Luhmann looks at the relationship between the internal differentiation of functional subsystems on subordinate differentiation levels (segmentation, centre/periphery, and stratification) and organizations within this internal differentiation. Organizations play an important role in the centre and in the periphery of some function-systems. Influential and important function-systems such as the economy, the law and the political system display this pattern of differentiation. The political system, for example, is segmented on its secondary level into nation states that are in their turn differentiated between centre and periphery on the third level of differentiation. The centre has a stratified structure that is dominated by the political administration, while the periphery consists of the loose coupling between parties, interest unions, and NGOs. This means that organizations are the dominant type of system that realizes and stabilizes the level of centre/periphery-differentiation (Luhmann 1990i). Put in cybernetic terms, the combination of multiple forms of differentiation enables particular function-systems to combine a high degree of necessary redundancy and unity with a high degree of necessary variety in order to react to the perturbations of their societal environment. The redundancy aspect is realized by organizations located in the centre, whereas the variety aspect is realized by organizations and additional functional structures (e.g. professions) in the periphery.

Organizations as interdependency breaks The concept of interdependency breaks is another aspect of Luhmann’s attempt to explain the societal function of organizations. Luhmann considers organizations as breaks of interdependencies within function-systems. This argumentation follows the classical concept of interdependency interruptions in cybernetics and general systems-theory, which is used to analyse the processes through which organisms and systems achieve higher levels of complexity by implementing step-functions (Ashby 1960). The breaking of interdependencies is a mechanism that increases the internal

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complexity of systems. Internal system-differentiation is a kind of interdependency interruption that equips the system with additional internal selection-filters. Environmental demands can be selected and decomposed in such a way as to affect only subsystems and not the whole system. Environmental developments and occurrences do not affect the whole system, but only those differentiated subsystems which are engaged in a particular environmental relationship. This kind of selectivity helps stabilize the structure of the entire system. The sociological relevance of this concept will be exposed later on in this paragraph. Internal differentiation functions as a way of breaking up interdependencies in social systems that have reached a certain level of complexity. From the viewpoint of the theory of sociocultural evolution, introducing breaks in interdependencies is a precondition for developing higher complexity. In the case of modern society, there is a primary interdependency break located on the first level of societal differentiation. This setting is specific to modern society and cannot be found in pre-modern societies, whose strata were essentially based on interdependencies. In aristocratic societies ascribed status and societal standing (Linton 1964) conditioned the access to power, property, money, law and the arts. In contrast to that functional differentiation is a differentiation form that is based on the simultaneous independency and dependency of the different function-systems. Function-systems process their specific functions autonomously. A particular function-system cannot substitute the function of the others. Modern functional communications are conditioned by self-generated elements, boundaries, processes and structures (Luhmann 1990f). Economic situations and problems, for example, are topics specific to economic communications but not to political, educational or legal communications. In economic communications, the relevant criteria are economic: solvency, prices and contracts, for instance. Similarly, the chance to accumulate property does not depend on a specific type of social standing or class membership. To give a further example, jurisdiction normally cannot be substituted by political power or economic payment. Political power, educational success, legal decisions “should” not be a matter of economic status and property in modern society, just as political power should not be (ab)used to attain private goals, make economic profit, and realize personal interests. Modern function-systems work on their problems autonomously. Therefore, modern society was obliged to invent structures that constitute strong interdependencies within a subsystem, namely the symbolic generalized media of communication. These media (money, power, law, truth etc.) bridge the difference of acceptance and refusal (Luhmann 1976b, 1990j) and, in doing so, foster communications within the subsystems. However, this implies that every function-system is dependent on the fulfilment of other functions, as well as on the performances that the function-systems 185

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offer each other. The economy, for example, presupposes that the educational system “produces” adequate personnel that can be deployed and further developed for the purposes of the working process. And the educational system presupposes that part of the money that is generated by economic processes will be made available to education. In sum, this line of argument does not suggest that there are no interdependencies at all in modern society – corruption in politics and the economy are common knowledge – but that such interdependencies are not stabilized on the primary level of differentiation. In fact, Luhmann’s point is that interdependencies occur on subordinated levels of differentiation. He suggests that an organization, as a specific type of social system, functions in wider function-systems as a structure that breaks interdependencies. Organizations serve as substructures that limit communicative connections. They block the direct correlation of every system process. In the economic system, for example, specific corporations are engaged in specific market segments, so that the ups and downs of car prices, for instance, do not affect the price fluctuation of napkins and vice versa. Similarly, in the political system certain parties stand for certain issues and political orientations (conservatism, liberalism, socialism, ecology). This differentiation on a subordinated level creates selectivity in the political system and makes it adaptable to important societal issues. In science, to give another example, universities and research institutes are often identified with particular disciplinary paradigms. And these approaches often bear the name of the university or institute: Harvard, Chicago, New York, Frankfurt, and Bielefeld. The medium of truth and scientific disciplines alike are mediated by and selected through organizational differences that function as interdependency breaks. In organizations departmentalism is a structure that functions as an interdependency break. The benefit of this structural feature can be seen in the stabilization of the system structure. Environmental perturbations that touch one specific department or business unit and may cause a crisis do not necessarily affect other departments directly. Every differentiated unit is a segment of the organization that encompasses it, and has therefore its own environmental relationships. This structurally legitimized indifference enables the differentiated subsystems to concentrate on their specific tasks and allows them to observe their specific environment for relevant information. In organization theory, the need to counterbalance this process and to reintegrate the differentiated subsystems is considered to be the complementary process of departmentalism. So the distinction between differentiation and integration has become a well-accepted concept that describes the structure and dynamics of organizational systems (see Lawrence/Lorch 1967).

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Structural coupling and organizations The concept of structural coupling can be understood as a complement of the concept of interdependency breaks. The reverse of interrupted interdependencies is structured interdependency between the autonomous subsystems of society. The ability to break interdependencies among function-systems is one important precondition for increasing societal complexity. Structural coupling is basically needed as a counterpart to interdependency breaks. It is a mechanism by which the operatively closed subsystems of society are connected with relevant systems in their environment. Luhmann’s notion of structural coupling originated in Maturana’s and Varela’s theory of living systems. As he has often pointed out, the autopoiesis of systems is unthinkable without simultaneous structural couplings between those systems and environmental resources and settings. A system is structurally coupled to its environment, or to other systems in its environment, if its structures are adapted or adjusted to the environmental circumstances or the structures of the surrounding systems. From an evolutionary standpoint, one can say that modern society demands different structural couplings, because functional differentiation increases the independence and interdependency of function-systems simultaneously, as has already been stressed in the previous chapter. In aristocratic societies the unequal strata were coupled through households, which functioned as multifunctional segments. Households offered the possibility of communication beyond the boundaries of strata, because in households people from different estates interacted permanently. In contrast to that, modern society does not predefine one particular form of structural coupling. A variety of different forms is possible, because in principle every societal structure can function as a structural coupling. Symbols, texts (contracts, testimonies, and reports), persons in specific roles (experts), and organizations (universities) are some of the structures that Luhmann treats as structural couplings. In his late writings, Luhmann discusses the relevance of organizations to the various forms of coupling. According to Luhmann organizations condense structural couplings and contribute to the structural couplings between subsystems (Drepper 2003, pp. 237 ff.). Organizations are not structural couplings in themselves, because structural couplings are institutionalized on the level of society. Nevertheless, structural couplings would not be able to achieve the necessary complexity for linking the autonomous subsystems to each other without organizations that have the capability to develop external communication, reap information, and bundle communications (Luhmann 2000c, p. 400). The present thesis in this essay is that this abstract concept is not distinctive enough and needs to be reformulated. There is a lot to be learned from a structural comparison between function-systems that utilize organizations

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for structural couplings and function-systems that do not. Structural couplings are based on existing societal structures and use the structural similarities and compatibilities of the meaning-structures of subsystems. In structural couplings, the expectations that function-systems have from each other condense and become institutionalized. To give an example, the structural coupling between the legal and the political system rests on two wellestablished symbolic generalized media with a clear-cut binary code: elaborated programming and well-defined roles (politicians, lawyers, judges). On this basis, the structural coupling can be established on a very abstract and general level, namely that where the constitution is of interest in its capacity as a text. With regard to coupled systems, structural couplings are expectation patterns that condense the reciprocal expectations of those systems. If we look at the constitution as a text that helps structure the coupling of the political and legal system, we see that the political system relies on the legal legitimacy of the text, while the legal system presupposes the democratic legitimacy of the text. The legal system depends on the power (as symbolic generalized media) that has been embodied in the text, whereas the political system depends on the law (as symbolic generalized media) that has also been consolidated into the text. Through this circular process the constitution becomes an institution and a valued address that is respected as a “paramount value” (Parsons) in both the political and the legal system. Structural similarities to that can be seen in the coupling between the legal and the economic system (contracts, property). In the case of contracts and property the two symbolic generalized media – money and law – are institutionalized for the purposes of structural coupling. If one signs a contract the economic and legal conditions and consequences are clear: one incurs the obligation to pay, and a breach of agreement can lead to legal action being taken. In conclusion, one can say that when a system comes to fulfil its societal function, a greater degree of structural elaboration reduces the necessity for functionally equivalent structures that have to be stabilized on the level of a lower system type (interaction or organization). If expectations cannot be generalized permanently on the level of symbolic generalized media, formalized expectations are a possible functionally equivalent structure. In an empirical context, this refers to systems that cannot condition their operations through binary-coded and programmed symbolic generalized media that bridge the communicative hiatus of acceptance and refusal. The educational and medical systems of modern society are examples of that. In those cases formalized rules, professional roles, and personal authority are functionally equivalent structures that alleviate the acceptance/refusal problem of communication. And these structures are mainly stabilized on the organizational level (Drepper 2003, p. 240).

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Conclusion Combining the theory of society with organization theory to form a societal theory of organizations and an organizational theory of society is a current topic in interdisciplinarily orientated organization theory (e.g. Tacke 2001, Drepper 2003). The claim for bringing society back into organization theory is compounded by the demand for bringing organization back into the theory of society. What can be retained from the analysis of Luhmann’s theory is that the societal embedding of organizations and the organizational side of society have to be understood – in the tradition of Émile Durkheim – as a relation of simultaneous enhancement. Society is the all-encompassing social system that all further differentiations refer to. Because of that, organizations have a double relation to their surrounding society: on the one hand, they reproduce societal communication – in this respect organizations are society – and on the other hand, they distinguish themselves from their outer societal environment – in that respect organizations are not society. Society exists on both sides of the organization boundary. Thus organizations meet with society in a double sense: in themselves and in their environment (Luhmann 2000c, p. 383). In this sense, the relation between the functionally differentiated society and organizations must be understood as a “simultaneous enhancement of both realities” (Luhmann 1982a, p. 12). However, a systematic society theory of organizations is a desideratum in Luhmann’s work. All in all, Luhmann’s contributions towards a systematization of the way in which organization and society interrelate are few and dispersed. This text has tried to give a comprehensive overview of the possibility to relate organization and society from the standpoint of Luhmann’s theory. The first section dealt with Luhmann’s critique of classical organization theory, its rationality premises, and the ontological system model. It expounded the thesis that Luhmann combines these critiques in his early writings and that the different theoretical parts – in this case organization theory and general system theory – benefit from each other. Luhmann uses the critique of classical-organization theory and the concept of organizations and systems (whole-and-its-parts) that derives from that theory to elaborate an alternative system and differentiation concept (open systems, system/environment). In this period of Luhmann’s work the analysis of organizations seems to be an excellent field for discussing and exemplifying arguments with a basic theoretical relevance. Here, the theoretical path leads from organization theory to social theory, so that the general theory of social systems benefits from organization theory. The second section showed how the basic theoretical differentiation of various types of social systems (interaction, organization, and society) could be combined with the theory of internal structural differentiation of complex systems. That section aimed to show that it is possible to focus on organizations as autonomous systems 189

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with their own logic of self-reproduction and at the same time examine them as dependent substructures of a broader system. The second section also highlighted some basic theoretical concepts regarding the relation between formal organizations and functionally structured society. The formalization of structures is a process that generalizes and civilizes complementary expectations on the basis of membership rules. Furthermore, organization is the primary system-level in modern society that stabilizes these expectation patterns. Functional differentiation would not be possible without the systemtype of organization that provides the continuing motivation of individuals and makes improbable expectations possible. The third section established a link between the problem of repraesentatio identitatis of modern society and two of the salient characteristics of organizations, namely, that organizations absorb uncertainty and can be addressed as corporate actors in the societal communication. Organizations compensate for the deficit in certainty particularly in the complex society, because they are visible addresses that can be held responsible for certain actions and decisions. The relation between subordinate differentiation-forms of modern society and organizations was the main theme in the fourth section. This conception presents Luhmann’s very first attempt to elaborate on the relationship between organization and society systematically. Luhmann started working explicitly on this issue in some of his last publications. In those works he examined the connection between the internal differentiation of functional subsystems on subordinate levels, and the role of organizations in this process. Luhmann tried to define the function of organizations in relation to the differentiation forms of segmentation, centre/periphery, and stratification. This analysis has made clear that those differentiation levels cannot be conceived of without organizational performance, and that the discourse on modern society as an organizational society must take into account the relation between subordinate forms and organizational performance. Further aspects of the societal functions of organizations were addressed in the fifth and sixth section. The concept of interdependency break described organizations as internal structures of broader systems that function as internal selection-filters for environmental demands. And the aspect of structural coupling the seventh section discussed the complementary process by which organizational performance contributes to the interrelation of functional subsystems. In that section, the analysis of systems theory stressed the functional equivalence of organizations to other social structures, such as symbolic generalized media and their materialisation (i.e., texts), professions, and roles. The aim of this chapter was to present and discuss Luhmann’s diverse contributions to the correlation between organizations and modern society. There are a great many fruitful ideas in Luhmann’s work to draw on; nevertheless, the task of developing this topic and elaborating a societal theory of organizations systematically remains to be done in the future. 190

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Chapter 9

The Design of Organization in Society Dirk Baecker

Which society? One of the standard criteria of sociological organization research is that it sees itself as a society theory of the organization and is able to deduce its issues from hypotheses relating to the societal and thus the non-organized elements of the organization. This applies on the level of the organization as an “institution”, for which – depending on the particular social context – there exists a clear idea of what can and what cannot be expected from that organization in terms of regulatory activities. And it also applies on the level of the organization as a communication, that is to say, the way in which organized communication differs from non-organized communication. Typically, an organization’s institutionalized communication has to do with “decisions” on “operations”. If you join an “organization”, you communicate and thus accept the expectation that your work will be the object of the organization’s decisions. Organization means loss of autonomy for the individual employee and a gain in autonomy for the organization. While this is a precondition to all communication of decisions, a balance will always have to be struck between how much loss of autonomy is bearable and how much gain can be achieved. The classical sociological theories of organization satisfy this precondition. Max Weber’s (1978) theory of bureaucratic organization describes the filing system, the office, the civil servant, competency, qualification, profession, the form of financial compensation, separation of office and property, and the idea of discipline, as structures in which the organization – in a traditional society on the threshold of modernity – was able to operate effectively. Emile Durkheim’s (1984) theory of the division of labor suggests that the feeling of solidarity with a different fellow being had to be accepted both in the family and in other social groups so that the organization could condition the degree of acceptable dissimilarity through the condition of complementarity. Niklas Luhmann’s functional systems-theory states that the individual organization can only be differentiated to the extent that it is able 191

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to relate its own programs, which have considerable degrees of freedom, to the binary codes of a functional system (Luhmann 1997a, pp. 826–847). It should be stressed that this sociological approach to organizational research is only meaningful if we differentiate between organization and society; in other words, if we do not assume that society itself can be organized or that everything that is possible or impossible in society is for that reason possible or impossible in the organization as well. Society has no selfevident bearing on decisions about labor; and what organizations consider to be desirable and feasible is not identical with what society regards as desirable and feasible (Udy 1970). It is only when we accept this difference that Charles Perrow’s (1989, 2002) seemingly extreme position makes sense: he claims that organizations in today’s society are increasingly “absorbing” this society via the dependence of labor on earnings, the production and handling of positive and negative external effects, and the bureaucratization of access to factors of organization (e.g., human resources). It is only by making this distinction between society and organization that we can observe tendencies towards reducing or expanding it. If we proceed from this distinction (see also Kieser 1989; Luhmann 1994a; Stern/Barley 1996), we do not find a neatly tied up social theory of organization but rather a whole series of open questions which can be ascribed to the fact that the term “society” is somewhat indefinite due to the absence of a sociologically unequivocal social theory. Although the Marxist notion of a “capitalist” society that has been the basis of industrial sociology is gradually disappearing (Boltanski/Chiapello 1999; Deutschmann 2002), this does not mean that new notions are finding general acceptance. In fact, of the various notions of society – from “risk society” to “information society” to “knowledge society” – those that are currently holding out reflect unresolved rather than resolved problems; that is to say, problems of coping with responsibility, with the effects of too much information and with knowledge deficiencies. Those who believe that the connection between organizational research and societal theory means that the former is made aware of the contextual conditions of world history, globalization, cultural and religious differences, and the differentiation of functional systems which permit every organization to define its reason for existence, its mission, and its measure, will not be completely disappointed – but neither will they be altogether satisfied. The explanation is simple. Social theory today does not limit itself to describing social macrostructures, which could define a more or less fixed framework of conforming and deviating behavior for meso- and microstructures. If we accept the standard devised by Niklas Luhmann in his book Die Gesellschaft der Gesellschaft, then social theory today is the theory of isolating an elemental social operation referred to as “communication”, which has to reproduce itself both microsociologically and macrosociologically 192

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(Luhmann 1997a; see also Willke 2001 and 2002). This suggests a departure from the broader social theories based on differentiation, evolution, and media and a move towards the narrower issue of how we can reproduce a communication that is assumed in principle to be improbable. If we apply this interpretation of society, the question raised by the “risk society” concept is whether and how the self-induced ecological risks to society are or are not fed into the reproductive conditions of society, especially the distinction between individual and society (Beck 1992). The question raised by the “information society” is whether and how communication processes – in interactions between individuals, in organizations, and in society – can cope with having to expect surprises constantly. Where the “knowledge society” is concerned, the question is whether and to what extent each position in society can cope with the attribution of knowledge gaps and the need to acquire any missing knowledge. With the concept of “globalization” the question is whether and how product, financial, and labor markets can cope with the challenge of worldwide competition. And the concept of the “world society” asks whether and how religion, culture, intimacy, politics, economics, sport, the military, and education can be equipped with a horizon of possibilities, and thus contingencies, which covers the entire world of possibilities and contingencies, without seeking refuge in the safe historical boundaries between religions, nations, epochs, and ethnic groupings, which permitted the definition of more or less reliable standards for what was to be expected in substantive, geographic, temporal and social terms. The reason for this ostensible “short circuiting” of micro- and macrosociological issues lies in the term “communication” which Luhmann coined to define the “form” of communication. Following up G. Spencer Brown’s (1972) notion of form, this means there is both an inside and an outside to a communication, or in other words a communication comprises both the aspects that are included in that communication and those that are excluded (see Luhmann 1997a, pp. 36–43 and 78–91). Accordingly, a teacher’s strictly local attempt to convey a basic knowledge of mathematics to his or her student must not only reckon with the student either understanding or not understanding mathematics. Teacher and student will also be assumed to ask themselves constantly how the learning of math under the conditions of school instruction relates to all kinds of matters of world society. Although these are excluded from the actual communication of mathematics, they are nevertheless included – as excluded elements – in the “form” of this communication. The long-range implication is that exclusion per se is observed in the communication (on both sides) and that the effectiveness of what the communication actually includes or comprises (math instruction) will be in whether this exclusion can or cannot be made plausible. This interpretation of the term “communication” does not imply that all 193

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familiar differentiations “implode” in the interdependence of each and every thing, as the holism of many a New Age philosophy would have us believe. Rather, it suggests that every differentiation must always be prepared to be made the issue that triggers disputes, and to have to be justified and/or negotiated in its particular form. Of course, in order for such communications to be possible via the exclusion and inclusion of the particular content of a communication, distinctions have to be assumed and drawn which cannot simultaneously be made the issue. In the society to which this definition of communication reacts we have to deal not so much with processes of “dedifferentiation” but with processes of “oscillation” (a term coined by Spencer Brown) in which the relationship between the inside and outside of all kinds of distinctions is hampered by reflections on the quality of that distinction. The lines of distinction not only separate things from one another; at the same time, they also relate things to one another, so that both sides of a distinction occur on either side of the distinction, albeit in a different form of operation (“cross”) and representation (“mark”). While the student is being instructed by his teacher in mathematics, he or she is “operating” within the frame of a school-class interaction, which revolves around the subject of instruction, i.e., mathematics. Furthermore, he or she “marks” whether and how this interaction is or is not effective in the light of politically motivated wars, economically modified career opportunities, cultural education conventions, family-related expectations, and potential personal relationships within the class community. The simplicity and elegance of the concept of the form of communication contrasts sharply with an enormous increase in the complexity of each single communication which is made visible by this concept. Working with the concept, we develop a feel for the “irritability” of every communication and thus for the amount of work that has to be done on both sides of the communication in order to reproduce it. It is in this context that Erving Goffmann’s (1959) apparently micro-sociological, interactionist perspective proves its far-reaching relevance to social theory because it is in fact thoroughly macro-sociological.1 Goffmann’s sociology not only reconciles – implicitly rather than explicitly – micro- and macro-sociological issues (thus moving beyond the conventional distinction), but he also works with the difference between communication and perception without drawing a dividing line between the two concepts, as we would do today under the impression of the cognitive sciencebased program of describing operationally closed mental and social systems (Luhmann 1990g and 1995g). In fact, this is a further feature of the notion 1

See also Goffman 1974. This societal-theory dimension of his sociology is played down in Goffmann’s (1983) own summary of his theoretical perspective. See also Rawls’ discussion (1987) and Fuchs’s comment (1988).

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of the form of communication. Not only does it exclude objective aspects of the communication or addressees or time horizons, whilst including certain others, but does so under the condition that mental systems are in operation in its environment, which – unlike communication – have the power of perception and which, therefore, on the basis of their perceptions, to which communication has no access, are likely to, or can both be discouraged and encouraged, to take part in further communication. Communication endeavors to transfer attractive or even compelling aspects of itself – warnings to deviate, such as the audibility of the spoken language, the formal distinctness of script, the dramaturgy of body, space and time flows (Burke 1969). However, all this cannot alter the fact that mental systems – whose capabilities are developed to a high level of sophistication exactly by taking part in communication – are still free to direct their attention even when they are susceptible to influence. It is this form of communication that the social theory of organization has to cope with today. It has the formidable task of describing the differentiation of the organization both from society and within society under the condition of drawing a distinction between communication and mental systems that are capable of perception. The enormous complexity of this task is only lessened by the fact that the organization has to use its distinction in society vis-à-vis consciousnesses in order to remain attractive, and that it can demonstrate to society this distinction vis-à-vis systems of consciousness in order to maintain and expand its scope for differentiation. In other words, the organization gains the commitment of consciousnesses through a “better”, e.g., more reliable, “society” (namely: “community”) – or it has the opposite effect because it is more authoritarian, more undemocratic and more uncivilized than mental systems are prepared to accept. And organization derives its legitimation from society by demonstrating that it is capable of commitment vis-à-vis consciousness and possibly capable of different degrees of commitment vis-à-vis the consciousnessses ascribed to employees, customers and other observers.

Organizational design In his book Organisation und Entscheidung, which concluded his work on organization theory, Niklas Luhmann suggested using the category of “design” to describe how an organization can secure the autopoiesis of the communication of its decisions under the condition of fascination, orientation and commitment of mental systems in its environment (Luhmann 2000c, p. 148). Through its design, an organization makes itself perceptible to these mental systems in such a way that they are not only impressed or even fascinated; they also have to be able to recognize what the main con-

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cern of that organization is, not just as an aspect of perception but also as a feature of the social system. And for this reason alone it will be vital not only to spellbind, i.e., to constrain the mental systems, but rather to sustain their interest, to encourage them to make a contribution, because the aim can not only be to restrict their latitude, but also to give them some influence on the decisions taken by the organization. The complexity of these demands on the design of an organization is perhaps nowhere more obvious than in a military organization, which under all three possible conditions of operation, i.e., as training organization (in peace), as a policing bureaucracy (in action), and as a bureaucracy in chaos (at war; on the latter, see Keller 2002), has to be in a position to guarantee coordinated action and maintain hierarchical distinctions. This means, the military organization must resolve the problem of integrating highly specific perceptions on the one hand, with a far-reaching generalization of command structures on the other hand in such a way that the organization as a whole is both effective and maneuverable. Each type of operation (training, policing, war) must be enacted without the risk of one of its branches, army, navy or air force, separating and becoming immune to commands. The two major elements of military organizational design that contribute much to resolving this problem are the weapon and the uniform. Both describe the deployment conditions of the soldier in the field by defining his scope for autonomy (the range of his weapon and competence of his rank) and by conditioning this autonomy in terms of reinforcement and coordination (as regards the weapon) and superiority or inferiority (indicated by the uniform) so that the individual’s relationship to his unit and its relative position in the organization is manifest without further communication. Even changes from one system state to another can be communicated and made perceptible by modifying rather than substituting weapon and uniform.2 In other organizations the same function is performed differently. Officials in all bureaucracies appear to adopt ultimately a specific set of gestures, mimicry, and rhetoric which permits them to communicate without the need for further thematization. They also clearly reflect the nature of the organization’s decision making and indicate the approach that would-be associates should take when addressing this organization. The highly disciplined official like the well-drilled soldier is not a fortuitous by-product of working conditions in the military or in a government agency; rather, they are “figures in a design” through which uno actu the social distinction of each organization and the structures of its autopoiesis are symbolically communicated and made manifest. It is for this reason, too, that a sociology of the 2

The “dress uniform” and non-bearing of a weapon, or its substitution by an ornamental weapon, make clear to the off-duty soldier that his behavior vis-à-vis civilians must as a rule be different from that vis-à-vis the enemy.

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bourgeois society was oriented towards the figure of the “substitute”, as well as his behavior, prevalence and chances in life, in the belief that the two figures of the “worker” and the “entrepreneur” and with them the conditions of the “class society” were truly obsolete (Simmel 1989, chapt. 6; Siemons 1997; Kracauer 1998); not to mention the field of literature that emphasizes the claims laid upon perception by organized communication as so unreasonable that the autopoiesis of the communication of decisions is jeopardized.3 Just as the design of an organization can be described as a symbiotic mechanism, to use Luhmann’s term, which permits every single communication to gain access to the psyche of a consciousness and the physis of a body, this access can in turn be called into question as soon as the psyche becomes aware – through other communications to which it is structurally linked (for example, when it reads) – of what the implications are. A move from the army to the air force can be an attractive proposition for the simple reason that the shirt collar is not worn as tightly so the individual has entirely different ways of proving his individuality. Although the term “organizational design” is familiar in the literature on organization, there has so far been no successful attempt to accurately describe its problem reference. The distinction between social systems (communication) and mental systems (consciousness), which has been developed from the theory of self-referential systems, is – as far as the special case of the organized social system is concerned – a proposition for describing the problem reference to which the term reacts. Moreover, we can conceivably interpret the notion of design – over and above organization – as a “structural coupling” mechanism (Luhmann 1995g, pp. 12–24) between consciousness and communication. We cannot go into this here. It is more important that even without an explicit definition the literature has compiled the structural features of “organizational design” which are consistent with our interpretation of the problem and function of design. First, the question of organizational design refers primarily to the separation and coordination of the various tasks of an organization: this means that the boundaries around positions and jobs have to be drawn in such a way that competencies are both distinguished from one another and related to one another and that these boundaries are both drawn reliably and can be observed (Thompson 1967; Galbraith 1973 and 1977). We should be able to assume that an organizational design, which in the final analysis has the job of presenting routines and contingencies not as two different worlds but as something that is connected, will always symbolize every boundary

3 I am thinking here of course of Franz Kafka’s two novels The Castle and The Trial and more especially of his short story “In the Penal Colony”.

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line in order to make the unity of distinction both communicable and perceptible within the organization.4 The literature not only encompasses questions of distinction and reintegration but also discusses questions relating to the type of communication that permits us to differentiate and thus make autonomous the autopoiesis of the communication of decisions within an organization and also to refer back both to the conditions of their differentiation and to achievements in the environment of the organized system. From this angle, it is worth considering the question of organizational design as a comparison of the effectiveness of different communication genres: obviously, electronic, written, and oral communication and the reference to documents versus discussion notes, or telephone versus face-to-face communication offer quite different possibilities both of differentiating and re-embedding a communication (Daft/Lengel 1984; Yates 1989). Organizational design here means using the communication channel as a variable for monitoring and control in the management of the organization. And finally, on the subject of organizational design we come to the socalled context variables, which describe the advantages and disadvantages of unequivocal versus equivocal decisions, unique versus recurring or comparable decisions, variable versus stable decisions, heterogeneous versus homogeneous and independent versus autonomous decisions, depending on the specific environments with which the organization is confronted (Butler 1991, p. 249). Here too, the organizational design must consider the extent to which the “communicative” recruitment of what kind of environmental contributions is involved or – at the other end of the scale – the “technical” isolation and insulation of the organization from the environment. This involves directing constant questions both at the internal environments of the organization (positions, departments, hierarchical levels) and at the external environments (mental: consciousness systems; social: other organizations, functional systems, interaction; organic and physical: natural environment). In doing so, the organization can only pursue those design options which either have the seal of society’s approval or to which society at least has no objection. We could apply the term “regime” to describe socially approved options for organizational design, if we take regime to mean the ability of a social system to keep grasp on both its own sub-systems and systems in the environment of this system. Regime, then, controls the risk of the control of its sub-systems by controlling the risks of its control of environmental systems: “Institutions and the rhetorics they come to agree upon both are open ended and can be extrapolated beyond present local disciplines and networks. Call the product, which is a native statement combining styles 4

For the “symbol” as “semiotic condensor” see Lotmann (1990).

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around institutions, a regime” (White 1992, p. 226). Typically, both these risks are increased and controlled through differentiation and heterogenization rather than through integration and homogenization, so that, for example, a heterogeneous workforce is a reliable indicator that the level of internal and external differentiation of public administrations has increased without a simultaneous decrease in the auto-control of these organizations. This goes counter to the commonly held belief that the more homogeneously the reality produced by control presents itself, the greater is that control. This is the reason Deleuze (1993) distinguishes “disciplinary societies” and “control societies”. Our thesis is that nowhere is the societal component of an organization more impressively documented than in its design. Of course, this embraces all forms of organizational culture much discussed since the 1980’s and with whose help organizations have tried to take responsibility for defining their societal preconditions in order both to be independent of these on the one hand, and to be able to establish links with the societal environment on the other hand (Ulrich 1984). For this reason, most organizational cultures aim at a socially acceptable form of hierarchy; in other words coordination and cooperation are designed to be both mentally acceptable and capable of reconciliation with individualization needs and to be in concert with the social systems in the organization’s environment, i.e., other organizations or political, economic, educational, and legal systems or the mass media. At the same time, this social aspect of the organization is nowhere more the subject of debate than in the way in which the organizational design is not so much an “interface” to other social systems (including its own subsystems) but rather to the mental systems in its environment. There appear to be at least two reasons for this, which are probable closely related, although on first sight they seem to contradict one another. The first of these is that as ecological risks grow, society is increasingly keen to adopt the perceptibility of mental systems and no longer to simply dismiss them as the private affair of individuals. It may be, and this is something that would need to be researched further, that it is easier for organizations than for other social systems both to focus and to control the excess “resonance” (Luhmann 1989a) of the communication vis-à-vis perceived environmental circumstances. The thematization of environmental behavior, which in functional systems simply becomes caught up in the maze of the relevant binary codings and produces little more than indignation and resignation in interactive systems, can be made the object of decisions provided these distinctions obey at the same time demands of value-added product design and quality with respect to markets and other publics. The second reason is connected with the society’s growing interest in “individualizing its individuals” (Luhmann 1989b). It seems to be in contradiction to the first reason in as far as it deflects the attention of society 199

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from ecological problems and addresses the opportunities of individuals in numerous relationships within society. On closer examination, however, it is possibly one and the same thing. I say this because the interest in “individualizing individuals” increases as society attributes its “home-grown” problems to its own regulative standards and suggests that the solution lies in the individuality of each member of society – in terms of politics, the economy, education, the legal system, and religion. The resulting “self-conflict” has permeated this society since Plato under different labels, the most current of these probably still being the contradiction between “totalitarian” and “liberal” social models, whereby “liberal” does not mean acquiescing to all the demands of the individual simply because they come from the individual, but to concede all an individual’s errors which, in the neighborly rivalry of individuals, can be mutually neutralized (Hayek 1976). Individualization means above all else to redefine the relationship between communication and consciousness in each individual case, and thus to increase the likely deviations of every single communication in the exchange with each individual consciousness on the one hand, and to increase the mutual orientation of communication and consciousness towards each other because, as we know, there is nothing like uncertainty to provoke imitation (including the imitation of deviations; see Alchian 1950, p. 219). In other words, it may be that the ecologization and individualization of society goes hand in hand with the attempt to equip society both with “irritation potential” and with observation points in the light of its vulnerable overall state. Whether this suggestion ascribes too much of Hegel’s “cunning of reason” to society, whether these “measures” would be effective, given the institutional inertia of quite different dimensions, and, finally, whether indeed the state of society is vulnerable are questions that will have to remain open here. It is more important for us that, at least on the organizational level, there are indicators that problems are not only being identified and communicated but also that they are being tackled. Just as the nowadays much maligned “bureaucracy” of the 18th and 19th centuries did much to emancipate society from traditional orders of kinship, class, ethnic groupings and cliques (Stinchcombe 1974) – and given the enormity of the undertaking, who would not expect there to be setbacks? – the organization could play today an equally creditable role by providing society not only with the still invaluable rationality of administrative structures (Luhmann 1977b; Luhmann 2000c, chapt. 15), but also with the intelligence of perceptionsensitive forms of communication. To put it plainly: the aim is to give the organization and thus society renewed access to the empirical worlds of labor, which in the wake of “Taylorization” in factories, government offices, schools, and universities, were replaced amid much dispute and unrest by work concepts designed on scientific, pedagogical and didactic principles (Edwards 1979; Malsch 1987). 200

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The attempt to access the intelligence of perception-sensitive forms of communication is being made particularly in the frame of organizational designs that are conceived as “self-designs” or at least that are receptive to self-design (Hedberg/Nystrom/Starbuck 1976; Nystrom/Hedberg/Starbuck 1976). If intelligence can be interpreted as observing own knowledge deficiencies with a view to drawing on the possible knowledge of others, and accordingly both using and extending this knowledge (Baecker 2002), then we are looking at organizations which – as “distributed systems” (Fox 1981) – can design not only beyond internal system differences but also beyond system/environmental differences. We could also say that what we see here are “networks” if by that we mean highly improbable reproduction relations of heterogeneous elements (White 1992). In other words, an organization’s socially motivated but also socially representable access to perception is not achieved by extending organization technology or by adopting more subtle forms of organized communication but by a combination of both, in a strictly loose coupling, if that term is permissible. Perception can be coupled to the organization if organizational technology poses communication tasks and if organizational communication poses technological tasks, whereby technology is unable to resolve the communication tasks and vice versa. This is a new situation, because with this problem the dreams of “sociotechnical” systems – in which communication uses technology and technology uses communication – appear to disintegrate (Bijker/Hughes/Pinch 1987). What we now see is a paradigm that is oriented more towards certain team sports or orchestral music: the specific techniques are laid down in rules, and instruments with a certain latitude for variation are stipulated; the level of communication (gestures, calls, signs from the conductor’s baton) varies, and interaction between the players depends on perception. To understand what is meant here, imagine for a moment a basket-ball game or a symphony concert without mental systems (including the conscious control of the body) being present. With this approach, organizational design means relating technology and communication – or causality and contingency – in such a way that maximum effectiveness in both technological and communication terms can only be achieved by including perception. In the language of Neville Moray (1984), we could also say that organizational design of this kind will necessarily produce those “ill-defined” systems which can only be transformed into “well-defined” systems through the non-predetermined but riskoriented and thus strictly choreographed and “playful” (Derrida 1970) use of perception and corresponding reactions. Currently the most convincing paradigm for what is meant here by organizational design are those high-reliability organizations (HROs) that Karl E. Weick and Kathleen M. Sutcliffe (2001) have made the subject of their 201

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book on Managing the Unexpected. They study how work is organized on aircraft carriers or in nuclear power stations to develop their concept of “mindful management”, which in this context means the reintegration of loosely coupled communication and perception. Management is “mindful” when it is in a position to be aware of its own expectations, the limited horizon of these expectations and the need for ongoing corrections and when it draws on both communicative and perceptive data to check the soundness of these expectations; in other words, when it directs its sights on ongoing decision requirements and keeps its eyes (and mind) open. The competence that is vital here may possibly be the “sensus communis” of an ongoing assessment of a community’s historical situation, which Hans-Georg Gadamer (1989) describes in Truth and Method as the essence of a globally informed, communicatively prudent and wise, rather than theoretically “correct”, behavior.5 Here too, the crucial point is that the objective is not to install fixed couplings between individual perceptions and communication structures quasi-technologically, as these are imagined in the motivation and management concepts of numerous management philosophies that are erroneously believed to be grounded in the social sciences. On the contrary, they should aim to reverse the “infantilization” (Argyris 1957, p. 66) of employees in organizations by permitting loose couplings and defining mature behavior expectations.

Routines It should probably be pointed out that “organization” has always meant relating causality and contingency, technology and communication in such a way to one another that routines can be found, put firmly in place, and monitored. There can be no doubt whatsoever that the exclusion and reembedding of individual, both cognitive and emotive achievements are at the center of the social constitution of the organization. Establishing routines has always meant and continues to mean safeguarding social processes, whether these relate to filing, assembly line production, field service, university research, classroom instruction, or treating the sick, against the erratic effects of individual perceptions. At the same time, however, precisely 5 See also Gadamer’s comments on the essay “Sensus Communis, an Essay on the Freedom of Wit and Humour in a Letter to a Friend” (1989 in: Shaftesbury 1999). Readers not wishing to pursue these sources should study instead the typically antibureaucratic Hollywood film and consider roles such as those by Nicolas Cage as Dr. Stanley Godspeed in “The Rock” (USA, 1966) or Alec Baldwin as Jack Ryan in “The Hunt for Red October” (USA, 1990), not to mention their respective co-actor Sean Connery in the roles of John Patrick Mason and Captain Marko Ramius. Virtually every one of Silvester Stallone’s parts uses the same topos of intelligent perception versus blind (and always highly organized) communication.

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those perceptions have to be “recruited” without which the routines will not find their object and will not be cushioned by cooperation. The extent of the closely linked de-motivation and re-motivation of individual perceptions that are directed through the organization along different paths from, say, family, play, intimacy, art and science, has throughout history never received the acknowledgement it deserves.6 We cannot write that history here. We shall restrict ourselves in this final section to naming three aspects from which it would make sense in social terms to re-introduce the excluded individual perception into the organization (Schimank 1986). In doing so, we shall focus on considerations that center not on the abandonment of routines, but on their reformatting. Only in this way can we justifiably claim to make a statement about “organization” and not, say, about something entirely “other”, towards which we need to “free” ourselves. We believe that the objective of an organization is primarily to structure the communication of decisions in such a way that decisions can absorb their uncertainty and not simply pass it on and allow it to become the aggregated condition of the system (March/Simon 1994; Luhmann 2000c). Rather like the memory of a social system, routines are able to both “discount” – from event to event – the difference between each of these events and to “recount” the connection between each of them: in the face of the complexity of these events, whose sheer variety makes any linearization and sequentialization improbable, this means selectively forgetting what it is that makes them individual and selectively remembering how individual they have to remain in order to be coupled to past and future events. The reference to “society” in this context means being able to install loose couplings between communication and perception, which the organization itself must neither describe nor answer for and for each of which different options of remembering and forgetting can be formulated. To operate “routinely” means to be able to “depreciate” perceptions with a view to communication and communication with a view to perceptions in order to be able to continue both.7 6

This is especially true if we concentrate on the difference between organization and society, which remains to be introduced into the Foucault-type of analysis of the connection between knowledge, power and discipline, which is particularly relevant to our context. To equate one with another would mean not least to be unable to reflect on one’s own standpoint. The distinction between the closely coupled de-motivation and re-motivation derives from Saussure’s language theory. The following quotation by Derrida (1974, p. 112) refers to this theory: “La langue doit sa naissance à la démotivation, mais ne pourrait évoluer sans avoir recours en permanence à la rémotivation des signes et structures.” 7 The description of the problem may be unfamiliar, but the essence is well known. It has to do with the above-mentioned “sensus communis” as well as with the political wisdoms of the sixteenth and seventeenth centuries (Machiavelli, Baltasar Gracián).

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We shall concentrate on three routines in this sense: on the newly emerging cultural form of the organization under the conditions of the introduction of the computer into society, on risk-bearing in networks, and on the significance of commitments in structuring the relationship between individual and organization. The most important of these aspects, which we can no more than outline here, is probably that routines today have to do with a much changed “cultural form” of society. If, like Niklas Luhmann (1997a, pp. 409 ff.), we may interpret a cultural form of society as the way of dealing with the superabundance of meaning, which the major communication genres or media in a particular society produce, then we can assume that today’s predominant cultural form (predominant in the sense of giving orientation) is no longer the teleological definition of a purpose, with which Aristotle restrained the surpluses of meaning of the written word, nor the certainty-creating restlessness with which Descartes reacted to the surpluses of meaning that resulted from book printing, but the the idea of media of communication by which Marshall McLuhan (1968) and Talcott Parsons (1977) considered controlled the superabundance of meaning produced by the computer. These media work their way via linking motivation to selection thereby reassuring the society that there is no gain in degrees of freedom (motivation) without a corresponding loss in degrees of freedom (selection). Organization today still means – in best administrative science and business economics tradition – the creation of a relationship between purpose and conditions, in which sufficient tension can be built up for pursuing and changing objectives (Luhmann 1977b, pp. 101 ff.; Luhmann 2002, pp. 256 ff.). Not least in the form of its traditional hierarchies, the organization is conditioned to enact those routines which operate with a calculated quantity of resources in pursuance of a particular purpose, or which allow those purposes to be interchanged. It is not least for this reason that we distinguish between labor on the one hand, which if at all possible should have a purpose, and management on the other, which introduces that restlessness into the organization that permits those purposes to be reviewed. In other words, the cultural form of the organization is well prepared for both the written word and book printing. With the introduction of the computer, however, society has had to adapt to yet another different cultural form which may be characterized as the need to create an awareness of form that can cope with objective, social and temporal decomposition – in the face of a complexity which has become incalculable due to its ongoing and multifold computation. Where the introduction of the written word had meant, among other things, that people had to expect individual memories to deviate (and thus had to devise bookkeeping) and where the introduction of book printing meant that increasing complexity could only be managed by a change of classifications (and thus by 204

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specialists), the computer confronts us, as only art has done hitherto, with the phenomenon of having to acknowledge each individual condition of a system as the starting-point for different couplings and being able to control (or rather: visualize) the resulting complexity only by constantly devising new network-like “figures” (Gestalten). The cultural form “medium” provides the appropriate background thinking, if we interpret “medium” as the observation of a range of possibilities from which a selection has to be made and where selection can only be contingent so that every ongoing selection is convincing from the viewpoint of its materialization, and is adopted and examined from the viewpoint of its effectiveness until a new convincing selection emerges.8 The medium motivates, as Parsons suggests, through the fact of its selection, or, in other words, both through selection, which takes place on a case-by-case basis, and through the other possibilities, which, although excluded at the present time, are (triggered by the fact of selection) kept in mind nevertheless. Accordingly, the purposes and restlessness of an earlier age are not obsolete. On the contrary (Rosenblueth/Wiener/Bigelow 1943): they are overlaid with a notion of “form” which considers the purposes to be secondary (relative to being on the move and in transition) and no longer accords to restlessness the credit it once enjoyed, i.e., that it is simply the transition stage on the way towards stabilization. The search now is for “disciplines”, “regimes”, and indeed for “empires”, in which the precarious and thus interdependent identities of institutions, ideologies, industries, and individuals are configured in a frame that overarches heterogeneity. This can only be described by a network theory which has recently gained currency and which can handle the ambivalent phenomenon of identity and control (White 1992).9 It is still too soon to predict with any certainty what the cultural form “medium” will mean for organizations and their routines. What we can say is that the shifting of the reference points “hierarchy” and “environment” to “networks” and “projects” indicates a greater potential for deconstruction and re-combination with regard to all production factors (labor, capital, technology, real estate, organization and information) and thus confronts us with a greater depth of focus both in innovation policy and in the analysis of value-added chains, organizational processes and interface design (Peters 1993; Peters 1999; Heuskel 1999). Organizational designers, managers and consultants no longer direct their sights just on criteria of technical and economic efficiency and effectiveness; their approach could probably best be 8 If this thinking is accurate, we must accept that a “mathematically” stringent theory of communication on the lines suggested by Shannon and Weaver (1963) might by of some future prospect. 9 On the concept of “fractal integration” through the “control of differences” in the “empire” see Hardt and Negri (2000, pp. 325 ff.).

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described rather as “cultivating improbable projects”. In doing so, they have revived the hermeneutic practices advocated by Gadamer (1989) as well as systemic approaches which are based on Heinz von Foerster’s, Humberto R. Maturana’s and Francisco J. Varela’s (Maturana/Varela 1980; Von Foerster 1981; Varela 1999) concept of “structure-determined systems”: according to these, every organization, every corporation, every government authority has its historical state, which is a product of the states through which that organization has passed and which has to be recognized (which does not necessarily mean: presupposed) as crucial to everything that is to come. This state, as the term “medium” indicates, is nontransparent in all significant respects, and we can grasp it only by using “operational research” (Ashby 1958, p. 97) based on current information. In the medium of an organization thus interpreted, the cultivation of a project means to realize the improbable by comparing available and non-available production processes. The organization can verify at all times whether it is in a position to do so by keeping a close watch on the relation between communication and perception. Only if it has routines for controlling this relation, based on the concept of loose coupling, can the organization hope to make the difference between communication and perception the paradigm for combining labor, resources and results. In the context of the cultural form “medium” with which society is reacting to the introduction of the computer, the organization and its routines are also assumed to be able to cope with a far higher level of nontransparency, with regard not only to social and mental, but also to ecological and technological relationships than would hitherto have seemed healthy to all visions of control (Kelly 1990). The concept of “form”, as developed by G. Spencer Brown (1972), can be usefully applied in this situation because it incorporates the “other”, “unmarked”, side of the distinction in the form of differentiation so that no transparency of self-evidence is to be expected at any point of operations. The reverse side of this concept – and this is our second aspect in considering how re-formatted routines might appear today – is that the two sides of the distinction are not only separated from one another, but that they are also related to one another. We suggest using the term “risk” – which has been effectively used in the social sciences for several decades – to describe the connection between the two sides of the distinction and thus to describe the constitution of a form (Douglas/Wildavsky 1982; Short 1984; Wildavsky 1988; Beck 1992; Luhmann 1993i). To use a differentiation suggested by Niklas Luhmann (1990g, pp. 131–169; 1993i), “danger” denotes the connection – visible only to the outside observer – between the two sides of a distinction from the viewpoint of a threat to this distinction; “risk” denotes the re-introduction of this observation on the inside of the distinction for the purposes of an inside reflection of that distinction, from the 206

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viewpoint not only of a threat to it but also of coping with this threat or, if you like, from the viewpoint of risk management. Taking up one of Kenneth J. Arrow’s lines of thought – “the competitive allocation of risk-bearing is guaranteed to be viable only if the individuals have attitudes of risk-aversion” (Arrow 1964, p. 91) – we shall assume that all network connections only emerge when risks are taken in order to avoid them and when this paradox enfolds as it spreads to the different positions in the network. Again, we are faced with the question of distributed systems, but in this context we pose it in a strictly sociological sense, i.e., how can a connection be made between two or more elements when this connection has no other motive than itself, or in other words, when the corresponding objective, social, and temporal motives have to be created after the fact and in order to maintain the connection? The answer to the question is that the connection will only materialize when all involved positions can assess with an adequate degree of reliability the risks that each one of them will take, the extent to which it recognizes and can cope with this risk, and the extent to which this risk makes each position selectively dependent on all other positions. Only then is it true to say that risks are taken in order to avert them. It is safe to assume that from the viewpoint of risk-bearing through risk assessment, organizational routines have been over-taxed for several decades now because the increased complexity and turbulence not only of the social environment but also of mental, cultural, technological and ecological environments has forced risk perceptions on them for which they have no coupling modus. To recognize, on one hand, and to fear mental, cultural, technological and ecological risks, on the other, is one and the same thing to an organization when it can no longer trust the regimes of authority, hierarchy, expert know-how and social indifference, which in the past afforded protection from these risks (and transformed them into ecological hazards). If these regimes fall victim to the transformation through which society adapts to ecological hazards in the broadest sense of the word, organizations are rendered helpless unless they can transform these same risks, from which they were hitherto protected, into options. These in turn have to be tailored to the organization’s different environments which are now transformed into network partners. In other words, organizations must begin to increase, present and cope with mental, cultural, technological and ecological risks – alongside the continuing social risks – in order to expand their networking capability in all these dimensions (Handy 1994; Handy 1996; Sennett 1998). Careers must be broadened by options for self-fulfillment – and the concomitant drawbacks of imposed “flexibilization” and forced aging. The familiar social milieus of work must be extended by training and development programs – and the drawback of emancipation from the “milieu of origin”. The 207

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conventional buyer’s or self-developer’s attitude towards technologies has to be replaced by a willingness to share the risks of the technology developments of partners who need to have different options in order to stay calculable. An organization should no longer ignore external effects but must internalize these in order to maintain demonstrably its sustainability with the ecological environment. And finally, the organization must broaden its hitherto more or less monopolistic connection to its elected functional system (the economy for corporations, politics for government authorities including the military, the law for courts and solicitors, education for schools, science and universities, art and culture for museums, galleries and theaters etc.). It must consider other, if not all, functional systems in order to demonstrate its established position in society or, in other words, its risk acceptance, both to the inside and the outside. Although the degree to which this takes place will be highly selective, it does not mean that it could just as well not take place. It means, however, that all organizational routines would be hopelessly over-taxed unless the organization were able to “take refuge” communicatively in taking account of certain risks only by perception and to take refuge perceptively in taking account of certain risks (possibly the same ones) by communication. “Talk” and “action” in which an organization’s decision-making behavior was hitherto embedded according to Nils Brunsson (Brunsson 1985; Brunsson 1989; Brunsson/Olsen 1993), are supplemented through “narration” and “experience” (Guillet de Monthoux 1983; Czarniawska 1997; Rifkin 2000), so that those dimensions of perception can be addressed which are not currently accommodated in communication; which, in other words, are neglected in the decision-making process. Virtually every manager is aware of these new dimensions of concern; the organization must do everything in its power to develop a networking capability in areas which only recently lay far beyond its horizon of interest. And this networking capability, thus my hypothesis, will depend on the organization’s willingness to accept risk whatever the cost of the acceptance may be. A third aspect to be considered when identifying which routines enable an organization to capitalize on its difference vis-à-vis society to organize its handling of communication and perception can be derived from the extensive literature on issues relating to “commitments”. The concept of “commitment” was introduced particularly into sociological literature to describe ties within an organization which, in terms of rationality, considered means to be interchangeable with other means with regard to their effectiveness for achieving ends. According to Philipp Selznick’s (1966, pp. 255 ff.) famous study of organizations, commitments refer to means and goals and to the connection between these; in other words they transform rational loose couplings into traditional fixed couplings, or freedom of scope into networks which – like immune systems – rebel against their dissolution. Commitments 208

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of this kind evolve out of the autopoiesis of the organization (Selznick speaks of the task of preserving the organization); out of the social and professional backgrounds of the organization’s employees, especially when these are coupled with demands that are not identical with those of the organization; out of the institutionalization of the organization’s values and goals, which restrict options and dictate behavior guidelines (Selznick underlines the commitment effect of so-called precedents); out of the organization’s social and cultural environment whenever this comes into conflict with the organization and to which the organization can only react with certain “claims to power”, which in turn trigger ties on the inside; and, finally, out of interests which crystallize in the course of the organization’s history of delegation practices. Today, we tend to see commitments of this kind not as a problem but as a solution to the problem. Provided that the risks of “overcommitment” can be eliminated – these are seen in a lack of creativity, opposition to change, and exaggerated conformity – commitments can be used as routines with which to tackle motivation problems (Scholl 1981; Randall 1987). This means we demand the chance to take on commitments on condition that these are viewed by all involved as something they can renege on. In this form, we might assume, commitments are a means of developing small, compact milieus – given the above-described demands for complexity both on the cultural form of the organization and its incorporation in risk networks. These milieus derive a degree of momentum and energy – that in some cases can be quite considerable – from the question of how long they will succeed in reproducing themselves and from the efforts required of them to liberate themselves from the commitment pressure they create. Commitments are social artifacts, but not of the kind in which individuals are actually committed to organizations or even vice-versa, but in which standards or routines define the intensity of communicative and perceptive relationships an organization expects or does not expect from its members. They are the result of a usually implicit, seldom explicit negotiation process in which the organization and its members provide each other with zones of indifference (Barnard 1968, p. 167), to which behavioral expectations can be attributed. These zones of indifference give an up-to-date reflection of the risk networks in which the organization is embedded. Accordingly, by keeping the various positions of these networks and their specific risks under close surveillance, consensus can be reached that everything that happens outside these networks should be ignored, at least for the present time, but – thanks to the “form” of communication – that it should continue nevertheless to be kept under observation. Only in this way is an organization capable of taking action and making decisions. And only in this way can it determine the price of this capability and how long it is willing to pay that price. 209

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In all three routines – the cultural form of the organization, risk-bearing networks, and the introduction of dissolvable commitments – the organization seeks its coupling to society, under the condition of re-integrating hitherto excluded communication and perception potential. In each routine, a bureaucracy that has been prematurely declared dead is reproduced and creates worlds that are no longer orientated towards the models of the worker, the civil servant, the blue-collar employee or the manager, but which amalgamate all these in a new model. This model is yet without a name in the social sciences, but can be dubbed “the hitchhiker” in honor of probably its most accurate description to date (Adams 1979). We take the hitchhiker to mean someone who, under the condition of his almost complete exclusion, is nevertheless included from time to time and, what is more, in a parasitical symbiosis. That is, a hitchhiker practices inclusion in exceptional cases.10 The hitchhiker is that social figure who is no longer disappointed by the failure of the Critical Theory to get universal inclusion accepted in organizations (Luhmann 2000c, p. 392), but who accepts it as a challenge and despite his admittedly weak, indeed powerless, position refuses to be deprived of the opportunity to exclude all organizations from enlisting him – and to exclude from that exclusion only a small number of these and only in exceptional cases. The figure of the hitchhiker, who is free to get in and out and who is at home both at the wheel and in a free-rider position defines a counter-factual and therefore normative version of an elite whose only proof of identity is that it is able to elect itself, and whose only chance is to select a combination of communicative and perceptive competencies by means of a kind of self-fulfilling prophecy, which can be coupled to different levels and horizons of organization.11 The “rule of the office”, of which Max Weber (1978) spoke in connection with the rationalization tendencies of the modern age, and from which he believed corporations still to be free because of their locally superior handling of knowledge, has spread to all organizations without exception in the age of “knowledge management” and, in the midst of the Götterdämmerung of capitalism (Deutschmann 2002, p. 253), is about to create space for an “intelligence” which, with sound theoretical know-how, practical experience, and reflective capability, relies no longer on the expert but on the “networker” who is able to bond with the cadre and open up to a watchful public (Bach 1999; Willke 2002, p. 116). 10

Luhmann (2000c, pp. 390 ff.), found that the organization completely reverses modernity’s social norm of inclusion as the normal case and exclusion as the exceptional case: its principle of membership excludes everyone and includes only very few, based on strict selection. 11 It remains to be seen whether the picture of the clover-leaf organization drawn be Handy (1990) – first leaf: professional core, second leaf: outsourced work, third leaf: part-time workers – will survive the leap into the present century, bypassing the current structural and economic crises.

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The figure of the hitchhiker can be used both to illustrate that no organization is conceivable today without reference to the society from which the hitchhiker comes and into which he or she can return at any time; at the same time, it tells us nothing about the competencies of this hitchhiker, the structure of the organization, and the quality of the society. While every organization develops its specific organizational design, other things are going on at the same time in different places. “Society” means to bring this insight to bear when establishing an organizational form.

Conclusion These thoughts are all directed towards re-introducing organizational practice into organization theory, but at the same time explaining what this practice can actually accomplish. It would be wrong to assume that organizational practice in government authorities, corporations, laboratories, armies, schools, and theaters has in the past failed to separate and reintegrate communication and perception (the opposite is in fact true); nor should we assume that these organizations are aware of what they have achieved in this field. The function of theory is to create awareness of such achievements. And the re-introduction of practice into theory consists in making corrections in the crucial area of the organization’s reference to society in order to be able to “inform” practice about itself. What we have here is a complementary relationship between theory and practice in which theory has the benefit of knowing the problems and practice has the benefit of knowing the solutions. This bears out the experience in dealing with a type of theory as it has been developed in the 20th century under the various labels of pragmatism, operationalism or constructivism. This experience suggests that theories can never be abstract enough to be able to reach the concrete level of practice that they endeavor to describe. Hardly any thought is more abstract than that underlying the “form of distinction” devised by G. Spencer Brown (1972). Hardly any thought is more abstract than that of the “operational closure” of empirical systems which Heinz von Foerster (1981), Humberto R. Maturana, Francisco J. Varela (1980), Niklas Luhmann (1995f) and others have pursued. And hardly any thought is more abstract than that underlying the operational separation and structural coupling of social systems (communication) and psychical systems (consciousness) put forward by Niklas Luhmann (1990g and 1995g). And yet all three ideas are based on the possibility of reaching the concrete level of practice that theory endeavors to describe. The fact that this practice has a societal reference precisely at the place where it is typical of a specific organization and where it makes this

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organization unique – within which decisions on how to deal with perception are taken but also where certain perception-related forms of dealing with communication are suggested or obstructed – is the initial abstract assumption and concrete discovery of a societal theory of organization, which this text proposes should be pursued. Where in the past we have concentrated on observing individual organizations either from the perspective of the ends they achieve or fail to achieve or under the perspective of the restlessness which they attempt to cope with and to create, in times to come we will have to observe how an organization handles one of its key resources, the perceptibility of its members, its customers, and other players, and what communication practices it develops in order both to utilize and limit these resources.

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PART IV Luhmann’s Theory in the Context of other Theories

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Chapter 10

Luhmann’s Systems Theory and Theories of Social Practices1 Kai Helge Becker

Introduction Various new conceptual developments have shaped the discourse of sociological and organizational theorizing during the past decades. Apart from Niklas Luhmann’s theory of social systems, some of the most innovative theoretical improvements in understanding the social dimensions of human behaviour have been achieved by a branch of social theories that can be designated as “theories of social practices”. The concept of “practice” attracted authors from diverse strands of theorising, as it is reflected in the works of social theorists such as Pierre Bourdieu (1984; 2000) and Anthony Giddens (1979; 1984), cultural theorists such as the late Michel Foucault (1984a; 1984b), philosophers such as Theodore Schatzki (1996; 1997) and Charles Taylor (1985; 1997), and ethnomethodologists such as Michael Lynch (1993) and Laurent Thévenot (2001) – just to name a few. Drawing on various concepts from different theoretical origins, above all particularly concepts from phenomenology, hermeneutics, structuralism and Wittgensteinian philosophy (cf. Reckwitz 2000, for an overview), they all have structured – partly by emphasizing quite different aspects – their work to a significant extent around the notion of (social) practices. Also in management and organization studies, practice-based approaches have proven to be highly innovative: whether it comes to human resource management (e.g. Townley, 1993), creative industries (e.g. Eikhof and Haunschild 2005), information technology (e.g. Orliowski 2000), organizational culture (e.g. Knights and Willmott 1987), accounting (e.g. Macintosh and Scapens 1990), career (e.g. Iellachitch et al. 2003), bureaucracy (e.g. Dandeker 1990), technical work (e.g. Orr 1996), or to health management 1

The author is thankful to Axel Haunschild and David Seidl for comments on a previous draft of this chapter.

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(e.g. Haunschild 2003), just to mention some of the topics covered so far, “practice theoretical” approaches have had an enormous impact during the past decades. Among these, especially the writings of Bourdieu, the late Foucault, and Giddens have proved to be of particular importance. Surely, scholars in organization studies, when drawing on these authors, have not always addressed all aspects of the concept of practices. Also, it has sometimes not even been the specific mode of practice-related theorising that has received the most attention when referring to those writings. Nevertheless, the idea of practice has become an integral part of management and organization studies. Therefore a closer look at the relation of theories of social practices and systems theory seems to be of a certain significance. Moreover, what makes a comparison of both strands of theorizing particularly attractive is the fact that – despite their various differences – both theoretical approaches share two common basic assumptions on the “nature” of the social: first, both are closely related to what has been called the “cultural turn” (e.g. Alexander 1988) in social theory and hence have a “constructivistic” stance towards the social. They both emphasize the importance of interpretive schemes, symbolic codes, or cognitive routines in order to understand how we construct and process collectively shared patterns of meaning when making sense of ourselves and the world we are engaged in. Second, both modes of theorizing share a common interest in “de-centring the subject”. This theoretical move, which has been put on the agenda by (post-)structuralism (cf. e.g. Giddens 1979, pp. 9–48), has proven to be particularly significant for the development of social theory in the second half of the twentieth century. It stresses the fact that it is not adequate to consider the subject as the independent origin of social phenomena. Instead, any analysis of the social has to take into account its collective, inter-subjective “nature” beyond anything that subjects, agents, or actors could determine. Clearly, the theoretical problems and the kind of reasoning that led to these two common basic perspectives must be considered to have been partly different in origin and intent. Also, obviously, both kinds of theories make use of different vocabularies and terminologies. However, theories of social practices, as well as Luhmann’s theory of social systems, eventually arrived at notions of the social that take into account these basic assumptions in a comparable way and on a level very fundamental to their modes of theorising. And yet: in the face of these common ideas about the “nature” of the social, both strands of the social sciences ended up in developing very distinct concepts of the social itself, namely “social practices” and “social systems”. This begs the question of what made the authors opt for their specific concepts and which advantages and disadvantages result from their decisions. Which particular strengths and weaknesses do these two strands of social theory imply, given the fact that they have in common both a cultural and a “non-subjective” thrust in their mode of theorizing? 216

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In the remainder of the chapter, this issue will be addressed as following: in the second section, our point of departure will be to characterise important features of the notion of social practices. While, quite naturally, it will not be possible to give a detailed account of all particularities within this discourse, this section provides the foundations for our comparative analysis in the following. The subsequent third and fourth sections compare both theoretical approaches with respect to the two underlying assumptions on the “nature” of the social that both strands of theorizing have in common. The third section addresses the “constructivist” perspective shared by both approaches, and in the fourth section we will elaborate in detail on the theoretical move of de-centring the subject and its impact on systems theory and theories of social practices. Based on this, the fifth and sixth sections explore how the distinct perspectives of both social theoretical approaches translate into partly similar, partly different concepts of some important social theoretical fundamentals. In particular, we will analyse the relation of structure and agency in the fifth section and address the status of the “material” and the role of the body in the sixth section. The chapter ends up with a conclusion in the seventh section, which provides a summary of the similarities and differences between systems theory and theories of social practices and contrasts the particular strengths and weaknesses of the two approaches. In sum, the aim of this chapter is threefold: first, to provide a better understanding of the conceptual logic inherent in Luhmann’s theory by relating some of his most important conceptual decisions to the concepts developed within the discourse on social practices; second, on that basis, to assess the particular strengths and weaknesses of Luhmann’s approach compared with practice-related ones; and finally, to demonstrate how both approaches can complement each other’s perspectives for further enhancing our understanding of organizations.

Basic aspects of the concept of “social practices” The aim of this section is to provide an overview of important theoretical leitmotivs in the development of theories of social practices. This calls for some precautionary remarks: clearly, it cannot be stated that all those different writers on social practices have contributed to one single coherent body of theory. Rather on the contrary: due to the diversity of theoretical backgrounds that have influenced practice-based theorizing, the writings of Bourdieu, Foucault, Giddens, Lynch, Schatzki and others accentuate quite different aspects and also differ with respect to the theoretical vocabulary developed. Nevertheless, they have much more in common than the mere use of the word “practices”. In fact, one can make out a set of shared theoretical problems, interests, and developments such that it makes sense to 217

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consider these theoretical approaches a family of closely related theories. And despite the conceptual differences that can be found in these works, one can note a distinct shift in theorizing towards quite parallel notions of practice in the writings of these authors, which justifies speaking of a paradigm of social practices – and probably even of a “practice turn” (Schatzki et al. 2001) in contemporary social theory. In view of this state of affairs in practice-based theorizing, it must be stressed that here it will not be possible to give a comprehensive account on this family of theories that does justice to the details and subtleties of each individual writer on social practices. Rather, we will describe the features of practice-based approaches in an “ideal, typical” way to have a basis for further analysis in the following sections. In doing so, we will mainly refer to the work of Bourdieu, Giddens and the late Foucault, taking into account their particular significance for the development of organization studies. More detailed analyses on the concept of social practices, covering also other theorists on social practices, can be found especially in the writings of Reckwitz (e.g 2000; 2002a; 2003a) and Schatzki (e.g. 1996; 2001), which are partly intended to provide an overview of the theoretical development in the field, and partly written with a rather programmatic intention. Given these preliminary notes, what justifies speaking of a strand of “practice-based” theorizing? What constitutes the basic notion of practice that the different writings on “social practices” have in common, despite their diverse and heterogenous backgrounds? As a point of departure, in an attempt to provide a general first approach towards a definition, one may characterize a social practice as a “temporally unfolding and spatially dispersed nexus of doings and sayings” (Schatzki 1996, p. 89). Examples for practices in this sense are academic practices such as writing and publishing (e.g. Bourdieu 1988), practices of sports (e.g. Bourdieu 1984), practices of the self and practices of living a relationship (e.g. Foucault 1984b), or practices of using information systems (e.g. Orliowsky 1992, following Giddens). From such a point of view, it is obvious that the concept of practices refers to more than mere single actions; rather, practices consist of a bundle of interwoven strands of behaviour. In fact, one can make out at least three aspects that link “doings and sayings” so as to form a “nexus”, i.e. a practice, and which must be considered fundamental to the specific perspective on human behaviour and the social that the notion of social practices involves: knowledge, the role of the body, and the material components of practices (cf. Reckwitz 2002a). 1. Practices are carried out on the basis of knowledge, on the basis of “schemes of perception, thought and action” (Bourdieu 1990b, p. 54). Being “knowledgeable agents” (Giddens 1984, p. 15), people interpret themselves and the world and are engaged in processes of sense-making.

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However, as practice theorists emphasize, the kind of knowledge involved in practices is not mainly a “know-that”, but rather a knowhow, a practical understanding of the situation and a capability of coping with it practically. The “feel for the game” (Bourdieu 1990a, p. 9) does not primarily consist of discursive, explicit rules of how to act, which could be verbalized and explained. Instead, practices are routinized behaviour, rooted in the “practical consciousness” of the agents (Giddens 1984), and drawing on “the pre-verbal taking-for-granted of the world that flows from practical sense” (Bourdieu 1990b, p. 68). Moreover, this knowledge is not an individual mental phenomenon, but a collectively shared understanding, fundamentally social in “nature”, which, for example, lays the foundation for analysing management and work practices as a cultural phenomenon related to modern society (e.g. Townley 2002; Orr 1996; Shenhav 1999). 2. Another important characteristic of practice-based approaches is the emphasis on the fact that practices are closely intertwined with bodily experiences. The knowledge involved in carrying out a practice also consists of “motor schemes and body automatisms” (Bourdieu 1990b, p. 69) and constitutes a person’s “habitus” as an embodied phenomenon. Whether Bourdieu (1984) describes the “hexis” (body control and poise) of the upper class, or whether Foucault (1984a) investigates pleasure and desire, the practice mode of theorizing highlights “that ‘the body’ is ‘constituted’ within some social matrix” (Schatzki 2001, pp. 2–3). From such a point of view, Bourdieu (1990b, p. 68), drawing on the concept of “practical understanding” addressed in the previous paragraph, states that “practical belief is not a ‘state of mind’, … but rather a state of the body”. And in a similar fashion – though generally putting less emphasis on the role of the body – Giddens notes that “structure is not ‘external’ to individuals” (Giddens 1984, p. 25) and “(f)undamental to social life is the positioning of the body” (Giddens 1984, p. xxiv). Within the discourse of organization studies, this aspect of practice-based theories has contributed to both general reflections on the role of the body in an organizational context (e.g. Dale 2001) and analyses of particular organizational phenomena, such as health management (e.g. Haunschild 2003). 3. A third integral part of the concept of practices is the notion that practices also have a material component; that is to say, carrying out a practice implies making use of “things”. In addition to the mental and bodily aspects of practices and to analysing human interactions, practice theorists also take into account the relation of bodies and minds to “objects”, “artefacts”, and (allocative) “resources” (cf. Reckwitz 2002b). Prominent examples of this perspective can be found in Bourdieu’s seminal analysis of tastes (1984) where he – among others – describes the eating practices of different classes (e.g. eating fish 219

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containing bones in the upper class in contrast to the eating habits of the working class, where fish dishes without bones are preferred), or in Foucault’s widely influential work on practices of disciplining, punishment and imprisonment (1979). In management studies, the development of practice-based approaches to understanding the use of information technology in organizations, for example (e.g. Orliowski 2000), has fruitfully drawn on this particularity of theories of social practices. Summing up these three aspects, we can state that practice theorists conceive of “practices as embodied, materially mediated arrays of human activity centrally organized around shared practical understanding” (Schatzki 2001, p. 2).

Systems theory and theories of social practices as cultural theories Having described some characteristics of practice-based social theories as a point of departure, we now turn to the first of the two fundamental assumptions that systems theory and theories of social practices share: their emphasis on the cultural aspects of social phenomena. We will start with a look at theories of social practice and then examine Luhmann’s theoretical position.

The “cultural turn” and theories of social practices Since the 1970s, roughly speaking, an “interpretive” or “cultural” turn in social theory has been under way (Reckwitz 2005a). This theoretical development took place against the background of social sciences that used to explain social phenomena – following Durkheim’s or Parsons’ path, for example – in terms of shared norms and values. Also, it must be seen in contrast to rational-choice theories – whether of economic, or rather sociological, origin – which analyse social order as a result of choices based on means, ends, and utility. Against this background, researchers focussing on “cultural” phenomena have increasingly emphasized that the social can not be understood in full unless one pays attention to the processes of sensemaking that organize our perceptions, provide interpretations of ourselves and impart meaning to our surroundings. In anthropology, cultural studies, gender studies, sociology of science, history, as well as the political sciences, more and more scholars have stressed the fact that a thorough analysis of social phenomena must also comprise the symbolic codes, interpretive schemes or cognitive routines that underlie and shape human behaviour. In the field of management and organization studies, the new paradigm that emerged has translated into organizational symbolism, narrative approaches, Weick’s theory of enactment, (sociological) neoinstitutionalism and Foucauldian discourse analysis – just to name a few. 220

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In view of the outline of practice-based approaches in the last section, it is evident that also practice-based theories must be considered a part of the cultural branch of social theories. Particularly the emphasis on “practical understanding”, “shared knowledge” and “schemes of thinking, perceiving and acting” clearly situates theories of social practices in the field of cultural theorizing (Reckwitz 2002a). Accordingly, practice-based approaches within the discourse of management studies have often explicitly, but at least implicitly, taken a “social constructivist” stance towards organizational phenomena. Macintosh (1994, pp. 190–192), for example, shows how Alfred Sloan’s implementation of accounting practices at General Motors was rooted in the context of a specific social construction of individualism. In adopting a similar perspective, Orliowsky (1992) emphasizes the importance of social patterns of meaning for using technology, and therefore highlights the “interpretive flexibility of technology”. Further examples of such a “constructivist” perspective can be found in Orr’s (1996) “ethnography” of modern work practices and Townley’s (1993) description of how HRM practices construct predictable and calculable employees.

Systems theory as cultural theorizing In contrast to this, it may be not so obvious at first sight to understand also Luhmann’s theory as a branch of cultural theorizing. How could a theory that places the rather “technical” term “system” at its conceptual core ever be a cultural mode of theorizing? And in fact, the concept of “culture” itself does not play an important role within Luhmann’s theoretical framework. But, when starting to look beyond the mere use of the term “culture”, Luhmann’s systems theory appears to be so genuinely cultural an approach that one could even be inclined to ask if it is about anything other than cultural phenomena at all. Although here we do not intend to go that far, the point at stake is that an understanding of the social as a cultural phenomenon lies at the heart of Luhmann’s way of thinking. The theoretical concept that is crucial for imparting a cultural perspective to the theory of social systems is Luhmann’s notion of distinction. In fact, it is exactly this theoretical building block in systems theory that gives rise to a conceptual parallel to what other cultural theories describe as “patterns of meaning”, “cognitive codes” or “schemes of thought, perception and action” (see also Reckwitz 2005b). To make this point, it is helpful to recall some basic concepts of the theory of social systems: situating distinctions at their core (cf. also Seidl and Becker 2006), Luhmann’s theoretical enterprises start off with the distinction of system and environment, and – on the basis of this first distinction – later introduce the distinction of social and psychic systems. One of the fundamental aspects that these two types of system – and only these two types of system – have in common is the fact that they process meaningful information (Luhmann 1995f, p. 59). Strongly 221

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drawing on phenomenology, Luhmann emphasizes that all elements of psychic and social systems take the form of meaning (Luhmann 1995f, p. 63) and permanently generate new “horizons of meaning” (Husserl) to orient themselves. On its part, each element of psychic and social systems is an observation made up by a distinction (and an indication). In the case of social systems, these distinctions constitute the topic of what is communicated (the selection “information” in terms of Luhmann’s theory of communication). In the case of psychic systems, they make up the content of the perceptions, thoughts, and emotions that “take place” in the minds of the participants of a social system. In other words: social and psychic systems process meaningful information by applying distinctions. On the basis of these distinctions, they construct, i.e. “enact” (Weick), themselves, their boundaries, their identities, their environments, and their communications (and thoughts/emotions/perceptions, respectively) during the process of autopoiesis. While these aspects already show that Luhmann’s perspective obviously is a specific version of constructivism (cf. Luhmann 2002c), we have to be more precise when speaking of “culture” in a strict sense. In fact, culture, made up by interpretive schemes or patterns of meaning, is primarily a structural phenomenon, that is, a phenomenon beyond single, individual applications of certain distinctions. Therefore, the mere fact that psychic and social systems permanently apply distinctions when observing does not qualify for the designation “culture” yet. However, there are, of course, distinctions that psychic and social systems apply repeatedly and make use of frequently. In this case, a – more or less stable – social structure evolves, which basically consists of what one can call patterns of meaning, interpretive schemes or cognitive codes. In view of this theoretical perspective, it does not come as a surprise that large parts of Luhmann’s œuvre are actually cultural analyses, i.e. – in systems theoretical terms – they are devoted to the study of those distinctions that play an important role in modern society. Two fields of his research especially stand out here: first, historical investigations on what Luhmann calls the “semantics” of society. With this term he refers to the stock of patterns of meaning, the hoard of concepts (distinctions) that society holds ready for frequent use. Among Luhmann’s writings, there are, for example, investigations on how the different specific notions of love have shaped intimate relationships in the past centuries (Luhmann 1986a), on the interpretive scheme we refer to as “nation-state” (Luhmann 1997a, pp. 1045–1054), on the notion of nature and how it relates to both the scientific, technical discourse and the ecological movement (Luhmann 1999a pp. 9–30), and on how specific forms of semantics structured interactions in the upper class during the 17th and 18th centuries (Luhmann 1993e, pp. 72–161).

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A second important example of the cultural perspective inherent in Luhmann’s works can be found at the core of his theory of society. According to Luhmann, society is mainly structured into functional sub-systems, such as economy, academia, politics, arts, the legal system, and religion. The communications within each of these systems are based on a distinct binary “code”. In the case of the economic system, for example, the code is “payment/non-payment”, in the case of the academic system it is “true/false”, and the legal system is organized around the code “legal/illegal”. It is not possible to go into the details here (cf. Luhmann 1989; or Chapter 1 in the present volume), but, generally speaking, it is on the basis of these codes that Luhmann explains the patterns of meaning, the interpretive schemes shaping and structuring the communications in the different systems. In doing so, Luhmann imparts to his sociological theory a genuinely cultural thrust. Moreover, during the past years especially the systems theorist Dirk Baecker (cf. also his chapter in this book) emphasized the fact that distinctions lie at the heart of systems theory. He considers the particular strength of a systems theoretical point of view to be a focus on how, i.e. by means of which types of distinctions, social systems come into being and differentiate themselves from an environment. And Wil Martens (forthcoming 2006) has recently elaborated on an analysis of organizations as a cultural phenomenon from Luhmann’s perspective. Finally, even Luhmann, who – for reasons beyond the scope of this chapter (cf. Luhmann 1999a) – normally does not prefer to use the term “culture” in this context, after all states that patterns of meaning, when being preserved and reapplied, “condense into what could be called culture in a comprehensive term” (Luhmann 1997a, p. 409; my translation, italics in the original). In sum, despite the differences of both modes of theorizing, it can be said that theories of social practices as well as systems theory agree on the fact that social phenomena must be analysed primarily as cultural phenomena. However, it must be noted that theories of social practice stress the practical character of the shared understanding on the basis of which we relate to ourselves and get along with our surroundings. In contrast to this, Luhmann rather emphasizes that these patterns of meaning have a dynamics of their own, somehow detached from the necessities of everyday life. This particularity of systems theory will be further addressed below.

The de-centring of the subject Perceiving the social primarily as a cultural phenomenon immediately calls for thorough concepts of where the patterns of meaning, symbolic codes and cognitive routines are located. When it comes to addressing this question, one line of reasoning has proven to be especially influential in the past

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decades: the theoretical move of “de-centring the subject”. In the following, we will first address the particularities of this specific perspective on theorizing the social and consider its impact on theories of social practices. In contrast to this, we will then examine which theoretical accentuations made Luhmann choose his specific way of de-centring the subject, and what the consequences of his choice are. It will turn out in the end that Luhmann’s social theoretical concepts must be regarded as being both more radical and more traditional than their practice-based counterparts.

The de-centring of the subject and its impact on theories of social practices Since Descartes’ momentous distinction between an “inner”, mental sphere (res cogitans), and an “outer”, material sphere (res extensa), a line of thought emerged, which went via Kant’s critique of pure reason to Husserl’s phenomenological concept of the mind and Sartre’s notion of a subject free to choose itself. Having finally translated into phenomenological, interpretive and ethnomethodological sociology, this tradition of theorizing considered the subject as the – more or less – independently given origin of social phenomena. Consequently, these approaches emphasized the idea that analysing the meaning the actors themselves ascribe to a situation, and investigating the conscious mental processes involved lie at the heart of sociological concern. While these notions provided the foundations of the cultural mode of theorizing described above, they also attracted criticism. Especially structuralism, evolving from Ferdinand de Saussure’s seminal analysis of language (1966) and particularly his distinction of langue and parole, made a strong point against the concept of a pre-given subject that is – more or less – transparent to itself. Particularly influential in this respect were Lévi-Strauss’ structural analyses of myths (e.g. 1968), which aimed at revealing the “unconscious psychical structures”, the “unconscious teleology of the mind”. Lévi-Strauss focussed his analyses on a non-conscious, supra-individual, collective level of cognitive codes (“langue” in de Saussure’s terms) that shape human behaviour, so to speak, “behind the subjects’ back”. By abandoning a subject-centred perspective, he intended “to show not how men think in myths, but how myths think themselves in men, and without their being aware of it” (Lévi-Strauss 1964, p. 20; my translation) and thereby challenged the notion of a self-conscious subject. Michel Foucault, in the famous last chapters of his investigation on The Order of Things (1966), even went a step further. From his (early) point of view, the entire concept of the subject must be considered a mere effect of discourse, i.e. a result of a specific collective structure of knowledge (“episteme”) that has been underlying the modern academic discourse since the 19th century. Accordingly, Foucault’s “archaeological” method shifts the 224

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attention to “non-mental”, somehow material, discursive statements (“énoncés”) “outside” the mind (1969). In doing so, it opens up the way to analysing – without reference to “the subjective”, and in their own right – those collectively shared patterns that make up human culture. Similarly, around that time, other writers, such as Jacques Derrida (e.g. 1979), Jacques Lacan (e.g. 1977) or Paul Ricoeur (e.g. 1974), also criticised the concept of the cogito and underlined the need for a “de-centring of the subject” in social theory. The writers elaborating on a theory of social practices reacted to these – quite controversial – reflections in their own way, which was partly critical, partly affirmative. Following structuralism, theories of social practices stress the significance of collectively shared interpretive schemes that basically shape what makes up the subject. Instead of assuming a free, pre-given subject, they focus on the unconscious, primarily non-discursive, supraindividual structures, i.e. the “practical consciousness” (Giddens) or the “habitus” (Bourdieu). Socially constituting the subject, these structures consist of tacit, implicit knowledge and lay the very foundations of agents’ perceptions, interpretations and even bodily behaviour. Moreover, these patterns of meaning are not only “structures structurantes”, i.e. structuring structures, but also “structures structurées”, i.e. structured structures (Bourdieu). Therefore, in reflecting class-related social differences and generating social fields, for example, they possess a logic of their own, beyond anything agents could determine. However, practice-based theories, in contrast to structuralism, acknowledge that agents can partly become aware of and reflect on the patterns of meaning shaping their behaviour. They possess a “discursive consciousness”, speaking in Giddens’ terms (1984), and can engage in the “care of the self” (Foucault 1984b). Yet, the routinized, embodied character of social practices prevents them from being entirely transparent to the agents. As the late Foucault (1984a; 1984b) demonstrates, their desires and pleasures are socially shaped on a very fundamental level. Similarly, Bourdieu (1990b, p. 69) emphasizes that agents, having acquired “social necessity turned into nature, converted into motor schemes and body automatisms, … never know completely what they are doing … [and therefore] what they do has more sense than they know”. Going back to Descartes’ distinction of the “subjective” res cogitans and the “objective” res extensa, it is possible to sum up the theoretical strategy theories that practice-based approaches use in de-centring the subject. Instead of situating social phenomena in an inner, mental sphere (as phenomenologists would do), or situating them in an outer, material sphere (as Foucault’s – early – archaeological approach suggests), they analyse the social-cultural world as being located in the social practices themselves. In doing so, they make the Cartesian distinction collapse (Reckwitz 2002a; 225

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2003b): social practices, as a “nexus of doings and sayings” (Schatzki 1996, p. 89), are collectively shared patterns of both meaning and bodily behaviour, which are neither transparent to nor made up by self-conscious subjects. Instead, being embodied routines, they are non-discoursive, primarily tacit, “unconscious” and supra-individual patterns of meaning and bodily behaviour which “mould” and constitute individual agents and lie at the foundation of their particular “doings and sayings”.

Niklas Luhmann’s move to de-centring the subject Niklas Luhmann’s theoretical œuvre takes up the issue of the de-centring of the subject in a different way, which must be considered to be partly more radical, partly less radical than the mode of theorizing in the practice-based approaches. Luhmann also comes to the conclusion that social phenomena cannot be located in a pre-given subject. However, in drawing strongly on the legacy of Husserlian phenomenology, Luhmann’s point of departure and main concern is the question of whether it is possible to conceptualize the social as an intersubjective phenomenon. Edmund Husserl’s famous problem of intersubjectivity (e.g. 1913) arrives when one intends to develop a theory of the social in proceeding from the assumption of pre-given subjects. In order to shed light on what made Luhmann choose his perspective on social phenomena, this problem will be briefly sketched according to Alfred Schütz’s (1975) criticism of Husserl. Also Alfred Schütz (e.g. 1974), in drawing on the concept of “life-world”, tried to solve the problem of intersubjectivity inherited from Husserl. It would be beyond the scope of this chapter, however, to elaborate on the respect in which Luhmann (cf. 1995f, pp. 80–81, 145–146; 2002f) was not satisfied by the concepts proposed by a phenomenological sociology. Proceeding from the assumption of a pre-given subject which, in view of phenomenological analysis, is well aware that the way it perceives the world is based on the constructions of its own mind, the first theoretical difficulty is as follows: how can a subject, from its purely “inner”, mental point of view, conclude that there are other subjects experiencing the world in a similar way? Husserl suggested a solution that mainly consists in the idea that the subject could become aware that its body is essential for its perception of the world, i.e. the subject could have a “kinaesthetic consciousness”. On that basis, it could make out other bodies in the “world outside its mind” and conclude from the fact that their behaviour is similar to its own body’s behaviour, that there may also be other subjects in the world apart from itself. Second: at best, this is how all other subjects would experience their surroundings, i.e. they all would experience each other as an “alter ego”. Still, this is not sufficient to conceptualize social phenomena, namely collectively shared, supra-individual patterns of meaning, which are relevant to all subjects. Even if, in a third step, all subjects concluded that all other 226

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“subjects/bodies” base their behaviour on patterns of meaning they all collectively share, one would still not come closer to a theory of the social. For, in proceeding in this way of theorizing, the world of social phenomena would still be the perception or “fiction” of single individual subjects and not an intersubjectively shared sphere of collective patterns of meaning. In short, it is from such a line of reasoning that Luhmann arrived at the conviction that a programme of research that attempts to develop a theory of social phenomena “out of” the inner mental sphere of pre-given subjects must be considered infeasible. According to Luhmann, the problem of intersubjectivity in a strict sense cannot be solved. Therefore, his systems theoretical approach proceeds in a different way. Developing the concept of the psychic system, Luhmann somehow preserves and takes up the legacy of Husserl’s notion of the mind. However, Luhmann is convinced that it is impossible to overcome the problem of intersubjectivity when trying to situate social phenomena inside the mental sphere of the subject. This is why he conceives of the world of social phenomena as a genuinely social sphere in its own right, as realm of phenomena sui generis, and introduces the concept of the social system accordingly. Being detached from the subjective mental sphere of psychic systems, social systems possess a dynamics of their own and account for what could be called the “inter” of intersubjectivity. In order to fully appreciate what Luhmann’s theoretical endeavour is aimed at, it is helpful to recur to what was stated above about the Cartesian distinction of an inner, mental, and an outer, material sphere. Theories of social practices react to this distinction by making it collapse into the concept of social practices. In contrast to this, it can be stated that Luhmann’s bold concept of the social system attempts to surpass this distinction by introducing a third sphere beyond the mental and the material sphere: the sphere of the social itself.

Consequences of Luhmann’s way of de-centring the subject In order to further illustrate Luhmann’s way of de-centring the subject, three consequences of the systems theoretical perspective will be addressed. First, social phenomena are independent from mental phenomena and are not conceived as originating in them. Being autopoietic, i.e. self-(re)producing systems, social systems themselves, instead of individual subjects, are the origin of social phenomena. “Only communications can communicate”, as Luhmann’s famous statement goes (2002g, p. 156). In other words: what counts as a social phenomenon, i.e. a communication, cannot be determined by the minds of individuals, but is “decided” by the context of other social phenomena. Moving a piece on a chessboard, for example, becomes a communication in the interaction system “playing chess” – the communication “checkmate”, for instance – only with reference to the rules, other moves 227

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etc. within the game, no matter what the individual player had in mind about the move. In organizations, for example, there are situations where an organizational member has done just business as usual and finds out later that the organization treats this behaviour as a deliberate decision, attributing responsibility, rewarding merit or calling for consequences. It can be said that Luhmann, in choosing such a perspective on the social, takes up the Durkheimian maxim that social phenomena can only be explained adequately by being related to other social phenomena. Second, social phenomena also possess a dynamics of their own. Not only can they be traced back to other social phenomena, but they can also follow their own “rules”, their own “logic”. Psychic systems can only “irritate” social systems, but not determine how a social system evolves. As experience in the ups and downs of organizational life shows, organizations in particular have a certain degree of freedom to attribute communications (i.e. decisions) to different persons, groups or committees, thereby electing them as heroes or scapegoats. On the basis of this, specific systems theoretical focus on the internal dynamics of social systems, management researchers (e.g. Wimmer 2004; see also Luhmann in this book) have developed a systems theoretical approach to management consulting. Taking into account that consultants (i.e. psychic systems) cannot directly influence and control the client system (the organization), this perspective allows, for example, for analysing the well-known problems of translating consultants’ recommendations into organizational action. Third, what is more, as a result of their internal dynamics, social systems develop their own structures. Common distinctions in academia, such as “formal” versus “informal organization”, or “subjectivism” versus “objectivism”, as well as the social conventions about when and how they are to be used, possess a “life of their own”. Being manifest in the communications, i.e. publications of the academic system, they are independent of the appreciation of single individual authors and, according to systems theory, “exist” as structures, i.e. patterns of meaning, on a genuinely social level. Similarly, organizational structures (decision programmes, channels of communication, etc.) must be attributed to the level of the social, since they will not (necessarily) change when an organizational position is filled with a different person.

Luhmann’s perspective as both radical and traditional Having arrived at this point of view, we could say, in the first instance, that Luhmann’s approach to social phenomena is more radical than the practicebased approach: in introducing the social as an autopoietic nexus of communication, in the way that it is clearly separated from psychic systems, he has de-centred the subject much further. At the core of social phenomena, there is the autonomous self-reproduction of social systems, which can only 228

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be “irritated” by psychic systems on the basis of “interpenetration” (cf. the introductory chapter), but not determined. Social systems are operationally closed: they “decide” on their own about what counts as a social phenomenon, possess a dynamics of their own, and develop their own structures. In contrast to this, practice-based approaches do not consider social phenomena to have a dynamics of their own: having also performed the move of decentring the subject, theories of social practices agree with Luhmann that social phenomena lie beyond what individuals could determine. Social phenomena, however, come into being only by actors’ carrying out certain practices. Moreover, even compared to Lévi-Strauss’ famous dictum that he intends to show “how myths think themselves in men” (see above), Luhmann’s perspective must be seen as a radical one: while Luhmann agrees that communications “communicate themselves”, he does not share the perspective that they communicate “in men”, for he has placed communications in a sphere on their own, entirely outside the sphere of the mental. However, it may be advisable to note here that Luhmann – in contrast to Lévi-Strauss – does not claim that communications are caused by other communications in social systems. Instead, his perspective indicates a functional approach (Luhmann 1995f, pp. 12–58). That is to say, what constitutes a communication from Luhmann’s point of view is the fact that it fulfils a communicative function. In other words: communications are communications insofar as they function as communications in relation to other communications. In the end, with respect to this perspective of an autonomous sphere of the social, Luhmann comes very close to the genealogical period of Foucault’s works. By further developing the archaeological mode of analysis, which aimed at investigating the (rather static) structures that underlie discourses, Foucault’s genealogical approach emphasizes how discourses follow their own internal dynamics and logic. On the basis of his non-subjective concept of power, Foucault conceives of social phenomena as a result of nonpersonal relations of forces, which evolve out of the specific “rationality” underlying discourses. His famous investigations on the Birth of the Prison (1975) or the Will to Knowledge (1976), for example, explore how discourses are shaped by “great anonymous strategies”, which do not “result from the choice or decision of an individual subject” (Foucault 1976, p. 95). This radical aspect of Luhmann’s way of de-centring the subject, however, is only one side of the coin. For, from a different point of view, Luhmann does not carry the de-centring of the subject as far as theories of social practices do. Still adhering to the legacy of Husserl’s concept of the mind (cf. Luhmann 2002f), Luhmann introduces the concept of the psychic system in order not to lose sight of the important role mental phenomena play for the emergence of the social. According to Luhmann, social phenomena cannot take place without being stimulated or triggered by psychic systems, which 229

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are operationally closed, autopoietic systems in their own right, detached from the realm of the social. Certainly, this should not be interpreted as if Luhmann had taken up the notion of a subject that is free to choose by itself and entirely independent of social phenomena. In fact, social and psychic systems coevolve with each other and permanently restrict each other’s degrees of freedom by being “coupled” on a structural level, by means of language, for example. Nevertheless, we cannot help stating that in preserving a distinct subjective, mental sphere – i.e. the psychic system – Luhmann’s social theory appears to be less radical than practice-based theorizing – one could even say: more traditional. Let us summarize what has been said in the preceding sub-sections about the role the subject plays in systems theory and practice-based theories. In the end, both theories agree that social phenomena are not mental phenomena. Both have “externalized” the social and placed it beyond a mental, subjective sphere, thereby taking into account that it is not adequate to consider independent, pre-given, self-conscious, transparent subjects as the origin of social phenomena. In de-centring the subject, they both agree that the mental sphere is not independent of social phenomena, but, instead, that the social strongly moulds and shapes what used to be perceived as a free subject. In view of these common grounds, also the difference of both approaches has been elaborated on, especially with regard to the question of how they deal with the Cartesian dualism between the inner, mental, and the outer, material sphere. Given this background, the following section turns to the question of how this difference in perspective affects the way in which both theories conceptualize some basic vocabulary of social theory, namely structure and agency, the status of the material, and the role of the body.

Structure and agency One of the most fundamental aspects of any social theory is the question of how it addresses the topics of structure and agency, and how these topics are related (Walsh 1998). Especially this issue is often exploited as an occasion for highlighting rather polemically a certain approach as the only one capable of adequately describing social phenomena. This section will not follow this path and will instead explore the notions of structure and agency in a symmetrical way that does justice to both modes of theorizing. Therefore, after some preliminary remarks, in the following we will first emphasize the similarities of theories of social practice and systems theory and then turn to what distinguishes both modes of theorizing.

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Preliminary note on the structure/agency dichotomy in both strands of theorizing When addressing the issue of structure, agency, and their relation, one immediately encounters the differences in concepts and vocabularies between systems theory and theories of social practices. Regarding the latter, examining the issue of “structure versus agency” starts in a quite straightforward way: social practices are carried out by agents. Therefore, in addressing the question of how practices are carried out, practice theorists have elaborated on a distinct notion of human agency and its relation to structures. In contrast to this, the social theoretical dichotomy of structure versus agency does not translate directly into the concepts of the theory of social systems. In fact, in proposing the concept of the social system, Luhmann explicitly intended to overcome the concept of human agency (cf. Luhmann 1995c): agents are not the basic unit of action anymore. Therefore, in order to be able to adequately compare both strands of theorizing, it is necessary to look out for concepts that take the place of the idea of agency. In other words: we will have to find concepts that – with respect to the theoretical logic inherent in the framework of systems theory – function as equivalents of the structure/agency relationship. For this purpose, it is important to recall Luhmann’s way of de-centring the subject. It has been stated above that Luhmann has abandoned the notion of an independent subject as the origin of social phenomena by introducing the concept of the social system while keeping the traditional idea of a mental sphere, i.e. the psychic system: the notion of the subject has been abandoned in favour of the distinction between social and psychic systems. This means that the concept of the subject is, so to speak, divided into two parts and replaced by the inner, mental sphere (the psychic system), and the outer, social sphere (the social system). Therefore, structures appear in systems theory twice: as (mental) structures of psychic systems and as (social) structures of social systems. Accordingly, what comes closest to the concept of action (in contrast to structures) within Luhmann’s framework is the single operations of social and systems; that is, communications in social systems, and thoughts, emotions, and perceptions in psychic systems, respectively. From this point of view, it seems to be justified for the purpose of our analysis to consider both psychic and social systems as “agents” and compare the relation of operations and structure in systems theory with the relation of actions and structure in theories of social practices. In fact, once one has got acquainted with this rather unusual perspective, it is possible to make out a concept of structure versus operations in systems theory that is analogous to Giddens’ and Bourdieu’s notions of structure versus agency. The similarities of both strands of theorizing that become visible in this perspective will be addressed in the following. 231

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Similarities in the concepts of structure and action/operation Of the three main exponents of practice-based theorizing on which this chapter draws, Anthony Giddens (1984) probably presented the most transparent account of agency. According to his notion, agents act primarily on the basis of a “practical consciousness” and a “discursive consciousness” (the concept of the “unconsciousness” will be skipped here, because – from a social theoretical point of view – it does not play a central role in practicebased theorizing nor in systems theory). The concept of practical consciousness refers to the “reflexive monitoring of action” (Giddens 1979, p. 56) that takes place when agents skilfully carry out the routinized behaviour lying at the heart of the notion of social practices. In contrast to this, the concept of discursive consciousness expresses the fact that agents can partly “rationalize”, i.e. examine their behaviour. This leads to a theoretical setting where agents mainly carry out routinized behaviour, which is only partly open to reflection and deliberate change. Similarly, Pierre Bourdieu’s (1977) perspective takes into account that agents act on the basis of routines rooted in their “habitus”. Understanding “le sens du jeu”, agents – in creative, skilful improvisation – apply these routines to meet the necessities of daily life within the economic constraints of a class-based society. In doing so, they reproduce the very social structures which inform their behaviour. It must be noted, however, that Giddens places more emphasis on the intelligence and competence of agents, while Bourdieu stresses more the social, embodied constraints imposed by the habitus (cf. Tucker 1998, p. 71). In any case, the practice theoretical concept of routines that are skilfully applied by agents gives rise to a notion of structure that explicitly takes a stance against voluntarism as well as structural determinism: from the practice theoretical perspective of a “duality of structure” (Giddens 1979, p. 69), structures both enable and constrain actions and are considered both a medium and an outcome of action. Analogously, Bourdieu (1977, p. 83) states that “structures are themselves the product of historical practices and are constantly reproduced and transformed by historical practices whose productive principle is itself the product of the structures which it consequently tends to reproduce”. Moreover, structures, being “virtual” in “nature”, do not possess an ontological status on their own, but exist only “in its instantiations in … practices” (Giddens 1984, p. 17), that is to say, only insofar as they are applied in the course of actions. In a theoretical move parallel to Giddens’ distinction between the practical and the discursive consciousness, Luhmann also distinguishes between different levels of how systems examine or “observe” themselves. However, because Luhmann’s conceptual efforts are much more detailed and complex (1995f, pp. 437–477), it is not possible here to give a comprehensive overview of all the concepts related to systems’ self-observations, such as 232

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“self-description”, “reflexivity”, “reflection” and “rationality”. Yet, it may be interesting to mention two “extreme points” within the range of concepts Luhmann offers. On a very rudimentary level, each social system performs a basic kind of self-observation, for “every communication declares, whether consciously or not, thematically or not, that it belongs to a system” (Luhmann 1995f, p. 456). This basic self-observation just addresses the fact that communications cannot be communications without referring to the communicative context that constitutes them as communications. In contrast to this, other ways of self-observations are more “demanding”, in terms of what is required to make them happen. The most complex and demanding kind of self-observation Luhmann distinguishes is rationality. “(T)his idea decrees that a system must control its effects on the environment by checking their repercussions upon itself if it wants to behave rationally” (Luhmann 1995f, p. 475). While interaction systems can normally be expected not to examine themselves so thoroughly – often they do not even describe themselves in relation to their environment (“we”/“they”) – one may assume that organizations sometimes at least try to be rational in the sense of this definition. In any case, however, it holds that the mere complexity and internal dynamics of a social system prevents any psychic system from being able to determine what is happening in the social system. Moreover, psychic systems can observe social systems only with respect to their own distinctions. Consequently, they are never able to see through and entirely comprehend a social system’s internal “logic”. Whatever the extent of rationality involved may be, psychic systems can only “irritate” the social system and never be in control of how the process of communication will be going on. Therefore, from the point of view of a psychic system as an “agent”, Luhmann – for different reasons, however – would also agree to Bourdieu’s conclusion that “agents never know completely what they are doing (and) … what they do has more sense than they know” (Bourdieu 1990b, p. 69). Besides the fact that systems theory – similarly to Giddens’ notion of agency – distinguishes also different degrees of self-examination, there is another similarity in both strands of theorizing, concerning the notion of action/operations and structure: the relation between structure and action in theories of social practices is equivalent to the relation between operations and structure in systems theories. Structures are structures only insofar as they function as structures. They are virtual in existence and do not have any ontological status beyond the mere operations of the system they structure (Luhmann 1995f, pp. 278–356). Moreover, Luhmann considers the relation of structure and operations a relation of mutual dependence. By explicitly referring to Giddens, Luhmann perceives the relationship of structure and “agency” (operations) as “one of reciprocal enabling” (Luhmann 1995f,

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p. 293): also the structures of psychic and social systems are both a medium and an outcome of the operations taking place in the systems.

Differences in the concepts of structure and action/operation However, despite all these similarities against the background of distinct concepts and theoretical vocabularies, there are four aspects that especially mark a difference between both strands of theorizing. Again, these four aspects must be considered a direct result of Luhmann’s genuine way of decentring the subject. Therefore, they all must be understood in the context of Luhmann’s decision to conceptualize the social world as a phenomenon in its own right. First: it must be stressed that there is a difference between systems theory and practice-based approaches with regard to the question of what counts as a social phenomenon. In the perspective of theories of social practices, each single action is social in a very fundamental sense. Whenever an agent carries out a practice, she or he draws on knowledge and bodily routines that are not just individual characteristics or “properties”. Instead, the very notion of practices involves the idea that the schemes and principles generating actions (the “habitus” in Bourdieu’s terms) are collectively shared. Hence, all practices are conceived as inherently social in “nature”. In contrast to this, Luhmann’s concept of the social system leads to a clear distinction between social and non-social operations. Only those phenomena that occur in the communicative context of a social system are social phenomena, according to Luhmann. Brushing one’s teeth in the bathroom alone, for example, is not considered a social phenomenon from the perspective of systems theory (Luhmann 2002b), while it is clearly understood as carrying out a certain social (!) practice from the point of view of practice-based approaches. By definition, in systems theory, brushing one’s teeth is social only if it is part of a communicative process: when parents explain it to their children, for example, when people share a bathroom and communicate via brushing their teeth (e.g. by making fun of each other about it), or when it is shown on TV. With regard to this perspective, Luhmann comes close to Max Weber (1978, p. 4; italics added according to the German original), who defined a social action as an action whose “subjective meaning takes account of the behaviour of others and is thereby oriented in its course.” However, it would be misleading to over-emphasize this difference in perspective between the two strands of theorizing. Also, Luhmann would not deny that practices carried out in solitude are shaped or constituted by social phenomena: since psychic and social systems coevolve with each other, the structures of psychic systems (including their memories) can be expected to reflect strongly the social conditions under which they evolved (cf. Luhmann 1990c, p. 49). Therefore, it is rather only a matter of definition whether one 234

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considers this kind of action as a social phenomenon or a phenomenon that is brought about by social phenomena. Yet, this difference in perspective further illustrates Luhmann’s efforts to conceptualize a social theory that provides the social with a distinct, somehow “pure”, level of analysis of its own. Second: so far, this section has only focussed on the systems theoretical notion of structure/agency with respect to the relation of operations and structures in psychic and social systems. While this has proved to be a fruitful perspective to discover similarities of both strands of theorizing, there is something more Luhmann’s theory can offer when it comes to the notion of agency. Apart from the operations of psychic systems (thoughts, perceptions and emotions) and social systems (communications), Luhmann himself has also developed a unique concept of action. According to this concept, actions are not certain activities carried out by actors, agents, or subjects, but a way of how social systems describe their own processes of communication: while the process of autopoiesis is under way, social systems create bundles of behavioural expectations towards the psychic systems participating in a communication. These bundles of expectation, called persons, function as addresses for communications. In doing so, they facilitate the (re-)production of social systems by providing “support points” (Luhmann 1995f, p. 167) for further connective communications. In this perspective, “persons” are social, i.e. communicative constructions by social systems. They are images or “fictions” that “condense” during a communicative process and are used by the social system as points of reference for communications. Actions, in Luhmann’s terms, occur whenever communications are attributed to these persons, by using pronouns and expressions such as “I mean” or “you said”, for example. In other words: communications usually describe themselves as being uttered by a person; they “pose” as actions in order to facilitate and steer the process of a social system’s autopoietical (re-)production. By conceptualizing persons as constructions by social systems, Luhmann comes close to Foucault’s (1966) perspective on the subject as an effect of discourse. In Luhmann’s theoretical setting, however, the mutual interplay of mental operations by psychic systems, communications by social systems, and the communicative construction of persons, gives rise to a more complex perspective in the end: whenever communications or actions take place, they must be considered a result of both (a) mental contributions by psychic systems, which “irritate” a social system and “trigger” communications, and (b) the autopoiesis of the social sphere, which constitutes communications as communications and ascribes them to persons. From this point of view, one could state that, in the end, it is the mutual interplay of social and psychic systems that Luhmann has put in place of the traditional idea of the subject, and that makes up his genuine concept of agency. 235

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Such a perspective opens up a variety of options for – both theoretical and empirical – research. Among other things, it provides a general framework for investigating the relation of individual mental phenomena and the world of the social, which could be stimulating for theories of socialization, for example, or theories of organizational membership. Moreover, Luhmann’s genuine concept of action lays the foundation for analysing, for example, under which circumstances and by means of which constructions social systems (organizations) attribute communications (decisions) to whom and with which effect (cf. also Knudsen in this book on decision-making in reform committees). Third: the analytical advantages provided by separating psychic and social systems and conceptualizing the world of the social as a sphere in its own right, also give rise to a perspective that is partly questionable: the interplay of psychic systems is always mediated by the internal dynamics of social systems. From this point of view, human interaction is never an immediate one. Although this notion of interaction obviously has its benefits, as seen above (cf. also Chapter 7 of the present volume, for example), it downplays an aspect highlighted by theories of social practices: every interaction takes place against the background of collectively shared understanding and bodily routines, i.e. the stock of social practices provided by society. Such a perspective sees action as embedded in a common “life-world” (Schutz and Luckmann 1974) and emphasizes that communications necessarily presuppose – to put it in Wittgensteinian terms (e.g. Wittgenstein 1953, § 206, 241; von Savigny 1991) – a certain shared “life-form”. Especially the Wittgensteinian influence has strongly shaped the framework of practice-based theorizing, namely the concept of collectively shared rules (e.g. Giddens 1984; Taylor 1999). This concept of rules, in its turn, fostered empirical analyses of class structures (e.g. Bourdieu 1984) and diverse social environments (e.g. Schulze 1992) – in other words: analyses of shared “life-forms”. In contrast to this, Luhmann offers the idea of a coevolution of psychic and social systems (cf. the first aspect above) and the notion of a stock of distinctions that society provides (semantics) as a basis for communication. Also, he emphasizes that communication always includes misunderstanding and is possible only because of the mediating and stabilizing achievements of social systems. For – during any interaction – the participants’ minds always remain fundamentally nontransparent to each other (Luhmann 1995f, pp. 103–136). Surely, there is empirical evidence for Luhmann’s basic assumption of the mutual inaccessibility of psychic systems and for his observation that interactions often work on rather unsecured grounds. Nevertheless, such a perspective must give rise to doubts whether Luhmann’s theoretical setting can fully comprehend the directness and immediacy characterising everyday interactions, and, hence, whether it can entirely compensate for the ideas related to concepts such as “life-form” or 236

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“life-world”. And yet, in view of Luhmann’s reasons for his way of de-centring the subject (see above), it must also be questioned whether the concepts offered by the practice-based discourse can provide an adequate answer to Husserl’s problem of intersubjectivity. Fourth: it has been argued above that the theory of social systems and theories of social practice share a notion of structure that is directed against both voluntarism and structural determinism, and that they state that agents and systems have some room to reflect on their actions and operations respectively. Yet, there is an important aspect of structures in practice-based approaches an equivalent of which cannot be found in systems theory: the routinized character of social practices. Structures in theories of social practices not only both constrain and enable behaviour, but they also reflect the fact that action is primarily based on behavioural routines. This idea gives a specific twist to the notion of structures: they are fundamentally interwoven with the body. While both strands of theorizing agree on the significance of cognitive and normative schemes (cf. Luhmann 1995f, pp. 319–325), theories of social practices, especially Bourdieu’s and Foucault’s approaches, also account for the significance of motor schemes and body automatism. This difference in perspective will be further elaborated on in the following section.

The status of the “material” and the body The question of how theories of social practices and systems theory relate material things and the body with the world of the social is another important aspect of a discussion that sheds light on similarities and differences of both strands of theorizing. Again, these topics must be considered a result of how both theories have performed their specific kind of de-centring the subject. In the following, this section will start with addressing two basic assumptions regarding the physical, material world that are shared by both strands of theorizing. We will then turn to the question of how material “things” (i.e. objects, artefacts, or resources) are conceived in systems theory and practice-based approaches, and finally, analyse the way in which both modes of theorizing account for the role of the body.

Two basic assumptions common to both strands of theorizing First: as a direct result of theorizing the social from a cultural perspective (cf. the third section of this chapter), both strands of theorizing stress the fact that the realm of the material (including the human body) is not an objective reality independent of social phenomena. Instead, they emphasize that the way in which human agents or social systems deal with material entities strongly depends on how they interpret them and impart meaning to them 237

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(cf. Luhmann 2002c; Giddens 1976). Both material things and the body are always encountered as already interpreted. The way agents and social systems perceive and refer to the material world is fundamentally based on the interpretive schemes, symbolic codes, distinctions, or cognitive routines that society provides, and hence a matter of social construction. Second: the world of the material is a general necessary precondition for the existence and evolution of social practices as well as social (and psychic) systems. Both theories agree that there could not be any social phenomenon at all without a material background, such as molecules, cells, sound waves, paper to write something down on, food to eat, or air to breathe. Of course, this is a rather trivial statement within the framework of most social theories and also from the point of view of practice-based approaches. Yet, when it comes to the theory of social systems this aspect may call for some clarification with respect to the concept of autopoiesis. In what way does this position not contradict the notion of self-(re)production of social systems? As Luhmann (1990, p. 32; my translation) writes: “Autopoiesis does not mean that the system could exist merely by itself, on its own resources, without any contribution by the environment. Rather, it is about [the fact that] … all elements the system consists of are produced by the system itself. Of course, this is only possible on the basis of the continuum of matter given by the physically constituted reality.” In producing or constructing a communication, social systems draw on the material world (the ink of the letters when something is communicated in a book, for example) and impart meaning to it. As a result, the ink forming the letters obtains a (social) function in a communicative context. In this way, not the ink of the letters themselves, but the communicative aspect that makes them function as a communication becomes an element of the social system. In other words: the concept of the autopoiesis of social systems highlights that social phenomena possess a dynamics that makes them capable of “organizing” material phenomena according to structures of meaning – to the effect that communications come into being. Therefore, also in a perspective that conceptualizes the autopoietical (re-)production of social systems, material phenomena are an indispensable precondition of social phenomena. Apart from this general stance towards material phenomena, practicebased approaches and systems theory differ very much in the way they conceive material objects and the body. Of course, again it will not be possible to elaborate in the following on all the subtleties that can be found in the writings of Luhmann and theorists of social practices; however, the topics addressed here should be sufficient to depict the main differences.

The status of the material in systems theory Though Luhmann has not systematically elaborated on a theory of the material, it is possible to make out in his works two central aspects of how 238

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material things are related to social phenomena: as a topic of communication in social systems, and as a means of orientation via the perception of psychic systems. First: material things can be a topic of communication in social systems. The distinctions and indications used by a communication to observe something can refer to a thing in the physical world that is part of the system’s environment. In doing so, organizations can communicate about a computer system or production equipment, for example. Due to the constructivist stance of systems theory, these material things are not objectively pre-given, but only become relevant to a social system if they are constructed as a part of its environment. In particular, Luhmann mentions two ways in which social systems can refer to material things. In the case where the social system experiences the relationship to material things as one of dependency, Luhmann (1995f, p. 184) calls material things resources of the social system. A second way in which social systems can impart meaning to the material world is via objects (Luhmann 1997a, pp. 99, 585). When a social system treats something as an object it draws on structures of meaning that define the “proper” shape and “proper” name for certain things. These structures allow for repeatedly identifying things and referring to them without giving rise to doubts as to what is meant and how to deal with those things. Of course, these two ways in which social systems can deal with material things are not mutually exclusive. In fact, most resources will be treated as objects by social systems. In any case, material things as such have no relevance to social systems, unless they are observed, i.e. enacted as a part of their environment. Second: material things can serve social systems as a means of orientation. Though social systems can observe via the distinctions they apply when communicating, they cannot perceive. Perception is a unique feature achieved by psychic systems through structural coupling with the human brain (Luhmann 2000a, Chapter 1). From this perspective, social systems are blind and strongly depend on the capacity of psychic systems to perceive. In fact, Luhmann (cf. the chapter on the paradox of decision making in this book) considers the ability of organizational members to perceive as their genuine contribution to facilitating the autopoietical reproduction of the organization. By perceiving the building where the organization is located, making use of written notes, electronic communication technology, or signs, for example, psychic systems can facilitate organizational communications and support the autopoiesis of the organization. However, it must be emphasized here again that, in any case, the social system itself decides what counts as a communication and how much perceptions influence organizational processes. “It is characteristic, especially for organizations, that they standardize the perceptive field of individuals, by means of documents, for example, and in doing so regulate which 239

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perceptions are given a chance to be transformed into communication” (Luhmann 2000c, p. 188; my translation). In making this point, Luhmann can provide a fresh perspective on Herbert A. Simon’s concept (1965, pp. 79–109) of the “psychological environment” of a decision. When analysing the bounded rationality involved in decision making, Simon discovered the significance of how organizations influence individual choices by directing the decision-makers’ attention to certain alternatives, means, and ends while making them ignore others. In Simon’s framework this idea directly led to the concept of decision premises, which constitute the psychological environment of a decision. Luhmann’s theory now allows to distinguish two levels involved in a decision: first the level of the interplay between psychic and social systems, which accounts for the way in which organizations regulate human perceptions. And second, the level of the social system “organization” itself, where – on a purely social level – uncertainty absorption takes place and decisions are justified with respect to decision premises. Coming back to the general role of material objects in systems theory, it must be noted that the two aspects mentioned above, i.e. objects as a topic of communication and as a means of orientation via perception, have one important point in common: the material world is not considered a part of any communication, i.e. of any social phenomenon. From the perspective of the theory of social systems, the realm of the social is systematically detached from the material world. Apart from being a general precondition for social systems, material things are relevant only insofar as they are objects of interpretation within the social systems’ collective structures of meaning. They only occur as “carriers” of meaning with respect to the distinctions that social (and psychic) systems apply.

The status of the material in theories of social practices In contrast to the above, theories of social practices put more emphasis on the social relevance of the materiality of objects, artefacts, or resources. Of course, also practice-based approaches agree that objects can be an important topic of communication and that the perception of human agents plays a crucial role when dealing with objects. However, they make a stronger point: material entities are not only perceived, interpreted or communicated, they are also used, handled and applied. Their application requires certain motoric skills and know-how (“practical understanding”), and they shape the way in which social practices are carried out. Already the notion of social practices includes, on a very fundamental level, the idea that practices must be considered “materially mediated” (Schatzki 2001, p. 2). In this perspective, material objects in their very materiality make up an integral part of social practices. “(T)heir social significance does not only consist in their being ‘interpreted’ in certain ways, but also in their being ‘handled’ in 240

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certain ways and being constitutive, effective elements of social practices” (Reckwitz 2002b, p. 210). A prominent example of the effects of material entities beyond interpretation and communication can be found in Foucault’s seminal work on disciplining and punishing. In analysing Bentham’s panopticon, Foucault (1975 pp. 195–217) demonstrates how architecture gives rise to certain practices of surveillance. The panopticon is not only a building that can be perceived or communicated about, but also implies in its materiality specific practices of how prisoners are disciplined, pupils taught, and workers controlled. Giddens (1984) has made a similar point about material objects by arguing that not only rules, but also resources must be considered an important part of social structures. By constituting power, only certain allocative resources (e.g. raw material, technology, goods etc.) enable agents to carry out practices. From this point of view, Reckwitz (2002b, p. 212) notes that the “things handled in a social practice must be treated as necessary components for a practice to be ‘practiced’. […] Certain things act, so to speak, as ‘resources’ which enable and constrain the specificity of a practice.” An example may illustrate this particular perspective. Drawing on Giddens’ concepts of resources and rules, among concepts of other theorists, there is a range of practice-based research that investigates the use of information technology in organizations (e.g. Orliowski 1992; DeSanctis and Poole 1994). Proceeding from the idea that technological artefacts are inscribed with the developers’ assumptions and knowledge of the world, researchers in this field analyse how the structure inherent in IT “shapes action by facilitating certain outcomes and constraining others” (Orliowski and Robey 1991, p. 148). In developing a “practice lens” for studying the impact of IT on social practices, Orliowski (2000) further elaborates on such a practice-based understanding of technology. Particularly, she introduces the distinction between technological artefacts and technology-inpractice, i.e. the patterns of social practices that actually evolve during the use of a certain technology. In doing so, Orliowski opens up a way of studying how people implement or “enact” a technological device through the daily practices of using it against the (structural) background of the options and constraints the technological artefact provides. To sum up, theories of social practices offer a more direct approach to investigating the social role of material objects, as resources or artefacts make up an integral part of social practices. In contrast to that, systems theory looks at the material world in a rather indirect way since objects become socially relevant only via the perception of psychic systems and as a topic of communication. Therefore, in having its primary focus on the social systems themselves, systems theory – and this can also be observed in Luhmann’s writings – basically runs a certain risk of underestimating the significance of the material world. However, it is important not to overlook 241

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another aspect addressed above: Luhmann’s perspective also opens up a genuine way of analysing how organizations, in possessing a dynamics of their own, can support or block the impact of material entities on their network of communications. This provides a basis for research that takes into account that organizations have certain degrees of freedom to regulate – on the purely social level of their communications – the relevance of certain artefacts, objects, or resources and how these influence organizational decision making.

The role of the body in systems theory and theories of social practices As also Luhmann (1995f, p. 245) complains, the role of the human body certainly is a neglected and under-researched topic in the social sciences (cf. Hassard et al. 2000). From this point of view, it is particularly interesting to ask what systems theory, compared with theories of social practices, could offer to rectify this unsatisfactory state of affairs. Since the body is also a material phenomenon, all aspects mentioned above about the status of the material in both strands of theorizing basically apply also to the status of the body. Especially, this implies a perspective according to which the human body is a necessary precondition for social phenomena and must always be seen as already interpreted and subject to patterns of meaning and cultural schemes. Similarly, when it comes to systems theory, it follows from this general point that the body can be a topic of communication and a means of orientation via perception. Concerning the latter aspect, it may be worth adding (cf. Luhmann 1995f, pp. 246–247) that for social systems the body is central in locating psychic systems and attributing communications to them. Given the details in the preceding subsections, it does not seem to be necessary to address all these aspects again, this time with explicit reference to the human body. Consequently, in the following, we will only highlight the focal point of the particular perspective the two theoretical approaches provide. As already mentioned in the second section of this chapter, as in the case of material objects, here too the body plays an integral role in the very notion of social practices. In fact, “a practice can be understood as the regular, skillful ‘performance’ of human bodies” (Reckwitz 2002a, p. 26). Accordingly, Giddens (1984, p. 3) states that action should “not … be discussed in separation from the body”. Putting even more emphasis on this aspect, Bourdieu (2000, p. 168) notes that “the social order is merely the order of bodies” and has coined the concept of the habitus to account for the fact that the social is essentially connected to the body. And finally, in attaching a comparable importance to the role of the body, Foucault – since

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the early genealogical period – has engraved in his writings the famous leitmotif to “expose a body totally imprinted by history and the process of history’s destruction of the body” (Foucault 1977, p. 83). It has been shown in the fourth section of this chapter that it is not without a reason that this emphasis on the human body emerged within the practice-based strand of theorizing. Because theories of social practices explicitly aim at overcoming the Cartesian dichotomy of “mental versus material” phenomena, they have been able to take into account the relevance of the body to the analysis of social phenomena ab initio. Therefore, it would not be an exaggeration to state that especially the theoretical efforts in the practice-based strand of theorizing have strongly shaped and enriched the agenda of research on the social significance of the body during the past two decades. Given this positive record, what would be the specific contribution that systems theory has to offer? Though it is not possible to address all details here (cf. Luhmann 1981c; 1995f, pp. 244–251), the crucial aspect is near at hand: as is the case with Luhmann’s perspective on material things, we encounter again a theoretical setting that clearly separates the social sphere from the sphere of the body. While Bourdieu or Foucault, for example, make the strong point that the social is “inscribed” in the body, Luhmann would insist on the fact that the social is not inscribed anywhere at all. It can shape psychic systems, and in turn the body, during a process of coevolution (Luhmann 1995f, p. 241); social phenomena themselves, however, can never leave the sphere of the social system – as thoughts as such can never leave the mind. This particular theoretical position imparts to Luhmann’s writings a tendency not to devote enough attention to the bodily constraints of human behaviour and the impact of social phenomena on the body (however cf. Luhmann 1986a, on the semantics of love). Certainly, when comparing Luhmann’s and say Foucault’s œuvres, one could not consider Luhmann a “social theorist of the body”, while Foucault’s writings surely justify such a description. Nevertheless, it is advisable not to stop here and instead ask again what Luhmann’s notion of an autonomous social sphere implies for the analysis of the role of the body. One concept particularly deserves being mentioned here: the idea of symbiotic mechanisms, which Luhmann (1981c) has coined to account for the way in which society relates to the body. Symbiotic mechanisms, being considered a purely social phenomenon, regulate how social systems activate, control, direct or suppress bodily behaviour, and how they react to or deal with certain (sometimes also communicatively disturbing) movements of the body. According to Luhmann, specific social systems – and one may also consider organizations here – have developed their own kinds of symbiotic mechanisms. When it comes to interaction systems, for example, society holds ready certain more or less tactless (or discreet) forms 243

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of avoiding or coping with bodily behaviour (e.g. with yawning during a business presentation). Concerning systems of intimate relationships, love has been coded as a “passion” (Luhmann 1986a): sexual activities are closely linked to – more or less stable – relationships and can serve as a proof of love. And the political system, for example, has developed its own specific methods of dealing with physical force and violence, primarily by ceding the use of force to the government and subjecting it to the law. Certainly, against the background of Bourdieu’s concept of the habitus and Foucault’s radical writings on how the social constitutes the body, Luhmann’s writings on the relation of the social to the body are, at least not at first sight, not among the particular strengths of his theory. However, as has been explored in the previous sections, Luhmann’s notion of the social as an autonomous phenomenon in its own right also opens up new perspectives for research. Actually, the idea that the social is systematically separated from the psychic, material and bodily spheres calls for more investigations on the mutual interrelations between these levels. The mere fact that the concept of social practices allows for a rather direct approach to analysing the impact of the social on bodily behaviour should not be seen as a substitute for more thorough reflections from a different angle. With respect to organizations, such reflections, for example, would include analysing the symbiotic mechanisms that organizations use when producing decisions autopoietically. The key question then would be: which mechanism do organizations employ to activate, regulate, discipline, and suppress the influence of human bodies – for the sake of maintaining their autonomous processes of decision making? Therefore, in view of issues of this kind, there is good reason to suppose that, even at its most disturbing point, Niklas Luhmann’s theory of social systems would be able to stimulate and enrich research on the generally neglected topic of the human body.

Summary and conclusion This chapter has aimed at comparing two strands of theorizing that are among the most innovative contributions to the current discourse in the field of organization studies: theories of social practices and the theory of social systems. On the basis of a close look at the social theoretical background of both modes of theorizing, it has been possible to compare the fundamental theoretical assumptions that shape the perspective of both strands of theorizing. In particular, it has been demonstrated that both theoretical approaches share a cultural, “constructivist” approach, which focusses on the patterns of meaning, interpretive schemes, and distinctions that constitute the way in which agents or systems relate to the world. Moreover, it has been shown that this cultural perspective is closely connected to the theo-

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retical move of de-centring the subject. In fact, both strands of theorizing agree on overcoming the notion of a self-centred subject as the independent origin of social phenomena in order to take into account the collective, intersubjective “nature” of the social. Despite this common theoretical interest, the two modes of theorizing follow a different course: the concept of social practices aims at making Descartes’ distinction of an “inner”, mental, and an “outer”, material world collapse into the notion of practices as a bundle in which bodily activities, material objects, and shared practical understanding are tightly interwoven. In contrast to this, Niklas Luhmann – strongly influenced by Husserl’s reflections on the problem of intersubjectivity – prefers to consider the collective “nature” of the social by introducing a social “realm” in its own right. Hence he clearly separates the spheres of the mental, the social, the material, and the body. It has been demonstrated that the notion of the social resulting from Luhmann’s seemingly unusual conceptual decision has parallels with certain (post-)structuralist perspectives on the social. Moreover, it has been shown that Luhmann’s approach must be considered both more radical and traditional than practice theoretical concepts. And also, it has turned out that such a concept of the social allows especially for theorizing the idea that social phenomena – among others: organizations – possess a dynamics of their own, which cannot simply be traced back to the behaviour of individual agents. On the basis of those observations, the subsequent sections elaborated on the way in which the different theoretical agendas of both strands of theorizing translate into consequences for the notion of structure and agency, the status of the material, and the role of the body. First of all, it turned out that – despite their fundamental differences – systems theory and theories of social practices still share many aspects when it comes to theorizing the social. With respect to the topic of structure and agency, they both distinguish different degrees to which agents or systems can examine or rationalize their operations and they both are aware of the duality of structure. With respect to the material world and the body, both agree particularly that material and bodily phenomena are always mediated by interpretive schemes or distinctions and are therefore always encountered as already interpreted. However, it has also been shown in which respect the specific conceptual strategies involved in both modes of theorizing amount to significant differences. Concerning the topic of agency, the practice theoretical notion, according to which the mental and the social level coincide, emphasizes the common grounds of shared “life-forms” provided by social practices. In contrast, its specific perspective of distinguishing psychic from social systems enables systems theory to provide a unique way for analysing the mutual interplay between mental and social phenomena. With respect to 245

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organizations, Luhmann’s approach is therefore capable of examining the question of how organizations construct decision makers, and under which circumstances and by which mechanisms decisions are attributed to whom. Concerning the status of the material and the role of the body, the general setting is similar: while bodily and material aspects form an integral part of social practices, systems theory systematically excludes material and bodily phenomena from the operations of social systems. The particular strength of practice-based approaches consists in their ability to reflect the routinized, bodily aspect of human behaviour. Additionally, they can adequately theorize the significance of the very materiality of resources, which comes into play when practices are constituted and shaped by dealing with the material world and handling objects. In turn, however, systems theory opens up new ways for analysing how social processes relate to material and bodily phenomena. This is because Luhmann provides a perspective to analyse how the social system “organization” disposes of how material objects relate to the organizational network of decisions. And with respect to the body, Luhmann’s concept of symbiotic mechanisms could stimulate research on the question of how organizations activate, discipline, or suppress bodily movements during their internal processes of autopoietical reproduction. In sum, we can state that theories of social practices provide a perspective on social phenomena that, in comprising mental, social, bodily, and material aspects, allows for an entirely integrated analysis of the social conditions that influence human behaviour. However, compared with systems theory, they appear rather weak when it comes to analysing the internal dynamics of social systems. As a mirror image to this, systems theory separates the social from the mental, the bodily, and the material, can therefore fruitfully emphasize the genuine dynamics of social phenomena, and is able to contribute to an understanding of the mutual interplay of these spheres. Yet, systems theoretical analyses can barely reflect entirely the direct significance of the material world and the bodily aspects of human behaviour. Especially with respect to organization studies, this result has an important implication for the relation of the two approaches, whichever of these two approaches one may prefer in the end. First: as organizations certainly do possess an internal dynamics of their own, it may be advisable to researchers with a cultural “constructivist” perspective who are interested in the functioning of organizations not to ignore the perspective of systems theory. Apart from Giddens’ sketchy note on organizations (1984) – which, to the best of my knowledge, has not proved to have had a significant impact on organizational studies – one can barely make out any practice-based concepts that explicitly relate to the internal form and functioning of organizations as a specific sphere in its own right. At least for the moment, practice-based approaches are in need of a complementary view that can compensate for this particular weakness. 246

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Second: it has been demonstrated by various findings since the days of Max Weber that organizational phenomena can certainly not be entirely explained on the strength of their own dynamics alone. Whether it is the particular life-forms that are typical for modern society, the role of the body, or the impact of technology on organizations: at least for the moment, also systems theorists need a complementary view to illuminate the restrictions involved in their particular approach. These two aspects imply that it may be advisable to perceive systems theory and theories of social practices not as competitors for truth in the discourse of organization theory, but rather as complementary approaches that could enrich each other’s perspectives. Especially the common theoretical roots in the cultural mode of theorizing may provide sufficient foundations for a fruitful process of mutual stimulation. In concluding this chapter let us turn to the French écrivain André Gide. It was his conviction that “the importance of a proposed new system, of a new explanation of certain phenomena, cannot be measured solely by its exactitude, but also, above all, rather, by the impulse it imparts to the spirit to make new discoveries, new observations … by the ways it opens, the obstacles it removes, and the weapons it provides” (Gide 1947 p. 116; my translation). After all, it is precisely in the sense of these words that systems theory and theories of social practices must be considered equal partners in investigating the social phenomenon we commonly refer to as “organization”.

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Chapter 11

Luhmann’s Systems Theory and the New Institutionalism Raimund Hasse

Introduction There is no neglect of social theories in organization research worth speaking of. Theories from other fields have always been taken into consideration – sociological, as well as others; for example, those of institutional economics (Williamson/Ouchi 1981) or those of cognitive psychology (Weick 1979, 1995; Sims/Goia 1986). Such openness may be considered to be a strength of organization research. With respect to sociology, researchers have incorporated interactionism (Silverman 1970), cultural theory (Hassard/Parker 1993) and postmodern thinking (Boje et al. 1996; Cooper/Burrell 1988) into the interdisciplinary field of organization studies. Furthermore, most of the methodological debates in the social sciences have been reflected upon (e.g. Weaver/Gioia 1994). As a result, there are diverse perspectives on organizations (Morgan 1986) and comparative evaluation of those theories is underdeveloped. Since the late 1980s grand theories and meta-theoretical concepts have been discussed animatedly. Additionally, there has been a revised interest in macro-sociological parameters such as social norms and expectations, institutional and legal contexts, as well as cultural phenomena. In this context, Niklas Luhmann has attracted a great deal of attention – initially in German-speaking Europe and more recently in the international debate. Compared with other grand theorists such as Michel Foucault and Anthony Giddens, Luhmann’s work differs in explicitly focusing on issues of formal organization. Thus, there are not only meta-theoretical concepts and macrosociological insights that can be related to issues of organization, there has additionally always been a distinct organization sociology which deserves a closer look (Luhmann 1964, 1973, 2000c). In the US, interest in combining organizational issues with a macrosociological perspective has directed attention towards the new institutionalism, as represented by John Meyer and his collaborators (Jepperson 2001; Hasse/Krücken 1999). The new institutionalism has dealt with the spread 248

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and growing significance of formal organizations (Boli/Thomas 1997) and, not unlike Luhmann, it has considered formal organizations to be a characteristic feature of modern society. Researchers in this context have also focused on the societal imprinting of formal organizations. In so doing, they have incorporated macro-sociological parameters and dealt with the impacts of a so-called world polity which predominantly consists of universal norms and expectations of rationalization and democratic principles (Meyer et al. 1994). What is often labeled “new institutionalism for organizational analysis” (Powell/DiMaggio 1991; Scott 1995) is thus based on a much broader sociological perspective. Though being based on different – and incommensurable – theoretical and methodological roots, both systems theory and new institutionalism are macro-sociological approaches which have dealt intensively with the links between an organization and society. This is the starting point of the following investigation which focuses on two issues. Firstly, a striking contrast will be outlined: While the new institutionalism is primarily interested in processes of change towards convergence (related to the diffusion of norms and expectations), the systems theory predominantly draws a distinction between types of organizations (assumed to be deeply influenced by processes of functional differentiation). Thus the systems theory may contribute to a compensation for what is currently being criticized by the new institutionalists themselves: the bias towards over-emphasizing the convergence of organizational forms. Secondly, I will argue that the systems theory is a promising candidate for organization analysis because insights into links between an organization and society are accompanied by a strand of research which deals with the micro-dynamics within a given organization. This micro-perspective is necessary in order to focus on the internal dynamics which determine the sensitivity to external parameters. The course of argument will be developed in three steps: In the first section, I will refer to the new institutionalism by highlighting its macro-sociological aspirations as particularly spelled out in the world polity-concept. It will be shown that – according to this view – any organization is assumed to be influenced by the diffusion of norms and expectations which are predominantly transmitted by international organizations, consultants and professional associations. It will be pointed out that fundamental differences between organizations and types thereof are neglected. The new institutionalism evaluates such differences as residuals, and change is expected to materialize as isomorphism. Critical remarks will also be made as to the neglect of micro-dynamics in organizations – crucial to the perception and processing of societal impacts. It will also be shown that, due to this limitation, the new institutionalism tends to outline an over-socialized and deterministic understanding of organizations. In the second section, I will describe Luhmann’s approach by emphasizing 249

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his insights into the societal effects and overall functions of formal organizations. It will be shown that the systems theory in this respect is as macrosociological as the new institutionalism. Organizations appear to be requirements for the reproduction of modern society, and they are assumed to have an enormous impact upon social evolution. As far as the reverse impact on organizations is concerned, it will be shown that the systems theory sheds light on fundamental differences between certain types of organizations, all of which are strictly related to functional differentiation as the characteristic structure of modern society. In doing so, the systems theory offers a perspective for the compensation of the strict focus on isomorphism which characterizes the new institutionalism. In the third section, it will be argued that interactions between organizations and society do not cover the entire spectrum of Luhmann’s contributions to organization theory. Instead, systems theory offers a sophisticated concept of organizational processes. Here, emphasis is placed on internal dynamics, otherwise neglected in the new institutionalism. Luhmann’s core assumption is that any organization is a distinct social system: From this point of view, organizations are systems which are characterized by a specific mode of communication – decision making. These decisions are related to earlier decisions made by the organization itself and societal impacts on organizations tend to be devaluated in this concept.

Organizational analysis, new institutionalism, and world polity Organization sociology does not need to be reminded that organizations are embedded in a social context which deeply influences any given organization. Instead, the basic distinction between an organization and its social environment is an established scheme (Aldrich/Marsden 1994). External parameters have even been considered to be determinants of organizational forms – in particular in contingency theory, where environmental factors such as market demand or available technologies have the status of independent variables determining the formal structure of any organization (Mintzberg 1979; Scott 1984). Similarly, the so called resource dependence theory emphasized the dependency of organizations on a variety of resources such as capital, knowledge and technology (Pfeffer/Salancik 1978). Finally, the new institutionalism of organizational analysis has re-addressed Weberian issues of legitimacy, and in doing so has focused attention on external norms and expectations (Jepperson 1991; DiMaggio/Powell 1991; Scott 1995). Another line of demarcation from both contingency theory and resource dependence theory is the fact that the new institutionalism is a macro250

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sociological approach which does not restrict itself to the level of formal organizations and their interfaces (Jepperson 2001). Instead, organizational issues are embedded in a research program that aims to identify processes of rationalization as a comprehensive worldwide cultural project (Dobbin 1994). In focusing on the so-called world polity as its driving force, a cultural variant of modernization theory is offered (Meyer et al. 1997; Meyer et al. 1994). In order to avoid any misinterpretation, two core assumptions of the new institutionalism deserve a closer look. Instead of arguing in a functional mode, rationalizing principles are considered to be modern myths. From this point of view, means of rationalization such as technology, education and accounting diffuse on a global scale because they are believed to increase efficiency. No claims regarding material effects are made. By contrast, it has been shown that the relationship between an increase in efficiency and such means is often difficult to measure or, if it can be evaluated, may be rather weak or even absent (Meyer/Zucker 1989). Secondly, instead of referring to rational actors as a starting point of the analysis, these actors are considered to be the outcome – or materialization – of the cultural script in which the world polity emphasizes rationality, self control and utility maximization (Meyer/Jepperson 2000). Organizations are considered to be mediating agencies of the world polity. It has been shown, for example, that technical standards or curricula diffuse on a global scale due to the activities of international organizations, consultants and professional associations. Where the grid of such organizations is dense, world polity is implemented, and this shapes or even constitutes the concepts of individuals, states, and organizations, all of which are considered to be modern actors (Thomas et al. 1987; Meyer/Jepperson 2000). The implementation of the world polity is thus a function of organizations (Boli/Thomas 1997). From this point of view, some organizations, such as the UN, the International Labor Organization, Amnesty International or Greenpeace, can shape states, individuals and organizations, all of which are expected to act and change in accordance with the world polity. As a consequence, organizations (as well as states and individuals) are the recipients of world polity – and this applies to any organization, though empirically differing in degree. The result is that organizations such as firms, administrative agencies, schools, universities, hospitals and so on are expected to incorporate means of rationalization – e.g. accounting practices, technologies and reforms etc. Furthermore, all organizations are expected to adhere to social and legal norms (for example, equal opportunities) and to reflect upon ethical standards (such as sustainable development). The core hypothesis is that organizations are generally expected to adapt to these prescriptions of world polity and its institutionalized agents (Meyer/Scott 1983). 251

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The basic principles of the research program were spelled out as early as 1977. John Meyer and Brian Rowan’s article in the American Journal of Sociology can be considered to be the starting point of the new institutionalism. It has stimulated controversial debates and served as a frame of reference for the bulk of empirical investigations (cf. Scott 1995; Hasse/ Krücken 1999; Schneiberg/Clemens 2004). Its core message may be summarized on the basis of a threefold question/answer scheme: Basic question

Answer

Why do organizations act and structure themselves in accordance with the expectations of their institutionalized environment?

Predominantly in order to achieve legitimacy; partly due to conditions of complexity and uncertainty making rational decisions and calculable consequences difficult.

How do organizations adapt to the institutionalized expectations of their environment?

Norms and scripts are formally represented and ritually enacted in order to demonstrate conformity and commitment.

What are the material effects of these processes of adaptation?

Only a few consequences are to be expected because organizations tend to decouple their practices; i.e. core activities and decision making from formal representation and ritual enactment.

The notion of a decoupling of internal practices from formal structures and processes is crucial to the new institutionalism. Decoupling implies that a sharp line of demarcation is drawn between two dimensions of organizational life. Otherwise organizations would lack any selectivity with respect to their institutionalized environment. Without decoupling organizations would be confronted with the risk of not being able to protect their core activities and decision making processes from external prescriptions beyond their control. Otherwise an organization would lose its capacity to develop and adhere to its own routines. From an organization sociology point of view, it should be noted that this model is closely related to James D. Thompson’s classical consideration of formal structures as buffers to protect core activities from environmental disturbances (Thompson 1967). Whereas Thompson referred to material buffers as, e.g., the storage of supply products important to avoid discontinuities in assembly line production, the new institutionalism focuses on legitimacy. With respect to institutionalized norms and expectations, the assumption is that no filter can be established on the organization/environment-interface because organizations need to demonstrate conformity and commitment. In order to avoid societal norms and expectations threatening core activities, however, selectivity emerges inside an organization – between 252

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organizational practices and routines, on the one hand, and formal structures and processes, on the other. The material effects of formal structures and processes on organizational core activities may thus be rather weak. Another form of selectivity may result from mediating agencies. This is DiMaggio & Powell’s perspective (DiMaggio/Powell 1983). The authors are not interested in macro-sociological issues of the world polity, nor do they emphasize decoupling mechanisms at the level of a given organization. Instead they consider organizational fields to be independent variables. Fields are constituted by powerful professions, regulatory agencies and other significant organizations (i.e. competitors and partners). Powell/DiMaggio (1991) assume that organizations in a given organizational field are affected by the same professions and regulations. Equally important is the fact that organizations in any given field affect each other – either mutually or unilaterally. Organizations tend to imitate each other’s structures and processes in order to learn from and minimize the risk of post-decisional regret (Harrison/March 1984). The result is that within organizational fields, or societal sectors, to use John Meyer and Richard Scott’s term (Meyer/Scott 1983), isomorphism is to be found (Kondra/Hinings 1998). DiMaggio & Powell (1983) exclusively refer to processes of isomorphism, noting that the lack of interest in complimentary differences between fields has led to sharp criticism (Schneiberg/Clemens 2004). First of all, it does not acknowledge that the idea of distinct fields is an analytical construction which neglects self-evident overlaps between, and differences within, real fields. Secondly, it confronts the fallacy of contingency theory which assumes that environmental factors plainly determine an organization’s structure. The paradigm shift from focusing on functional requisites (contingency theory) to issues of legitimacy (new institutionalism) does not resolve this theoretical problem. Thirdly, strictly referring to organizational fields is predominantly an inter-organizational perspective which is fading from the macro-sociological dimension of the world polity approach. To summarize, the focus upon organizational fields may not be an appropriate means of investigating the interplay of organizational and societal change from a broader perspective. An alternative and more promising path may be to put more emphasis on the inherently multi-dimensional character of the world polity, which is assumed to shape modern organizations (Friedland/Alfaord 1991). Here, the potentially contradictory and mutually exclusive character of institutionalized norms and expectations has to be taken into consideration. Rationalization principles, for example, may collide with issues of democratization and deliberation when reforming public services. Likewise, shortterm competitive advantages and first-mover advantages may be at risk when industrial production is aiming toward principles of sustainable development. These contradictory relations hint at the fact that it may be 253

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impossible to follow all institutionalized norms and expectations to the same degree. Without explicitly referring to the world polity-program this argument has been put forward by Nils Brunsson (2002), and his contribution has been quite convincing in arguing that organizations have no alternative to the selection and interpretation of such norms. As a consequence of such selection and internal processing, it may be concluded that institutionalized norms and expectations do not always have the same effect (Zucker 1977). Decoupling may thus not be a universal mode but a variable which empirically ranges from loose to tight coupling. As a consequence, the formal incorporation of institutionalized norms and expectations may or may not make a difference in terms of internal practices – and the material impacts of such incorporation may vary according to the organizational processing of these expectations. In this respect, a micro-foundation which highlights the internal dynamics is necessary for analyzing material effects on organizations and the corresponding repercussions on society. Unfortunately, such a micro-foundation is mostly absent in the new institutionalism. Thus far it has been argued that the new institutionalism may serve as a starting point for an evaluation of systems theory, because – and not unlike Luhmann – it has contributed to an understanding of links between organizational forms and societal context. Two characteristic features have been critically reflected upon: (1) the neglect of differences with respect to societal impacts and corresponding organizational forms, and (2) a missing micro-foundation which needs to be overcome in order to shed light on organizational processes and their effects. As will be argued in the next two sections, Luhmann’s theory deserves a closer look because it offers insights which may contribute to a solution to both research problems.

Organization/society – Links in Luhmann’s theory of social systems Unlike most sociologists who have put forward a grand theory, Niklas Luhman addressed organizational issues throughout his career. Referring to his biography one may even argue that organization research was his entry into the social sciences – and it may be noted that in the famous controversy between systems theory and critical theory Habermas accused Luhmann of transferring a technocratic perspective from administrative organizations to the whole of society (Habermas/Luhmann 1971b). Regardless, organizational and administrative topics dominated Luhmann’s agenda in the 1960s and early 1970s when he was heavily influenced by organization research from the US, in particular by the work of Herbert Simon and James March. In his later publications, Luhmann readdressed organizational issues with254

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in his advanced theoretical framework. Not only does this apply to “Die Gesellschaft der Gesellschaft” (1997a) where the spread of formal organizations is related to the evolution of modern society and functional differentiation as its primary mode, but also to his outline of an autopoietic theory of organization as spelled out in “Organisation und Entscheidung” (2000c, pp. 39 ff.). Therefore it would not be an exaggeration to argue that Luhmann was a genuine organization sociologist in touch with the research field and heavily interested in related single issues. Luhmann’s development of a general social theory may be characterized by paradigmatic changes (as from cybernetics/functionalism in the beginning via evolution theory/autopoiesis to a formal theory of form/theory of observation). By contrast, Luhmann’s perspective on organizations has been more consistent over the years. Nevertheless, two approaches to organizations may be distinguished. On the one hand, and not unlike the new institutionalism, Luhmann emphasized the interrelationship between an organization and society. On the other hand, organizations are considered to be distinct social entities – a level of reference which is only loosely coupled with its social environment. In this section I focus on interrelationships. Then I will deal with internal dynamics. General remarks on the societal effects of formal organizations can be found already in the beginning of Luhmann’s contribution to organization sociology: In the 1960s and 1970s organizations were considered to be conflict regulators and communication channels. They were characterized with respect to their capacity to process different issues simultaneously – sometimes 24 hours a day, as is the case with hospitals, for example, and for decades or even for centuries, as is the case with churches. Furthermore, Luhmann argued that organizations were preconditions for the differentiation of labor, and could thus trigger forms of action which would otherwise have been rather unlikely. Highlighting differentiation as the core principle of social evolution, Luhmann concluded that “… a high degree of … specification of behavior can only be achieved by the mechanism of organization which modern society requires in many of its most important functional domains” (Luhmann 1975b, p. 13, translated by the author). It thus seems appropriate to state that, according to Luhmann, modern society needs to be based on formal organizations, and in that sense modern society is an organization society (Schimank 2001). Comparable weight has been put on the societal functions of organizations in later writings on social evolution and functional differentiation (Luhmann 1987b). With respect to contemporary society, the significance of organizations has even been compared to generalized communication media – such as truth (science), power (politics) and property (economy) – which is clearly at the heart of his theory of functional differentiation. Referring to the differentiation of the modern economy, Luhmann noted: “Media and 255

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organizations are two forms of the formation of unlikely, sophisticated expectations … In this respect, they are functionally equivalent means, and all functional systems … are dependent on their interplay” (Luhmann 1987b, p. 41, translated by the author). Profound reflections on the social impacts of the emergence and diffusion of formal organizations are also to be found in historical descriptions. Here, Luhmann stated that “… organizations originally emerge in response to an obvious need for decision making about collective action … as a consequence of money economy or under conditions of religious pluralism” (Luhmann 1981a, p. 361, translated by the author). This interpretation is based on the observation that organizations emerged in medieval cities and proved to be rather influential as regards processes of specialization. In this respect, the differentiation of politics, science, economy etc. appears to be tightly coupled with corresponding organizations like public administration offices, universities, banks, etc., all of which are considered to be so-called primary organizations of “their” functional systems (Luhmann 1997a, pp. 840 f.). Emphasis is thus placed on close links between the functional differentiation of modern society and the emergence of specialized organizations. Currently, links between organizations and society are one of the main foci within systems theory (cf. Kneer 2001). In this context, organizations are assumed to incorporate codes and entire programs of functional systems and such incorporation is considered to determine the identity of most organizations (Tacke 2001). Insofar as organizations give sole priority to codes and programs of certain systems, a categorical distinction between types of organizations, like economic, scientific or political, can be drawn. Organizations, then, may even be considered to be sub-systems of the functional systems whose logic they have incorporated (Willke 1994b). This “organizations as sub-systems” perspective is of paramount importance within the framework of Luhmann’s theory because it allows the re-addressing of macro-sociological issues of integration and steering (Kneer 2001). The reason for this is that organizations are considered to be the only social systems that can communicate with each other.1 In so doing they can setup inter-organizational relationships with any type of organization.2 Insofar as organizations are considered to represent societal systems 1

Theoretically, such inter-organizational communication is possible because organizations have a dual status. They are social systems (which have internalized codes of programs of functional systems), and they are actors (which means within the framework of Luhmann’s theory that communication can be attributed to them just as it can be attributed to people). 2 Such inter-organizational arrangements have gained enormous attention through the discourse on social networks. Strictly in accordance with Luhmann’s distinction of only three societal levels (interaction, society, organization) these network structures need to be reconceptualized as being either interaction (among organizations) or organization (with single organizations as members, as in the case of associations or neo-corporate arrangements and social pacts) (cf. Kneer 2001).

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such as politics or economy, communication between them offers the potential for processes of mutual adjustment or even for regulation which would otherwise have to be questioned from a systems theory point of view (Lieckweg 2001). Thus far, emphasis has been put on close relationships between organizations and their societal context. It has been shown that the systems theory assumes that organizations fulfill social functions which are crucial for the reproduction of modern society. Furthermore, a trend has been outlined which predominantly characterizes organizations with respect to functional differentiation. Organizations are assumed to copy codes and programs of those functional systems, with which they are expected to identify. From this point of view, societal functions and relationships with the social environment have been at the center of Luhmann’s reflection upon organizations. This perspective might easily be compared with the new institutionalism. The result of such a focused comparison is that both theories are based on different concepts of modern society, which has a profound impact on the applied perspective on organizations. According to the new institutionalism, society is predominantly made up of norms and expectations which affect any organization. Thus, processes of change toward isomorphism are expected. The systems theory, by contrast, highlights the differentiation of society into functional systems. According to this view, processes of differentiation into politics, economy, science, and so on are considered to be the prevailing pattern of modern society. As most organizations are considered to be closely related to one of these functional systems, the systems theory highlights different types of organization. This may serve as a starting point for questioning the new institutionalism’s emphasis on isomorphism. In the next section it will be argued that this is not the only insight the systems theory provides. Instead, Luhmann’s contribution to organization sociology offers a micro-sociological perspective.

Micro-foundation: Organizations as distinct systems Luhmann’s reflection on the relationship between society and organizations have been accompanied by a strand of research that exclusively focuses on organizations as distinct social systems. Initially this was indicated by the fact that his functional analysis predominantly referred to the focal organization itself. Luhmann was interested in the impacts of certain organizational forms on the reproduction and functioning of a given organization (Luhmann 1964). Later as he developed his theory of social systems to a more advanced level, organizations were conceptualized as autopoietic systems which relate their decisions to earlier decisions in a self-referential manner (Luhmann 1988c; 2000c).

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In what follows, I will argue that Luhmann has focused on organizations with respect to organizational effects throughout his career. The starting point was a sharp criticism of Max Weber’s ideal type of bureaucracy as an efficient and legitimate form of modern organization (Weber 1972; Luhmann 1971b). Such a criticism was very much in line with the mainstream of organization sociology at that time (cf. Hasse 2003a, pp. 55 ff.). In contrast with many others, however, Luhmann did not restrict his analysis to an empirical falsification of Weber’s thesis about the bureaucratic form as the materialization of modernization processes. Instead, and in contrast to Weber’s ideal type, he called the means/end character of organizations into question and argued that ends fulfill functions other than regulating action on the basis of decision outcomes (Luhmann 1973). It should be noted, however, that these functions are strictly related to the focal organization, not to the whole of society or the functional systems thereof. The main research question then became: In what respect do certain structural features of an organization affect the reproduction of this organization? (Luhmann 1964) This preference for analyzing the functions of organizational forms with respect to the organization itself can best be illustrated by focusing upon a fundamental requirement of any organization – but probably of the whole of society as well: The need to absorb complexity and uncertainty. In organizational analysis, addressing issues of uncertainty absorption has a long tradition. Key figures like James March (March/Simon 1958) and James Thompson (1967) have dealt with uncertainty absorption, and Luhmann related his findings to the research field in general. From a macro-sociological point of view, however, it is striking that uncertainty absorption was strictly considered to be a requirement of the organization. Uncertainty absorption was expected to protect the focal organization from risk and information overload. Implications for the whole of society or for nonorganized parts thereof were explicitly neglected, and in this respect no difference is to be found between Luhmann, on the one hand, and organization researchers such as March or Thompson, on the other.3 When emphasizing the quasi-sovereign status of organizations in Luhmann’s contributions to organization sociology, his basic distinction between interaction, society, and organization as the only levels of reference offers important insights (Luhmann 1975b). Organizations are considered here to be much more important conceptually than other social entities such as groups, classes, or networks, none of which are considered to be such 3

Against the backdrop of those characteristics of contemporary life which are emphasized in interpretations of so-called information societies (Castells 1996; Webster 1995; Duff 2000) it may be more evident than ever that uncertainty absorption is required not only by organizations but by the whole of society as well. For such a reflection on organizations as “uncertainty absorbers”, cf. Hasse (2003b).

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basic principles of modern society. In “Interaction, Organization, and Society” (Luhmann 1975b) the coupling between an organization and its wider societal context is explicitly neglected. Instead, the emergence and diffusion of formal organizations is treated as a “completely independent development which embodies a new principle of boundary spanning and self selection, and which can be deduced neither from interaction nor from society …” (Luhmann 1975b, p. 12). Furthermore, it was even assumed that organizations may decide to shift their orientation as, for example, a research organization may decide to relate its decision making to political issues. This implies that the notion of a fixed relationship between an organization and its specific societal context is called into question. Instead, the identity of an organization is considered to be open to change on the basis of decision making, as are any other parameters of an organization (cf. Hasse/Japp 1997).4 Since the end of the 1980s, the core concept of organizations as decision making entities has been outlined in greater detail. Organizations are conceptualized as autopoietic systems which relate decisions to their own past decisions. They are considered to be “systems which are composed of decisions, and which produce the decisions they are composed of … by themselves” (Luhmann 1988c, p. 166, in italics, translated by the author). From this point of view it is not surprising that an embeddedness of organizations is not the main argument in his masterpiece “Organisation und Entscheidung”. Instead, organizations are supposed to be self referential entities (Luhmann 2000c, pp. 39 ff.) implying that organizations or types thereof are not considered to be subsystems – or agents – of functional systems. Summing up, it can be concluded that Luhmann’s contribution to organization sociology consists of two perspectives. Organizations, on the one hand, are considered to be a distinct frame of reference. In early contributions, theoretically based on principles of functional analysis, this is spelled out by emphasizing the impact of an organization’s structural features on the organization itself. Then, and as the systems theory developed in the direction of self-reproduction, organizations were conceptualized as selfreferential systems. As a consequence, organizations appear to be only loosely coupled with their societal environment. On the other hand, Luhmann has argued that the emergence and diffusion of formal organizations is tightly coupled with societal evolution. Initially this was hinted at by the societal functions of formal organizations. More recently, the relationship between organizations and functional systems, such as politics, economy, and 4

With respect to the historical development of Luhmann’s systems theory it may be noted that this indicates that the basic concept of social systems as self-referential entities has been applied to organizations even at an early phase of the theory’s development.

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science, has been at issue. In this context, organizations appear to be preconditions of functional differentiation, and organizations are described as parts thereof. Occasionally, organizations are even assumed to mediate between and within functional systems. In this respect, the significance of organizations to macro-sociological processes can hardly be over-estimated.

Conclusion The starting point was the observation that the incorporation of theories from other fields is a characteristic feature of organization research. Recently, systems theory as developed by Niklas Luhmann and his scholars has attracted a significant amount of attention. In addition to metatheoretical and methodological concepts Luhmann’s contribution is considered to be a unique macro-sociological approach which extensively reflects upon the significance of formal organizations. I have focused on Luhmann’s contribution to organization sociology by showing that the systems theory is not the only macro-sociological approach which theorizes on the links between organizations and their wider societal context. The new institutionalism offers a particularly strong macrosociological alternative. As a consequence, the potential exists for a comparative evaluation which may be important for bringing Luhmann’s theory further toward the core of organization sociology. Additionally, it has been shown that a micro-foundation of organizational processes has accompanied Luhmann’s macro-sociological focus on organizations. Both perspectives offer important insights which can be explored on the basis of a focused comparison. According to the new institutionalism, organizations are a characteristic feature of modern society. It has been argued in this context that organizations such as international organizations, consultants and professional associations support the diffusion of western culture and the prevailing forms of rationality on a global scale. In so doing, organizations are having a profound impact on states, individuals and organizations, all of which are considered to be modern actors deeply influenced by world polity. This implies that organizations (as well as states and individuals) are recipients of world polity. They are expected to change in accordance with pre-given and organizationally mediated scripts. Because of its emphasis on the wider societal context, the macro-sociological character of the new institutionalism cannot be questioned. As its weakness, the strict focus on isomorphism has been criticized, and a top-down perspective has been identified which fails to acknowledge an organization’s selective and idiosyncratic processing of norms and expectations. The systems theory, by contrast, has offered insights into both organization/society links and internal dynamics. Links are spelled out when formal organizations are supposed to be a precondition for the evolution of mod260

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ern society and when considering organizations as deeply influenced by their societal context. According to this point of view, organizations tend to identify themselves (and are identified), for example, as economic, political or scientific organizations. The systems theory thus distinguishes between types of organizations. Rather than over-emphasizing changes in the direction of convergence, such types are assumed to be a persistent feature of modern society. The strict focus on internal dynamics, by definition, devaluates any links with the societal context. Instead, information processing and decision making are at issue. In this line of research, Luhmann considered organizations to be self-reproducing systems, and it is worth noting that the basic idea of self-reference was applied to organization sociology quite early on. Furthermore, decision making as an autopoietic process is clearly at the heart of “Organisation und Entscheidung” (2000c) which was Luhmann’s most important contribution to organization theory. From this point of view, the systems theory is characterized by a micro-foundation which cannot to be found at all in the new institutionalism. In summary, Luhmann has offered insights which may be used as a resource pool for the advancement of our understanding of both internal processes and external links. However, there is still a need for clarification as regards how these perspectives can be theoretically integrated. Empirically, issues of both organizational change over time (as an ongoing process and with structural impacts as, for example, discussed by Chandler (1977) and Fligstein (1990)) and societal effects of certain types and forms of organization (which may or may not fit the scheme of functional differentiation) seem to have been neglected. As a consequence, and in striking contrast to historical observations, contemporary impacts on society which go beyond the mere reproduction of basic structural features of modern society cannot be addressed appropriately – but this may be considered as another parallel to the new institutionalism.

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Chapter 12

Luhmann’s Systems Theory and Postmodernism Jochen Koch

Introduction When Robert Cooper and Gibson Burrell outlined their program of organizational postmodernism in 1988, they were very clear about splitting the world of social theory into two opposing schools of thought: “Modernism with its belief in the essential capacity of humanity to perfect itself through the power of rational thought” and “Postmodernism with its critical questioning, and often outright rejection, of the ethnocentric rationalism championed by modernism” (Cooper/Burrell 1988, p. 92). This diametrical concept – contrasting apparently not only different theoretical perspectives but also deep-rooted worldviews or even ideologies – was accompanied by a definite assignment with regard to the relevant discourse participants: the modern side should be seen as represented basically by Habermas and Luhmann, the postmodern side mainly by Derrida, Foucault and Lyotard. Not only did Cooper and Burrell make an obvious distinction between the two camps on the modernist side, namely a critical perspective held by Habermas and a socalled functionalist perspective viewed as represented by Luhmann, but they also presented a clear assessment of Luhmann’s systems theory: “Luhmann’s work represents a formalization as well as a justification of the developments charted by Bell. In what is sometimes called the ‘new systems theory’, Luhmann spells out the inexorable rationality of systemic modernism in which Kant’s notion of the critical, rational subject is completely repressed in the interests of a machine-like system of social functionality. Society itself becomes a gigantic organization” (Cooper/Burrell 1988, p. 96). Such an estimation and pigeonholing of Luhmann’s work must be irritating at least to those who have been taking a closer look at the significant developments in systems theory in the last thirty years. Nevertheless, not only is this assignment embedded in a strong tradition corresponding to the (self-)interpretation of modernity in the line of Weber (1979) and Habermas (1984), with regard to the development of modern society in a conflictive manner between reason and rationalization, but this estimation of Luh262

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mann’s work also approaches the postmodern critique of modernity, as formulated by Lyotard (1984), who characterizes this attribution of systems theory as a problematic and affirmative modernist approach. And last but not least, Luhmann himself has shown a great affinity to the notion of “modern” and in several statements has rejected the idea of a postmodern society, calling it a non-workable description of the present society (Luhmann 1998). Hence the relationship between Luhmann’s theoretical work and the numerous approaches to postmodernism seems more complex and ambiguous than previously thought, and for that reason it should be re-considered and examined in a more detailed way. It is the purpose of this paper to resituate Luhmann in the context of the ongoing debate on postmodernism, accentuating and clarifying the similarities between systems theory and the main theoretical ideas of various postmodern positions without losing sight of the evident differences. Part 1 and 2 of this chapter will offer a short overview of the ideas central to postmodernism, referring to the conceptual framework introduced by Lyotard and supplementing it with some ideas of Derrida and Foucault. Part 3 will then focus on the different components of Luhmann’s theoretical work by highlighting possible parallels to postmodern thinking. In part 4 three pitfalls of an exclusively postmodern reading of Luhmann’s systems theory will be discussed, and in part 5 a comparative perspective will be provided by drawing on both differences and similarities between systems theory and postmodern approaches. Finally, a short summary in the form of five elements of a theory of difference will be presented, showing the central affinity between systems theory and postmodern thinking.

The impetus of postmodern thinking Postmodern approaches are introduced into social science in order to criticize, reject and overcome the foundational premises of modernism. For the most part, the underlying premise of modernism conceptualizes the development of modern society as an inherently ambiguous process of conflict between the “origin” idea of the Enlightenment (liberation of the life-world) and its degenerated systemic version in the form of a mechanization of social order. While these two faces of modernism might seem incongruent and antagonistic, postmodern critique posits that they both rely on the same assumptions: that (1) discourses represent both reason and reality and that (2) there is a conscious subject. The idea of a (direct) representation and the idea of a (totally) conscious subject are fundamental to the self-understanding of modernism, and they both reflect the idea of a fundamental unity. In contrast, postmodernism can be understood as a general “assault on unity” (Power 1990). Instead of unity one can find in the centre of any 263

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discourse a web of contradictions or “discursive gaps”, and this could be interpreted also as the locus of power reconceptualized as a subtle and covert web of prior structuring. Instead of unity a postmodern understanding tries to emphasize the idea of difference, and this motive can be found in all postmodern approaches: “Foucault’s genealogical method is therefore similar to Lyotard’s agonistics and Derrida’s deconstruction: all deny the concept of a perfect origin and substitute for it a process of differential contestation” (Cooper/Burrell 1988, p. 101).

A framework of postmodern theory Central to the idea of postmodernism is the work of the French philosopher Jean-François Lyotard (1984; 1988) and his all too famous claim of the end of meta-narratives. However, beyond the mere proclamation of the end of meta-narratives, one can find in his philosophy an important and profound framework for a discursive understanding of recent society that focuses on three different problems of communication, knowledge and social integration: (1) the problem of legitimation, (2) the problem of chaining and (3) the problem of meta-narratives.

The problem of legitimation Generally speaking, “legitimation is a process by which a legislator is authorized to promulgate (…) a law as a norm” (Lyotard 1984, p. 8). Lyotard draws on scientific discourse to illustrate this problem, suggesting that any statement has to fulfill a given set of conditions in order to be accepted. The rules of this scientific discourse are therefore the domain of a scientific “legislator” who prescribes the relevant conditions (for instance, internal consistency and experimental verification) and determines whether a statement is considered scientific or not. At this point the problem of legitimation becomes evident. Scientific legitimation can also be required of the rules inherent to scientific discourse, or even of the goal of such a discourse. If it is the goal of scientific discourse to distinguish between true and false, what is the status of this goal itself? In other words: is the distinction between true and false itself true or false? This simple question leads scientific communication to fundamental and virtually unsolvable problems. Yet such a reflection of a discourse on its own rules and goal cannot be prevented unless rules are introduced which themselves do not fulfill the scientific standards. “This is exactly what Nietzsche is doing, though with a different terminology, when he shows that ‘European nihilism’ resulted from the truth requirement of science being turned back against itself” (Lyotard 1984, p. 39). The undermining effects are inevitable. 264

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At this point Lyotard introduces the idea of narrative knowledge and thus the distinction between scientific and narrative knowledge, which can be seen as a specific means of unfolding the problem of legitimation. According to Lyotard, the main difference between these two types of knowledge lies in their different approaches to legitimation. While scientific knowledge is always confronted with the problem of legitimation, narrative knowledge is not, because the process of generating and transmitting narrative knowledge is presumed to be self-legitimating. In this sense, scientific knowledge is supplemented by narrative knowledge in order to close the gap of legitimation, and therefore narrative knowledge has an important relevance to the possibility of making scientific statements. However, the legitimating function attributed to narrative knowledge in this relationship is not obvious, nor can it be made explicit without losing its function of legitimation. Consequently, to resolve the problem of legitimation a specific genre of discourse cannot refer explicitly to a simple narration. “A science that has not legitimated itself is not a true science; if the discourse that was meant to legitimate it seems to belong to a pre-scientific form of knowledge, like a ‘vulgar’ narrative, it is demoted to the lowest rank, that of an ideology or instrument of power” (Lyotard 1984, p. 38).

The problem of chaining While the problem of legitimation in a narrow sense can be regarded as a “discursively enclosed” one because of the complex relationship between included and excluded parts of narratives, the problem of chaining is in the first place clearly an open one. It deals with the possibilities and limits of linking different genres of discourse (their phrases or their knowledge claims respectively) with one another. Whereas different phrases or knowledge claims of one genre of discourse could be linked following the rules of that discourse, there are no rules for linking different genres of discourse. In the concept of Lyotard, this problem is presented in a clearly antagonistic perspective: “By its rule, a genre of discourse supplies a set of possible phrases, each arising from some phrase regimen. Another genre of discourse supplies another set of other possible phrases. There is a differend between these two sets (…) because they are heterogeneous. (…)” (Lyotard 1988, p. xii). This problem of linking, or (as proposed here) chaining, is presumed to be fundamental, induced by the premises of the genres of discourse themselves. The conflict between different genres of discourse is inevitable and therefore called a “differend” to mark the intended antagonistic relationship. In this sense there are no unified rules for chaining ethical and scientific claims, for example, because ethics and science follow their own rules of discourse. It is presumed that this problem cannot be resolved in general, so that any “solution” or any claim of a solution is suspected to explicitly or implicitly 265

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suppress potential differends. This does not mean that there cannot be any solution at all, but that there is no general solution. In this discursive understanding, and due to the impossibility of having general and unifying rules, such a general idea of chaining is called a grand narrative. In this sense the problem of chaining refers also to a narrative, but on a deeper level, which then can be understood as a grand narrative or even as a meta-narrative.

The problem of meta-narratives Meta-narratives are no simple narrations but narrations that seem to be based on discursive knowledge but in fact are not. Lyotard has identified two major forms of such narratives, one more political and the other more philosophical (Lyotard 1984, p. 31). Both forms could be seen as represented in the concept of Enlightenment. “The explicit appeal to narrative in the problematic of knowledge is concomitant with the liberation of the bourgeois classes from traditional authorities” (Lyotard 1984, p. 30). Furthermore, such a meta-narrative also resolves the problem of legitimation for each genre of discourse. This can be explained by drawing again on scientific discourse. In this sense the goal of science to distinguish between true and false is itself stabilized against auto-logical reflection by referring to the idea of a grand narrative; for instance, to the idea of Enlightenment. True are those claims that deserve the idea of Enlightenment, and it is the idea of Enlightenment that is true in itself. Beyond solving the problem of legitimation, this narrative can be considered a grand narrative, because it also reconciles different genres of discourse. This is the point of departure for all postmodern critiques, as it shows that the idea of a meta-narrative or even a grand narrative has to be considered the pseudo-solution of both problems mentioned above. The problem of a meta-narrative in this interpretation becomes a problem of the invisible, subconscious and emergent structures of the knowledge development process, and therefore it also entails a linkage to power and power structures. Lyotard (1988) has analysed this problem from an ethical perspective under the notion of “differend”, demonstrating in an instructive way how certain types of claims are systematically excluded. A similar conceptualisation can be found in the work of Foucault (1972; 1973) under the notion of episteme and in his later work (1979) under the notion of apparatus (dispositif). In this sense casting doubt on a meta-narrative requires a highly sophisticated framework, which offers an analytical perspective for grasping the “subconscious structure” of the conceptual ideas behind society and therefore of society too. While Foucault is certainly more sceptical, this is the

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point where the concept of deconstruction developed by Derrida (1977; 1978) fits in. One of the central outcomes of the deconstructive work developed by Derrida is the idea of de-centering the subject. On both an epistemological and a societal level, modernism is basically built on the idea of a subject as a unity and as a fundament. This may be best represented in the Cartesian cogito ergo sum embodying the concept that the ultimate grounding for all thought and theorizing should be the process of human self-consciousness and therefore the subject. For postmodern approaches this idea of an ultimate and foundational subject is instead highly suspicious, and one can find this questioning of the subject not only in the work of Derrida, but also in the work of Foucault and Lyotard. Common to these postmodern critics is the attempt to think and to theorize without attributing a central role to an idea called “subject” in the sense of an unquestionable reference point. Instead of focusing on the subject, the postmodern approaches look at the role of language and at conceptualizing philosophy, science and society from a discursive viewpoint, as was delineated above. This short framing of central postmodern ideas serves as a background for pointing out the similarities and differences with regard to Luhmann’s theory.

Postmodern elements in the theory of Luhmann One of the most appealing aspects of a comparison between Luhmann’s theory and the different postmodern approaches could perhaps be detected in the previously mentioned idea of de-centering the subject. Like postmodernists, with their approaches for undermining the modern idea of the subject, Luhmann has definitely not reserved a central position for the subject in either his theory or his structural description of modern society. Basing his social theory on the main element of communication, Luhmann places the subject (or in a sociological sense the individual) not at the centre but in the environment of the society (see Chapter 1 in the present volume). At first sight, and following a confrontation on this level, one is tempted to see a clear parallel between the postmodern idea of de-centering the subject and Luhmann’s approach of placing the individual in the environment. At second sight, however, the idea of de-centering the subject in a postmodern sense has a clear critical impetus and a clear critical implication, whereas Luhmann’s “de-centering” is due to theoretical decisions to understand society on the basis of communications. Put this way, it leads us to state that these are quite different backgrounds and thus also potentially quite different ideas. But on the other hand, and perhaps at third glance, both the postmodern and the Luhmannian “de-centering” converge on a more

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fundamental, or even better, on an epistemological understanding of the problem. In this sense both the idea of de-centering the subject and Luhmann’s idea of thinking society “without” individuals at centre stage are “embedded” in the epistemological idea of difference.

The idea of difference in the work of Luhmann Luhmann’s theory is a constructionist and difference-theoretical approach, in the sense that it attempts to treat neither the objects of the world nor the terms of world description as simply given (Luhmann 2002e). The starting point for all reflections (for all theory- or system-building processes) is not identities but distinctions, to which other distinctions can be connected. For that reason identity is conceived only as a difference, namely as a difference between identity and difference (Luhmann 2002a). This form of radical deontologisation of objects goes along with the idea that there is no unity without a reference, but every reference leads to another distinction. In this sense the unity of a system is not representable without referring to its environment, and that means referring to the distinction between system and environment. Thus, the unity of the distinction between system and environment is another difference – for example the difference that constitutes an observer observing by distinguishing system and environment. Therefore, any conception of unity in Luhmann’s theory has to be seen as referring to another difference; and there is no final and ultimate unity, neither in the structure of modern society nor in its semantic description. This idea obviously leads to the paradoxical “foundation” of systems theory: every unity is a difference, or, to put it another way: “The same is different” (Luhmann 1993g). Therefore it is “foundational” to the theory of Luhmann that there is no foundation in terms of a final and ultimate unity, for example consensus, critique, subjectivity or even intersubjectivity, because every foundation leads only to another distinction and therefore to a paradoxical statement. Focusing on such paradoxical statements is fundamental to Luhmann’s theoretical work, and it is also an important issue in postmodern thinking.

System and environment The central distinction in Luhmann’s sociological theory is that between system and environment. It constitutes the paradigm of recent systems theory (Luhmann 1995f, p. 176). Every system is constituted by a specific relationship to its environment. Therefore, and in the interest of emphasizing the difference-theoretical impetus, it would be more accurate to speak of system-environment-theory rather than systems theory (cf. Luhmann 2006). This implies that neither should the concept of environment be misunderstood as a kind of category residual to the system, nor should the concept of

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system be interpreted as a kind of “perfect origin” that is independent of the environment. Both – system and environment – “are what they are only in reference to each other” (Luhmann 1995f, p. 177). This reference is constituted by a boundary and at the same time constitutes that boundary between system and environment. The concept of boundary, therefore, is important for understanding the idea of difference between system and environment (but also of every other distinction in use), because “(b)oundaries cannot be conceived without something ‘beyond’; thus they presuppose the reality of a beyond and the possibility of transcendence” (Luhmann 1995f, p. 28). In this sense the boundary forms the system and its environment; it both constitutes the distinction between them and at the same time is constituted by them. This obviously leads to the idea of self-reference.

The notion of self-reference It is one of the basic ideas of Luhmann that every system constitutes its boundaries in a self-referential manner, meaning that the operation which draws a distinction between system and environment has to be seen as an operation of the system itself. This leads to another fundamental paradox: how can it be assumed that a system is constituted self-referentially when the boundary between system and environment is fundamental to the constitution of the system? Without such a boundary there is no system, and without a system there is no self-referential constitution. Obviously this self-referential statement is not an invention of Luhmann’s, but, as such, one of the central epistemological problems of modern science (Rasch 2002). However, as shown above, it also appears as a crucial aspect of postmodern theorizing. The idea of paradoxical statements is central to elucidating the difference between modern and postmodern approaches, and the interesting point is how this problem has been treated in a specific theoretical setting – or to use Luhmann’s language: how it is “unfolded” (Luhmann 2002f). The recognition and the unfolding of this problem indicate a certain postmodern understanding of the constitution of knowledge, and reflections in this regard show why the idea of self-reference is one of the most interesting concepts in the theoretical work of Luhmann at least with relation to the postmodern debate. With Luhmann one can distinguish at least two important and different forms of self-reference, which relate to different forms of self-referential operations: reflection and basal self-reference. According to Luhmann, the operation of constituting a boundary constitutes the unity of a system but not the identity of that system. The difference between unity and identity is therefore important and is related to the position of an observer. While the unity of a system can be observed only by an external observer (an observer observing with another difference), the identity of a system is constituted 269

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by a self-observation of that system building upon the difference that constitutes the self-observing system. When Luhmann (1990a; 1995f) describes social systems not only as selfreferential but also as autopoietic systems, he focuses on that insight: the operation of constituting a boundary of a system (which is the system) cannot be observed and therefore cannot be reflected in that moment of constitution or by the distinction which is constituted in that moment. The idea of autopoiesis is indeed very helpful in indicating that proposition: it also stands for a temporalized concept of systems in stating that the process of boundary constitution is not a nonrecurring operation but has to be repeated as long as the system exists, and the system exists as long it is able to connect element to element. In this sense Luhmann’s theory is not only temporalized but also contains an interesting parallel to the idea of différance proposed by Derrida (1984). In this relation, the notion of autopoiesis indicates something that Derrida’s model could not indicate in a strong sense because any indication is simply deferred. The process of autopoiesis itself has to be presumed unobservable because any description of this process could only be provided by the use of another distinction. However, observation and even self-observation are possible, but not in the sense of a direct representation.

The logic of form For grasping and providing a theoretical description of this highly sophisticated idea of self-referential systems, Luhmann refers to the laws of form proposed by the mathematician George Spencer Brown (1979), who has developed an abstract calculus of distinction. This calculus starts with the instruction “Draw a distinction!” and this is meant as both, constitute a boundary and indicate one side of that boundary. For Luhmann the process of drawing a distinction is an operation that constitutes a double-sided form by indicating one side. For example, drawing the distinction between system and environment constitutes the difference (the boundary) between system and environment by indicating the side “system”. In this sense Luhmann introduces the distinction between operation and observation by stating that every observation is itself built on an operation, and to operate means to draw a distinction between two sides by indicating one of them. Operations are always blind, meaning that any observation has a “blind spot” in the sense of an unobserved aspect because it has to draw a distinction. The blind spot lies in the operation itself and in the necessity that any observation has to draw a distinction in order to observe. Therefore, the process of observing an operation requires at least two different operations: an observed and an observing operation, which cannot be the same. Thus, the distinction between operation and observation can only be observed by 270

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another observer constituted by another distinction, which itself is blind to its own constituting operation. Therefore, one can state that there is basal self-reference but no possibility for basal self-observation. Self-observation is possible, however, but only by using other differences for observing and therefore by building on other distinctions. On the basis of the logic of form, this idea of self-observation can be described as a re-entry, which means, for example, the re-entry of the distinction between system and environment in the system (Luhmann 1993g). In this sense any self-observing system operates with the difference between system and environment for further observations. These are operations “in” the system, built on the difference between system and environment. For Luhmann the notion of re-entry is very helpful because it describes the paradox of self-observation and shows how such paradoxes are unfolded in a productive way (Luhmann 1988c; 1995h). Therefore, the notion of reentry stands not only for the idea of fundamental paradoxes, but also for the unfolding of paradoxes. This is always the case when a system is able to embrace a specific distinction as both the same and different. For the purposes of self-observation any observing system has to distinguish between itself as observing and itself as observed, and therefore it treats itself as different, whereas the process of self-observation has to neglect the distinction between observing and observed in order to observe “itself”. Every system that is capable of self-observation is capable of handling re-entries. And the criterion for the ability of handling re-entries depends on the distinction in use. Therefore, the distinction between system and environment is for Luhmann a very “performant” one because it provides the operation of observation with a high ability to re-enter, and thus with the ability to unfold paradoxes. In consequence it is not exaggerated to state at this point that Luhmann’s conceptualisations are similar to postmodern thinking in many respects. On the other hand, Luhmann’s idea of responding to the question of who is drawing a distinction with the concept of a self-referential observing system, which can be observed by other (self-referential) observing systems and so on, may give the impression that, in the end, Luhmann formulates a theory that tries to offer the possibility of grasping and representing society by building on multiple but consciously connected observers. Even if it is not Luhmann’s idea to represent a complete representation of recent society by building on the idea of “observing observers”, and therefore of second-order observation, his conceptualisations nevertheless entail at least three further aspects that could be regarded as problematic from a postmodern perspective, as discussed in the next chapter.

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Obstacles to a postmodern annexation of systems theory As it has been argued until now, there are numerous similarities between the main tenets of postmodernism and the theoretical approach developed by Luhmann. However, at least three aspects of Luhmann’s theory seem problematic from a postmodern standpoint, which are nevertheless also central to the epistemological positioning of systems theory. These premises are (1) that there are systems, (2) the statement of a higher performativity of systems theory and (3) Luhmann’s claim to have formulated a super-theory with universal validity. These three aspects should not be reconceived in the form of underlying assumptions (or of an underlying meta-narrative) because they are not unconscious premises of systems theory, but rather explicit statements and therefore reflected dispositions of Luhmann’s approach. All three aspects obviously provoke postmodern opposition – not only at first sight – and in the end they seem to justify the evaluation of Luhmann’s theory as an essentially modernist approach. But this is definitely not the case and therefore a closer examination is required.

“There are systems” As mentioned above, Luhmann’s theory is developed as a constructionist approach paired with a radical de-ontologisation. Therefore, one might be puzzled by the fact that systems theory also allows for the statement that there are systems, meaning that the notion of system in Luhmann’s theory not only is a conceptual idea, but also should be viewed as indicative of an object in the (social) world (Luhmann 1995f, p. 2). This statement seems to contradict the main constructionist and also postmodern insight that neither language nor any other symbolic system can provide us with a direct representation of the world or of any object in the world. Therefore, Luhmann seems to undermine his own approach with regard to the reification of systems by giving them an ontological status. But this interpretation does not go far enough to explain Luhmann’s statement. For Luhmann it is important to distinguish between a conceptual, semantic level and a structural level. “Thus the statement ‘there are systems’ says only that there are objects of research that exhibit features justifying the use of the concept of system, just as, conversely, this concept serves to abstract facts that from this viewpoint can be compared with each other and with other kind of facts within the perspective of same/different” (Luhmann 1995f, p. 2). The use of the notion “system” means an abstraction at both a semantic and a structural level. But one has to distinguish carefully between a conceptual abstraction (on a semantic level) and a self-abstraction (of a system itself and therefore on a structural level). In this sense the statement there are 272

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systems suggests a comparison of the extent to which structural forms of self-abstraction are built upon conceptual abstractions (Luhmann 1995, p. 2) but it does not suggest the idea that there is a direct representation of reality. No term, not even the notion of system, is able to represent reality in a direct way. Therefore, the statement there are systems does not undermine this basic epistemological insight, because it merely provides the assumption that there are self-abstractions in the social world constituted by using (or better: observing with) the difference between system and environment. Furthermore, abstraction (or self-abstraction) is an epistemological necessity, and the application of the notion of system is also for Luhmann only one possible means of doing so. But it is also Luhmann’s conviction that the paradigm system/environment is one of the most performant for this purpose, if not the most performant at all. And this leads to a second problematic aspect.

Legitimation by performance As Lyotard has shown, the problem of legitimation is central to postmodern critique. In this sense legitimation does not refer simply to political discourses, but has in addition, or even basically, an epistemological impact, homing in on the blind spots or latencies of any theoretical statement in order to uncover its unreflected and problematic premises or assumptions. Even if Lyotard argues that in the end the problem of legitimation could not be resolved but was always revealed (by statements based on the so-called narrative knowledge), the search for legitimation still remains central: the insight that no statement could attain an ultimate legitimation and therefore has to be treated as deconstructible, does not lead to relinquishing the idea of legitimation at all. From this perspective, Luhmann’s claim that systems theory is the better theory because it provides a more adequate or even powerful description of recent society (Luhmann 1997a, p. 1095), has to be regarded as highly problematic because it presumes that this legitimation by performance necessarily leads to the identification of an adequate description with an affirmative attitude. It is known that this is the main starting point for the meanwhile classic Habermasian (1990) critique, which deplores the lack of critical potential of systems theory by drawing on the shortcoming that it has no normative foundation. For Habermas, Luhmann’s approach is only an affirmative one, which in specific respects probably shows what society is but which could never show what society should be. For Luhmann, on the other hand, the distinction between a critical and an affirmative position stems from the old-fashioned idea of the nineteenth century, when theories were observed by distinguishing reality from ideality. It is Luhmann’s conviction that for a theory to be adequate in today’s time, this contrast has to be 273

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replaced with the twin questions of “What is the case?” and “What is behind this?” (Luhmann 1978). In this sense systems theory is neither critical nor affirmative, but rather both, and in the end it is more critical than critical theory could ever be, because trying to cope with the second question “What is behind this?” implies a permanent self-questioning of any distinction in use. Therefore, Luhmann’s approach fits right into the discursive setting designed by Lyotard. Lyotard himself states that every genre of discourse has a specific end, and every genre of discourse is chaining phrases in reference to this end. Nothing else is stated by Luhmann when he evaluates different theoretical approaches with regard to their capacity to fulfill a specific goal of a specific system. In this sense it is the goal of scientific discourse to distinguish between true and false, and that means showing what is the case and showing what is behind this. Analysing Luhmann’s approach from this perspective therefore leads to the insight that not only the critique of Habermas (1990) can be rejected as outdated, but also that the postmodern critique of Lyotard (1984) has to be seen in this respect as a misleading one. The idea of performance and the form of legitimation Lyotard is aiming at is obviously not the performance that Luhmann has in mind when he states that systems theory is the better approach. Therefore, Luhmann evaluates different theoretical approaches in comparison to systems theory by drawing on the distinction adequate/inadequate, but for Luhmann an adequate description always has the potential to answer both questions. Referring to this highly sophisticated requirement, Luhmann is not stating that systems theory is the only imaginable approach able to cope, but that it is certainly one of the best, and certainly better than any approach coming from Frankfurt (Luhmann 2002c). In this respect the evaluation of better vs. worse has its point of reference in the necessity of coping with those twin questions, and this leads to the third and final problematic aspect of a postmodern understanding of systems theory.

A super-theory with universal validity The third aspect of Luhmann’s approach, which must provoke at least mild irritation in the postmodern camp, is the claim that systems theory is a super-theory with universal validity (Luhmann 1995f). Both the idea of a “super-theory” and the claim of universality are at first sight incompatible with the postmodern ideas represented above. But even from the perspective of other components of systems theory, the claim of a super-theory and universality seems highly problematic. For example, if we focus on Luhmann’s conceptualisation of complexity as irreducible (1990b), and the consequence that all necessary reductions of complexity are always selective and therefore 274

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incomplete, then the claim of a universal super-theory (heading obviously for completeness) also seems incompatible with systems theory. However, in order to avoid a hasty judgment of incongruity and inconsistency, what Luhmann may have precisely intended by referring to “super” and “universal” deserves a closer examination. There is no doubt that it would be problematic if systems theory claimed to be universally valid, but Luhmann relates and reserves the claim for universality for a very specific aspect. It is not his intention to formulate an exclusive claim of truth with regard to other theoretical approaches. It is neither his intention to state that systems theory could reflect the complete reality of an object, nor to claim that it could exhaust all possible forms of recognizing an object. None of these claims are intended, but systems theory does claim universality for its grasp of its objects (Luhmann 1995f, p. xlvii). In this sense systems theory as a theory of social systems has to include all aspects of the social world. This may appear as a very subtle difference, but it is nevertheless of great significance. According to Luhmann, of course, a super-theory claiming universality is also selective with respect to its objects, and does not imply that the chosen selection is the best and only one. But super-theories with a claim to universality are constructed as self-referential theories, meaning that they appear as their own objects. Furthermore, they are constructed in such a way that they do not exclude, but rather include, other competing approaches. Therefore, super-theories are totalizing not in the sense of exclusion, but in an including manner. In this respect it is imperative for totalizing theories to have the potential to reconstruct other theoretical approaches (even those with contradictory statements) in their own terminology. The basic principle of this attribute can be clarified by contrasting systems theory with another approach, for example critical theory. In this sense one can reconstruct the critical theory of Habermas (1984) in terms of systems theory by drawing on the main distinctions in use (e.g. life-world vs. system; critical vs. affirmative and so on) and showing what can be made visible and what has to remain opaque by doing so. On the other hand, starting with critical theory one can accept certain elements or statements of systems theory but one has to reject all the others. While Luhmann’s approach enables us to see, observe, reconstruct and at the very least deconstruct critical theory, Habermas forces us to choose a side in the hope that we have picked the “right” one. Certainly this is a slightly exaggerated contrast, but it reflects an important difference in the theoretical self-understandings of each approach concerning the difference between inclusion and exclusion. In this respect, however, it seems very plausible that the idea of a universal super-theory as formulated by Luhmann realises basic issues of postmodern thinking.

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Considering the aspects discussed above, systems theory, which at first sight seems to entail various problematic statements with regard to postmodern theorizing, at second sight appears to be a connectable variation and also concretization of main postmodern ideas. However, this evaluation does not imply that systems theory should automatically be seen as a postmodern approach.

(Not) drawing a distinction: between Luhmann and the postmodern ideas of difference A comparison between Luhmann’s theory and the approaches of Foucault, Lyotard and Derrida as the main representatives of postmodernism could be accomplished on many different levels. The following consideration will focus primarily on the conceptualisation of difference in the respective theories. Luhmann has developed his constructionist and difference-theoretical approach by referring to many interdisciplinary ideas that do not stem from the same philosophical background that constitutes the focus of the debate on modernism and postmodernism (Luhmann 1993a). Therefore, to resituate Luhmann in this debate and to focus on the similarities between Luhmann’s approach and the main postmodern frame of theorizing, one has to pay attention also to the differences in this regard. In so doing, however, one starts with the insight that Luhmann’s theoretical self-understanding is basically not a modern one but entails a specific “consciousness of distance” with relation to the main modern assumptions and in this respect also reflects the postmodern critique of modernism. Therefore, the difference between Luhmann’s approach and critical theory is not only one of systemic modernism vs. critical modernism, but also, or perhaps even primarily, this difference points to a position at a distance from modern epistemologies. The general assumption of complexity (which at the same time undermines the Habermasian ideas of both life-world and discourse), the assumption of inevitable blind spots inherent to any observation or communication (which undermines the idea of communicative self-transparency) and so on – all of this constitutes a theoretical framework which makes a clear difference with respect to a modern understanding. But whether Luhmann’s approach could or should, therefore, be treated as postmodern is another question to be discussed. However clear and evident the similarities between certain elements of Luhmann’s theory and the frame of postmodern thinking presented above may be, some differences are also apparent. In this sense the relationship between Luhmann’s conceptualisation of an adequate description of recent society and the Foucauldian idea of the modern episteme “man” (Foucault 276

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1973) and the consequences for every knowledge claim to be pseudo-knowledge, seems to be the most appealing. In Foucault’s view, the condition of modern society and modern science brings about an inevitable oscillation between different oppositions (“doublets”), such as the empirical and the transcendental, which cannot be unfolded and do not lead to positive knowledge (Dreyfus/Rabinow 1983, pp. 25–43). It is certainly not Luhmann’s conviction that there is something like truth in itself, but Luhmann would not describe this oscillation between two different sides of a distinction as a hopeless search for positive knowledge. Instead, and to Luhmann’s way of thinking, this modern condition leads to the necessity of unfolding the paradoxes of modern knowledge, whereas for Foucault the answer to these paradoxes seems to lie in his concept of power. In this sense, redescribing Luhmann’s theory in terms of Foucault’s idea of power (1979) might produce interesting insights, but the assumption that every blind spot or latency could be regarded as an indicator of the existence of (unobtrusive) power has to be rejected on the grounds of its onesidedness. In terms of a theory of distinction, the centrality of power has to be replaced at the very least with the idea that even power must have another side; power therefore refers to another difference, and the other side of that difference could not be called power again. With regard to the work of Lyotard, there are more and far-reaching similarities one can grasp by paralleling the constitution of genres of discourse and the idea of functional differentiated systems. In this sense Luhmann’s conceptualisation of societal subsystems, based on a specific binary coding (like truth/untruth for the system of science), fits into the idea of genres of discourse offered by Lyotard. This does not mean that Luhmann’s and Lyotard’s theories bear identical descriptions of modern society, but on a conceptual level they offer a very similar idea of difference. Therefore, however different these theoretical backgrounds may be, one can find similar ideas suggesting an analogy by referencing the problem of legitimation and the problem of chaining. While Lyotard (1984) has unfortunately situated Luhmann’s approach in a more or less unbroken tradition of older ideas of systems theory, which basically refer to procedural forms of legitimation, Luhmann (1997a, p. 90) himself has emphasized the common elements in both approaches – for example, their similar positioning of the subject. However, Luhmann also criticizes Lyotard’s presumed neglect of the fact that every chaining operation constitutes a difference between system and environment, which has to be reflected in the system or the discourse (Luhmann 1997a, p. 90). Here, Luhmann refers to Lyotard’s concept of the differend, for which the problem of chaining is central, but Lyotard is also engaged – as in The Postmodern Condition – in legitimation problems and problems of self-

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reference. The aspect that Luhmann presumes to be neglected by Lyotard indeed refers to the problem of legitimation, which is also central for Lyotard. Examining both distinctions, the problem of legitimation and the problem of chaining therefore reveal a more similar conceptualisation of the discursive description and the systemic description as and of an adequate idea of recent society. And above all, Lyotard’s proclamation of the end of metanarratives fits in perfectly with Luhmann’s idea that the modern society has lost its capacity to represent the whole through one of its parts. In the end, the primary source of friction may be that Luhmann would not call this (structural) situation “postmodern”, but the situation is qualified and described in nearly the same way by postmodern semantics and systems theory (Luhmann 1990h). Last but not least, with regard to the relationship between systems theory and deconstruction, one can again grasp a deeper and more significant difference. While the basic idea of deconstruction can be applied to the problem of legitimation, the deconstructive program of Derrida is certainly not reserved only for revealing paradoxes of self-reference in the sense of the problem of legitimation. For that reason also differences constituting genres of discourse (Lyotard) or the functional differentiation of society (Luhmann) are presumed to be deconstructible and are therefore potential objects of deconstruction. This poses a problem for a sociological theory such as Luhmann’s, because so-called proven forms of observation are elementary for theorizing, and therefore notions like “society”, “system”, “environment” are not called into question at a certain level of theory-building, even if they are not taken for granted as assumptions in that theory. For Luhmann it makes no sense to examine and deconstruct the notion of system, for example, whereas for Derrida this is certainly a highly problematic concept. But before focusing on this different level of deconstruction, one has to state that there are clear similarities or analogies between Luhmann’s and Derrida’s theories, mostly with regard to the problem of legitimation and, therefore, of self-reference. Luhmann tried to work out these parallels by reconstructing the theory of deconstruction as a second-order observation (Luhmann 1993b). At the same time, however, Luhmann tends to build up a critical distance to deconstruction by questioning its theoretical potential to construct. “Deconstruction seems to recommend the reading of forms as differences, to look at distinctions without the hope of regaining unity at a higher (or later) level, or without even assuming the position of an ‘interpretant’ in the sense of Peirce. Deconstruction seems to be adequate for an intellectual climate heading toward cultural diversity. But are there any firm rules and any hope for results in the deconstruction business – that is, are there any framings that are not themselves deconstructible? Or would applying deconstruction lead only to reflexivity, recursively, and self-reference 278

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resulting in stable meanings, objects, or what mathematicians call eigenvalues? It seems that there is only différance” (Luhmann 1993b). In this sense Luhmann clearly perceives the similarities between his own theoretical approach and deconstruction, but on the other hand he clearly states: 1. That the focus of deconstruction is all too narrow. “It is almost a oneword discussion, or a text/context discussion, where deconstruction is the text and the history and the usages of the word the context” (Luhmann 1993b, p. 767). 2. That the deconstructive rejection of logocentrism cannot be paired with a general rejection of all formalisms and logics. Here Luhmann refers to Gotthard Günther. “Günther is not satisfied with the fuzziness of verbal acoustics and paradoxical formulations and tries, whether successful or not, to find logical structures of higher complexity, capable of fixing new levels for the integration of ontology (for more than one subject) and logics (with more than two values)” (Luhmann 1993b, p. 768). 3. That it is not the task to attempt to clarify what Derrida possibly means. “Derrida himself distinguishes le sens de sens (the meaning of meaning) and signalisation, which could mean ‘making and deferring distinctions’ on the one hand and ‘indications’ on the other. His writings are écriture in his one sense (that is, also ‘inscriptions’). It remains open what they indicate” (Luhmann 1993b, p. 768). In the end, it is this openness and indeterminacy that is irritating for Luhmann as he considers deconstruction. Luhmann can understand why the writing of Derrida has to be self-deconstructive in order to be able to show how deconstruction works and that this idea of deconstruction fits right into the philosophical project of Derrida. But for Luhmann this does not mean that there could not be further steps built on distinctions, which may be regarded as deconstructible, but which do not have to be deconstructed because it makes no sense to deconstruct everything. On the contrary, it is Luhmann’s idea that the ongoing processes of observing constitute so-called eigenvalues, which represent successful, performant or even proven forms of observation, and which are therefore interesting for purposes of being connected with further distinctions. Therefore, Luhmann wants to reconstruct (and integrate) deconstruction as a specific form of second-order observation. With this idea he goes beyond deconstruction – or he falls behind it, depending on whether one endorses the perspective of Luhmann or the perspective of Derrida. Whereas Derrida is fundamentally sceptical about any idea of appropriation and instrumentalisation of deconstruction, for Luhmann, Derrida is permanently engaged in obscuring the preconditions for the use of

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distinctions. “But also one can pursue the contrary objective of making the architecture of theories as clear as possible so that an observer may decide whether to follow their suggestions or to choose at certain points an alternative path” (Luhmann 1993b, p. 768 f.). One can attribute this difference between Luhmann and Derrida to their different theoretical projects, with Derrida (1978) philosophically engaged in deconstructing the tradition of metaphysical thinking and Luhmann (1997a) engaged in a sociological theory of modern society. However, there will remain a basic difference that cannot be resolved by drawing on the different perspectives induced by a discipline’s interests. While Luhmann conceptualizes his theory of distinction, which confirms the emergence of proven eigenvalues, by stating that there is a specific form of societal differentiation which cannot be negated (and this is similar to the discursive setting stated by Lyotard) without losing sight of any sociological idea of stating what the case is, for Derrida any claim of whatever the case may be is deconstructible. However important the second part of the abovementioned twin question is for Luhmann, it is not acceptable for him to “destruct” the first part by the second.

Fitting elements of different theories of difference The discussion presented here has tried, despite all the evident differences, to demonstrate that there are indeed many similarities between postmodern conceptualisations and Luhmann’s difference-theoretical foundation of systems theory. Therefore, the classification of Luhmann’s approach as a traditionally modernist one, providing only affirmative descriptions of a “cold and mechanical process” of rationalisation, has to be rejected. However great the differences between the primary postmodern ideas and Luhmann’s systems theory are, there are more significant indicators, which justify the view that systems theory has to be positioned at a clear postmodern distance from modernism. In this sense, and as a summary, the following five elements could be seen as a framework for such an approach forming a distance to modern epistemologies by drawing on the idea of difference. 1. There are two fundamentally different forms of difference: a) one between different discourses (or systems), b) the other between a discourse and its otherness (or between system and environment). The first one constitutes and is constituted by a problem of chaining; the second one constitutes and is constituted by a problem of legitimation. 2. A theory of difference has to deal with both problems and their relationship without claiming or referring to a meta-narrative. The relationship between discourses (or systems) cannot be described without involving the self-relation of a discourse (or a system) to its otherness (or environment). 280

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3. A theory of difference claims a basal form of self-reference. On a conceptual level this claim leads to the recognition of paradoxes and to the insight that every knowledge claim is built upon the unfolding of a paradox. 4. Such a theory of difference has the status of a universal super-theory in the sense that it tries to include and not to exclude itself and competing theoretical approaches as an object of itself. 5. Such a theory of difference is not just a meta-theory that only deconstructs all claims in terms of differences, but one that also constructs all its objects and concepts as differences to which further differences can be connected. In the end one may state that there are differences that make differences, but that there are perhaps more differences that “unify” postmodern thinking and Luhmann’s systems theory.

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Chapter 13

Luhmann’s Systems Theory and Network Theory Michael Bommes & Veronika Tacke

Introduction Networks have been gaining remarkably in empirical relevance in a variety of societal realms during recent years. Accordingly, the term network has become widespread and even fashionable within the social sciences. This is true, not least for organizational research, to which various social sciences contribute. Scholars of political organization have identified a huge number and variety of “policy networks” on different levels of policy formation. In view of this, they have described the state as a “network state” (Teubner 1999). Parallel to this, the diversity and growing relevance of so-called “business networks” exposed by an impressive number of empirical studies suggested the advent of a “network economy” (Hessinger et al. 2000). Beyond this, the “network revolution” (Teubner, ibid.) seems to have reached nearly all societal realms of organization. Although scholars of organizational network analysis noted, at an early stage, the conceptual challenges that network phenomena provide in consideration of current sociological knowledge regarding organizations (Mayntz 1992), efforts to bring together theoretically elaborated concepts of organization, on the one hand, and general concepts of the network, on the other, remained few and far between. Instead, the respective research and discussions primarily centred around the idea of networks as a third form of coordination: While economists referred to economic exchange and a respective contractual continuum along which networks are a “discrete structural alternative”, i.e. positioned “between” markets and hierarchies (Williamson 1991), sociologists tended to emphasize the role of trust and solidarity, thus denoting that networks emerge “beyond” (ibid.) market price and organizational command. Networks seem to be “more social” (Powell 1990) than other social forms of co-ordination. In search of theoretical tools, researchers who followed this thread of discussion turned to a sociological network approach that is well known for its concept of 282

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“embeddedness” (Granovetter 1985). Though the concept was not developed particularly for this context, it became famous, if not fashionable, even in the context of organization research. Concerning the difference between basic theoretical concepts and empirical evidence, the reference (if not fallback) of organization research to network concepts has sometimes resulted in confusion. The so-called “dissolution of organizational boundaries”, which has become a common observation and parlance during recent years, exemplifies this. Whereas describing organizations means referring to system boundaries, network theory inevitably dissolves the organization, as well as any other social structure, into nothing but individual network relationships. Ignoring the constitutive distinction between members and non-members, organizational boundaries disappear. Thus, the dissolution effect is, primarily, a necessary effect of theoretical changeover. As a consequence, the question of whether or not some kind of structural change (i.e. the dissolution of boundaries or the emergence of networks) has taken place is impossible to resolve with regard to empirical evidence. It is not surprising that scholars of systems theory are more sceptical and hesitant regarding the idea of dissolving system boundaries. At the same time, this may be one reason why systems theorists remained hesitant regarding the theoretical challenges that the network phenomenon poses. Besides a lot of rather loose and uneven terminological uses of the network concept (see Kämper/Schmidt 2000, pp. 219 ff.), only two theoretical suggestions have been made. They both refer to the particular case of organizational networking. Whereas Gunther Teubner (1992, 1996) suggested describing networks as a “real emergence-phenomenon” that emanates from a “re-entry” of contract and organization, Kämper and Schmidt (2000), instead, reconstructed networks as a “structural coupling” of organization systems which makes use of interaction systems. Both suggestions are highly (and all too) specific. They empirically encompass very different circumstances (business networks and policy networks), at the same time lacking an angle for theoretical generalizations going beyond these particular cases. Regarding the state of the art, in any further attempt to develop a systemstheoretical concept of networks, at least two interrelated requirements would have to be considered. In order to grasp the huge variety of empirical network cases appearing within and between differentiated societal contexts, an adequate network concept must primarily be formulated as a sufficiently general concept, which can then be re-specified in order to cover this variety. Secondly, in order to meet this challenge, the concept must take into account basic insights and eligible claims from the theory of society which, in the case of systems theory, is a theory of functional differentiation. In view of the state of the art, it makes sense to turn to the theory of society

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as a framework, and thus take the long way round in order to arrive at the particular case of so-called organizational networks. The chapter starts with some major differences between the sociological network approach and sociological systems theory. Picking up some basic ideas from the sociological network approach and reformulating these in terms of systems theory, the first part of the chapter aims to develop a systems-theoretical concept of networks (see Tacke 2000). With regard to primary structures of societal system differentiation and respective modes of inclusion, the chapter argues, on the one hand, that networks are a secondary form of order in modern society: Networks presuppose social systems (i.e. organizations and function systems) as far as it can be shown that networks assume their form from a reflexive combination of options that are represented by (individual or organizational) addresses, and that these options are due to the social addresses’ particular profiles of inclusion and exclusion in various social systems. At the same time, networks supplement social systems: Whereas modern societies’ basic systems rest upon a “primacy of problems” (which then guides the search for the relevant social addresses), networks follow a “primacy of addresses” (which allows the creation of particular new problems and possibilities which the underlying systems cannot provide). Against this theoretical background, the second part of the chapter reveals aspects of coupling networks and organizations. Depending on the social addresses involved, which can be personal or organizational, “personal networks within the organizational context” are distinguished from “organizational networks”. Whereas the former can either remain “silent” or be acknowledged through organizational decisions, the latter are necessarily brought about by organizational decision.

Social-theoretical network approach and theory of societal differentiation Theoretical divergences Systems theory is a social theory which at the same time comprises a sociological theory of (modern) society. This means that the theory not only describes its objects of research on the level of basic concepts (e.g. system, observation, autopoiesis, communication), but further specifies these basic concepts with regard to modern society. By explicitly taking into account the primary structures of societal differentiation, especially function systems, organizations, and systems of interaction, systems theory can analyse their interplay and, in doing so, describe the characteristics of modern society. Compared to this, the sociological network approach is a social theory without a theory of society. It does not differentiate modern society from its 284

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historical predecessors. Instead, the respective distinctions are explicitly denied by scholars of network theory (see Granovetter 1985). There is no dissent between scholars of systems theory and those of the sociological network approach regarding the assumption that networks had already existed in pre-modern societies. Instead, it would be mistaken from both points of view to regard networks as a specifically modern phenomenon. However, in contrast to network theorists, systems theory emphasizes that the conditions of emergence and reproduction and the societal meaning of networks (as well as other structural forms) have radically changed with the transition from societies ordered by segmentation and the stratification of families and groups to modern society which is primarily differentiated into function systems, organizations and interactions. From this point of view, the weakness of purely socio-theoretical approaches is that they neglect the transition from one form of societal differentiation to another, as well as its structural implication for networks. Therefore, they overestimate historical continuities. At first glance, it seems evident that the idea and concept of the network inherently accounts for societal discontinuity, which scholars of the network approach ignore. On the one hand, the network concept is founded on basic assumptions, which are assumed to be universal, but which are actually only of primary structural significance in the case of stratificatorily differentiated societies. The older stratified societies conditioned the individual’s participation in communication according to status and affiliation, and actually defined social relationships according to “status-role-sets” (Burt 1982), as scholars of network theory phrase it. Network theorists’ actual reference to conditions of stratificatory differentiation becomes even more apparent when they circumscribe networks using a “causal primacy” of socialstructural “positions” and “social bonds” (Hessinger et al. 2000, p. 31; Thorelli 1986). On the other hand, network concepts obviously presuppose social conditions which have emerged for the first time in modern society, since, within this society, social relationships are constitutively established in a reflexive way. Network theory will only apply and make sense on the precondition that one’s position is no longer conditioned and bound by the societal structure, as was the case in stratified societies. In other words, network theory’s empirical subject is precisely the multiplicity of occasions which allows for the building of networks – in modern society.

The primacy of the societal differentiation of meaning Looking at it this way, network theory seems to reflect on a particular modern experience and view: former social bonds become fluid – and this is the precondition for the emergence of new, reflexive bonds. This fluidisation abolishes the “causal primacy” of socio-structural positions and status285

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bonds while replacing it with another societal primacy, henceforth conditioning the individual’s options regarding social participation and, as a consequence, the social contexts of network building. The transition from pre-modern to modern society is accompanied by the detachment of individuals from social positions assigned by societal structure. Instead, new forms of conditioning develop which selectively specify the social processes of communication and the conditions of individual participation. Theorists of social differentiation – from Marx, Durkheim, or Simmel to Weber and from Parsons and Habermas to Luhmann – have demonstrated that the forms of conditioning of the social process are forms of social meaning driven by the logic of social differentiation. Max Weber has already emphasized that social relationships are based on the content of meaning which mutually adjusts people to each other. He describes modern society’s primary form of differentiation as a “differentiation of value spheres,” which is the result of a process of social rationalisation that took off in Europe during Early Modern Times (Weber 1976). Later, Niklas Luhmann conceptualised this differentiation process more strictly theoretically and methodologically as an evolution of functional systems (Bommes 1999, p. 66). He argued that social relationships – together with the differentiation of meaning – are dragged into a certain “maelstrom of inclusion” of functional systems (Luhmann 1997a, p. 738). That is to say, relationships are no longer determined, once-and-for-all, by the individual’s affiliations to stratified families and groups but become selectively specified and conditioned by different social contexts of meaning – whether these are functional (structured by e.g. economic, scientific, legal, political, educational, or religious codes of communication), organizational (structured by decision and membership) or interactive (based on reflexive perceptions of co-present participants). The sociological network approach ignores the processes of societal differentiation although these imply radically different modes of the individual’s inclusion in society and transform the conditions of his or her communicative participation in society. The structural form called “functional differentiation” is only possible when individuals no longer assume only one position in social structure that defines the horizon of their social options (affiliation, total inclusion), but are able and forced to participate in diverse contexts of communication, each of which operates under its own restricted criteria of individuals’ relevance (partial inclusion). The structural precondition of this multi-contextual form of inclusion is the individual’s exclusion, i.e. his or her detachment from feudal bonds. In modern society, then, the contexts of the various systems and the respective aspects of meaning determine whether or not individuals are addressed in communication, and whether or not they are treated as relevant (inclusion) or irrelevant (exclusion) as regards further communication (Luhmann 1995b, p. 241). The 286

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systems themselves regulate what topics of communication they take up and what kinds of positions these particular communications assign to people (Luhmann 1997a, pp. 738 ff.). These positions change with the systemic contexts of meaning, and they are not transferable arbitrarily from one context to another: A professor has to stay in the hospital waiting room until the physician has finished treating a student. If there is a causal primacy at all, it is in principle not concerned with positions and bindings, but references of meaning, and thus social systems.

Systems and networks as complementary social structures Taken together, the point where network theory and systems theory disagree concerns the question of how the individual’s participation in the social world is regulated. Nevertheless, the two theories do not diverge accidentally. Instead, they show distinct complementarities – at least from a systemstheoretical perspective. Systems theory emphasizes that modern society’s primary structure consists of differentiated social meaning, i.e. social systems dealing with specific (functional, organizational or interactive) problems. Individuals become relevant within the scope of those systemic problems. This means that they are used as addresses for communication according to the specific meaning and criteria of the systems’ operation. The primacy of problems, by which systems are defined, determines a person’s relevance as an address for communication, thereby conditioning “social relationships” due to the specific social meaning (e.g. the problem of illness and the roles of patients and doctors in the health service). Compared to this, network approaches assume a primacy of addresses, thereby ignoring the specific meaning-related conditioning of social relationships by social systems in modern society. Theoretically they leave open the question of what kind of meaning social relationships process and what kinds of problems they deal with or afford. The difference between network theory and systems theory could be understood as a theoretical incommensurateness – and left at that. Indeed, the difference and the complementary deficits can also be seen as a challenge and turned into sociological productivity. The following sections try to take an initial step in this direction and will be conducted from the perspective of systems theory. Functional and organizational systems, on the one hand, and networks, on the other, will be considered to be complementary forms of social structure that are based on different structural primacies (problems, addresses). As mentioned before, the establishment of functional and organizational systems is due to a primacy of problems, while network constitution features a primacy of addresses. The crucial and initial point of network emergence is the observation that addresses – the capabilities they represent in communications – can be combined. Networks thus emerge from the consideration 287

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of options and indeterminate potentials which become accessible through the social addresses at hand and the social possibility of combining them. From this perspective, networks are actually a form of structure that is based on a primacy of addresses, as is assumed by network theory. However, our initial assumption, i.e. that the constitution of functional and organizational systems and networks is complementary, does not imply the abandonment of the societal primacy of functional differentiation, which systems theory denotes, but rather presupposes it. This can be seen when considering more closely the process of building networks. Formally, the driving force for network building can be found in those social potentials which become accessible by linking the possibilities stemming from heterogeneous system contexts of meaning. This accessibility is based on the inclusion of the networks’ members in these systems. It entails two presuppositions: the formal freedom to combine social addresses and the existence of social systems that provide the kind of resources used in social networks and made accessible to their members. Against this backdrop, we assume an asymmetric relationship of functional and organizational systems, on the one hand, and networks, on the other. If networks, structurally speaking, follow a primacy of addresses, then theoretically this needs to be conceived of as a secondary form of order in modern society. The structural reason for this is to be found in the mode of generating social addresses in modern society. This mode forms the basis for the freedom to combine these addresses in networks, and it is a product of system differentiation – and thus presupposes these primary societal structures. Social addresses result from the modes of inclusion and exclusion of individuals in a functionally differentiated society and in particular in its functional and organizational systems. Networks certainly cannot be causally explained by structures of societal differentiation. Nevertheless their emergence and growing importance is due to the primary differentiation structures of modern society.

Network emergence as reflexive combinatorics of addresses In order to meet a great variety of network phenomena theoretically and to grasp even very fluid empirical forms of social networks, the network concept proposed here defines networks in a minimalist and formal way. Therefore, it is necessary to distinguish the network concept from mere address connectivities (Stichweh 2000a), which have misleadingly been characterised as “networks” in the so-called “small world” research (Milgram 1967; Watts 1999) as well as in research into scientific citations (e.g. Baldi 1998). The simple fact that scientists cite other scientists’ articles

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and that individuals can name more than 1,000 people as acquaintances does not yet match the network concept as it is defined here. In order to distinguish clearly between address connectivities and networks, the next section further examines what can be defined as a social address, what kind of social addresses are considered during network building, and how networks can emerge and stabilise by combining social addresses.

Social addresses – individuality and ubiquity A social address is a more or less elaborated profile of attributes and forms of behaviour that personalised others are provided with and identified by during communication. Addresses are attributional artefacts produced within communication for communication (Luhmann 1995a; Fuchs 1997a). While proper nouns basically indicate social addresses, they become “complex addresses” when accumulating further distinctions (Stichweh 2000a). Pertaining to this, there are, on the one hand, those components subsumed under the idea of addresses in everyday life. Their horizon of meaning refers to communicative accessibility, at least in terms of a postal address, a telephone number and increasingly also an e-mail address. However, addresses only gain a social contour and individuality from an individual’s current inclusions and exclusions. His or her profile of inclusions and exclusions refers back to the individual history and career of participation in differentiated system contexts of society. At the same time, it indicates the horizon of the individual’s potential relevance to particular kinds of communication in the future. Concerning the individual profile of addresses, it is not only important that individuals participate to varying degrees in economic, political, legal, educational, familial or scientific communication. It seems even more important that participation can take place in 1. different functional roles (achievement/audience), 2. particular organizations (with reputation in some fields but not in others), and 3. different parts of the world (where individuals may be citizens or foreigners). Thus, according to its primary structure of differentiation, modern society constitutes social addresses in a poly-contextual way (Fuchs 1997). The implications are twofold: On the one hand, this means that addresses emerge as highly individual profiles of inclusion and exclusion which open up a more or less large variety of options for communication (and exclude others at the same time). On the other hand, the poly-contextual character of individual addresses implies that they usually do not become activated completely or in all their particulars. Instead they become selectively relevant, depending on the respective contexts of meaning (the family, the firm, the sports club, the hospital, the court, the parliament etc.) which determine the aspects remembered and those either not recalled or unknown. 289

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Besides the poly-contextual character of social addresses, the ubiquitous relevance of their emergence also has to be noted. Social addresses come into play whenever communicative meaning is attributed to someone whom the communication can conceive of as a unitary instance of the production and reception of utterances (Fuchs 1997; Stichweh 2000a). This has at least three important consequences for a concept of networks set up in a systemstheoretical frame: 1. There are two instances that communication can treat as “personalised others” in modern society: Not only individuals but also organizations are units of communication that utterances can be unitarily ascribed to. To put it more simply, organizations can communicate (outward) to others in their environment. This neither holds for function systems nor for systems of interaction. For networks, according to their core activity of combining addresses, this implies that they can rely on individuals as well as on organizations. 2. If any participation in communication is inextricably associated with a social address, and if the construction of social addresses bears upon the communicative necessity of attributions, social addresses will be constitutively linked with the differentiation of communicative meaning and the respective modes of inclusion. Thus, provided that communication constantly and inevitably produces addresses, it seems that networks are dependent on the structures of system differentiation, at least if we assume that the main reasons for initiating the formal core activity of networks (i.e. combining addresses) can be found in the social options represented by these addresses. 3. Network building relies on the difference between the basic and the reflexive use of addresses in communication. The basic relevance of addresses is clear: As soon as communication starts, inclusion takes place – somebody has to be treated as relevant – and as soon as inclusion takes place, communication utilises and disposes of addresses – this somebody has to be addressed in one way or another. The reverse does not necessarily apply: Communication can be concerned with addresses as its topic without including the “somebody” being talked about. Empirically, this is a trivial issue. Addresses and their specificities can be inquired about during communication, and can thus also be provided for further communication: “Concerning X’s problem, I suggest contacting Y in Z. I have attached his e-mail address.” Indeed, it is this kind of reflexive handling of addresses that seems especially crucial in network building.

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Individual address books as the potential for network-building Modern society has abolished principal restrictions regarding communicative addressability and, moreover, developed media of communication with a global range and scope. Based on that, addresses can be activated quite suddenly and unexpectedly in time and space. Nevertheless, the reflexive use and activation of addresses does not happen completely accidentally. A particular form of social memory has to be taken into account here: the social phenomenon of address books. Regarding network-building, two forms can clearly be distinguished: Directories are one form of address book, and are structured according to categories. They are more or less like public address registers, and serve a more technical aspect of communicative accessibility, although, mostly without uncovering particular aspects of social addressability or at least reducing these to a minimum. Unless one knows whom to call regarding what matter, a local telephone directory with alphabetic sorting is rather useless. Compared to this, yellow pages are sorted by category as well, but on the basis of functional aspects of addressability. The categories (healthcare, lawyers, firms) and subcategories (e.g. internist, ear specialist, cosmetic surgeon) give access to specific communications, while at the same time signalling that addressability cannot be relied on in other respects. Differing from public address registers, individual address books save addresses for one certain address, private or organizational. Individual address books are unique. This is due to their individual address composition, but more importantly, because every registered address refers to a particular history of contacts which adds meaning to each address and marks the exclusive respects of addressability that further communication can resort to and – as could be the case – can count on. Besides functional addresses saved for retrieval (doctor, lawyer, hairdresser), individual address books comprise addresses characterised by their mobilisability which makes them an important resource underlying networks. For example, the address of the doctor I rely on from time to time differs in this respect from the address of my acquaintance who, among other things, is also a physician. The horizon of meaning called acquaintanceship allows mobilising him or her even with regard to questions and communicative expectations normally excluded from the framework of professionally organized medical care and respective asymmetric roles (doctor/patient). The difference between functional and mobilisable addresses, however, is neither fixed nor literally codified. Obviously, this difference cannot be read from address book letters, but can at most be inferred from its written substrate. Sociologically, this inference does not refer to psychic cognition but is a social achievement. The peculiar mutual meaning of addresses is stored in social memory and must be restored by communication. Accordingly,

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even the distinction between functional and mobilisable addresses must always take place anew by means of communication – and can likewise fail.

Network constitution The individual address book is not a network in itself, but rather the result of the reflexive use made of addresses. It keeps at the ready the address pool for networking and is in many respects also a document of networking, i.e. of the addresses implied. Network-building starts out from a reflexive handling and restoring of addresses which are expected to be mobilisable. The addresses are observed selectively due to the possible approachable options that their profiles of inclusions and exclusions announce. The pool of mobilisable addresses is characterized by a range of diffuse, indeterminate horizons of possibilities. Although the specific poly-contextual profile of each address also constrains possibilities, new options can suddenly be discovered in its frame: One’s former colleague lives in a city, where one is looking for a flat; the student of media studies is looking for an internship and the communication just remembers that the professor’s brother works for a broadcasting company, and so on. Access to perceived options and the first steps towards networking are precarious. Is it still possible today to ask one’s former colleague whether or not he or she can help with house hunting? The initial position, the take-off, is precarious, because mutuality is generally bound to the context of meaning which defines it: Fellow students mutually help each other with their studies, but do not naturally also act as housing agents for each other. Is it possible to ask one’s former colleague to help in the provision of an internship for one’s daughter or will he give advice concerning investment using his inside knowledge as a banker? The attempt to utilize discovered contextspanning options is not covered socially, because the different contexts of meaning (e.g. studies, housing, organizational membership, financial expertise) are factually in no way related to each other. The chance of being perceived as illegitimately connecting heterogeneous contexts of meaning and, moreover, the anticipated denial of an unreasonable demand are just other words for the risks inherent in a communicative attempt at networking. Provided that the risk of such an illegitimate attempt is not only taken but also meets with success, the communications may discover and mutually ask for more and other possibilities that the involved addresses could provide for each other. Due to the self-energizing effects of communication (Japp 1992) which result from successes in uncertainty absorption (March/Simon 1958; Luhmann 2000c), the unlikelihood of network emergence can be transformed step by step into a likeliness of its maintenance.

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Stabilizing networks Although, in the first instance, heterogeneity is a particular barrier to the initiation and establishment of networks, in the next step it becomes the particular basis and promoter of their stability. This is due to the necessity of solving the problem of how members of networks can compensate for the heterogeneous options made accessible to them by other network members. Modalities of accounting for heterogeneous assistances, accesses, complaisances and provisions are needed. The solution lies in the dimension of time: Social compensation for rendered services is inevitably postponed to a later point in time as a “credit” for an undefined future service in return. The necessarily unspecified and not beforehand clearable proportion of those heterogeneous services is always combined with the permanent creation of a “remaining obligation” to a return service as well (Luhmann 1997a, p. 635). That is to say, the poly-contextuality of the arrangement supports the establishment of a generalised reciprocity rule. Reciprocity is able to stabilise a network and, in addition, to ensure its unquestionable repute as well as its high flexibility in different circumstances (ibid.). Social networks may practice the rules of reciprocity silently, but they may also simplify these conditions by relying on network-specific myths. They may underline “the brotherhood” or “deep bonds of friendship” or refer to kinship or ethnicity as “primary bonds”. Those secondary forms of stabilisation may then broaden or restrict the flexibility of these networks by providing them with the structures to account for their borders. The principle of generalised reciprocity is significant for the stabilisation of networks. It is not their constitutive principle (as in Powell 1990; Mahnkopf 1994), but it allows the establishment of their operational continuity in time. Therefore, the question of stabilisation mechanisms in the dimension of time must be distinguished from the question of network constitution.

Organizations and networks So far, it has been shown that networks presuppose the differentiated social systems of modern society since they constitute the social addresses which networks are built upon. These social systems provide addresses containing individual profiles of inclusions and exclusions, thus making them attractive and relevant to the reflexive combination in highly specialized networks. In this section we turn to the relationship between organization systems and networks, a structural distinction which the general network approach can neither grasp nor give reasons for. As we have argued before, the network approach systematically underexposes the difference between personal and organizational addresses, as well as the distinction between the social 293

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and factual aspects of inclusion. In fact, both individuals and organizations can be activated as network-addresses. Against this backdrop, formal organizational networks have to be distinguished from personal networks in the organizational context. This distinction will be taken as a framework here, in which aspects of coupling organizations and networks are considered. We will draw on various empirical examples, but the aim is neither to examine empirical cases in detail nor to establish a theoretical typology of networks in relation to organizations. Instead, we aim to highlight aspects of coupling the two underlying structural forms (organizations and networks), thereby exposing some structural conditions, inherent constraints, driving forces and possible effects.

Personal networks in the organizational context In view of the huge variety of networks that can be found in modern society, only dealing with networks in relation to organizations seems to be an extensive restriction. In fact, this restriction seems minor given that, firstly, organizations occur in almost all function systems, secondly, organizations typically procure access to various functional provisions, and, thirdly, individuals spend most of their lifetimes in and around organizations. Thus, the case of a network to which organizational accesses have no relevance is probably a curiosity. With regard to networks among scientists it has, for example, been argued that the aspect of organization is “almost totally irrelevant” (Mullins 1968, pp. 795 f.). However, this result is misleading without detailed examination. Respondents were asked to name the addresses of other scientists with whom they “communicated information regarding research.” In fact, the respective network addresses mostly did not belong to the same department or organization but instead to “distant” organizations. This is not surprising, since the more sub-disciplines are specified, the less probable it will be to find addresses for scientific communication in the same location (Stichweh 1999a). While the argument underlines the relevance of (global) networks in modern science, it simultaneously underestimates the relevance of organizations to these networks of highly functional communication. In his study, Mullin has taken for granted that respondents (as well as their network partners) were employed at universities or other research organizations which provide their scientists with economic income, with functionally necessary resources for scientific work, and, last but not least, with an organizational address that signals to others their inclusion in a scientific achievement role. In contrast, it is well known that scientists without a post or organizational position tend to be excluded from scientific collaboration as well, i.e. they are communicated as less relevant to scientific networks, if not “almost totally irrelevant”. As a consequence of this, these scientists

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may however become relevant to professional support networks, which do not primarily transmit scientific information but establish “access to resources necessary for scientific work” (regarding the case of Russian immigrants in Israel, see Toren 1994, p. 726). As far as these resources (research funding, positions and the like) are organizationally bound, professional support networks presuppose the access of at least some addresses to the respective organizations. As much as organizations are relevant to scientists’ networks, scientific organizations largely rely on these forms of network building. In order to comparatively analyse how organizations formally deal with and capitalize on personal networks which they find in their own context, or even initiate, we now turn to further cases of personal networking before the particular case of organizational networks combining organizational addresses will be considered. The silent character of personal networks in the organizational context The following case exemplifies the general idea that personal networks in an organizational context exist in the “darkness of informality,” as Teubner (1996) put it. The case is taken from a study of the recruitment of apprentices at a major company in the German car industry (Bommes 1996). Concerning the nearly 200 apprentices who were finally recruited in one agegroup, it was the case for about 60% of that group that one or more of their parents had already been employed by the same organization. This proportion was only 30% concerning the approximately 450 applicants for apprenticeships. This difference in proportion was surprising even to members of the company’s personnel department who, in principle, knew about kinship-related tradition-building at the firm. As the study foreshadows, this surprising effect resulted from personal networking: Applicants’ parents (as organizational members) asked their shop stewards (who had access to the respective organizational decision-making arena) to put in a good word for their sons and daughters, possibly by reminding the shop stewards of past collegial support in union issues or by raising future expectations. The study does not refer to the idea of “informality” but characterises these circumstances of organizational inclusion appropriately as “silent”. Such networks are not officially announced within organizations, even if all persons involved know about them. The formal acknowledgement of personal networks’ influence on organizational recruitments is improbable primarily in the semantic framework of so-called “human resource management,” which demonstrates its organizational relevance and even societal modernity through factual notions of individuals’ achievements (as opposed to social ascriptions; Parsons). However, the difference between “knowing” and “saying” does not reveal the whole story, pointing to a second, structural condition producing this “silence”. Since organizations are social 295

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systems reproducing themselves purely through decisions (Luhmann 2000c), they can only attribute final results concerning the recruitment of members or apprentices to their own decisions, even if a personal network has produced this organizational result anonymously (Luhmann 2000c, p. 243). An organization’s self-reference thus implies that nobody ever becomes an organizational member without the organization having decided on this. The aspect of silent coupling refers to what Luhmann called “nondecisional decision premises” (Luhmann 2000e, p. 145): The network belongs to the organizational context in that it comes into existence by reason of organizational decisions. Nevertheless, the network itself is not produced by organizational decision, even if it acts selectively as a premise for decisions, allocates or branches off organizational resources, and eventually participates even in the systems’ structural drift. Following Luhmann’s observations of regional circumstances in Southern Italy, the personal networks’ capability of exploiting systems seems to turn out to be a principal weakness of the latter (Luhmann 1995c). However, the systems’ principal openness to the establishment of secondary social structures is not synonymous with decreasing standards of achievement. Regarding conditions of accomplished and prevailing functional differentiation, organization systems also profit from personal networks. The reason for this can be found in different modes of including individuals. The logic of addresses, which networks are built upon, signifies that they follow a social, particularistic mode of inclusion. Systems instead, due to their factual problem-related orientation, have a universalistic mode of inclusion in common. That is to say, they are based on inclusion criteria defined by the respective problems and programs that the system deals with. Although deciding highly selectively as regards membership, organizations do not consider questions of participation in view of social aspects of the participants’ addresses but with respect to their capability to solve factual problems. Since organizational decision criteria are factual from the outset, they typically leave margins of decision contingency open. Even though constraining and affording personnel decisions, organizational decision criteria do not positively select exactly one individual for one organizational position. Accordingly, personal networks, due to their address-related social orientation, can close residual decision contingencies even without essentially violating organizational decision criteria. Personal networks are parasites in this case: They live on the organizations which feed them, while caring for their host by releasing it from residual decisional contingencies. The personal network as an organizational solution In view of their own problems and programs, organizations can appreciate or even reckon with existing personal networks in their environments. The silent character of organizational inclusion via personal networks which is 296

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denoted above raises the question of whether organizations make personal networks an issue of their own decisions turning the social orientation that defines a network into a factual solution for organizational problems. Examples are easy to find. It is well known that members of sales forces are recruited not only according to personal sales and marketing skills, as testified by career certificates, but also in view of the length of the customer lists they bring with them from former employments at other organizations. In a similar way, editors are often recruited on the basis of contacts with authors they are likely to bring with them (Levitt/Nass 1989, p. 195), and universities ask professorship applicants about their international scientific contacts. Thus, organizations capitalize on these networks which seemingly exploit the organization in the way discussed above. In all these cases organizations take advantage of existing individual address books and couple them with personal networks that have emerged around new members’ addresses in other organizational contexts. The cases dealt with so far have in common that the coupling of personal networks and organizations rests upon at least one individual’s double inclusion – as an organizational member and as a participant in a network. This double-inclusion turns out to be a precondition for coupling personal networks and organizations. Apparently different examples can demonstrate this: For example, alumni networks, whether founded by graduates or initiated by university administrations, exclusively connect addresses of erstwhile participants. In this case, the relation of network and organization is not realised by double inclusion (even though this is possible too). Rather, the connection is formally assigned to an organizational position which the organization expects to serve the alumni-network as a whole not least in view of accessible organizational advantages (e.g. career services for current students, advertisements for the university, donations from alumni). Accordingly, the network’s point of contact at the university is addressed by network members not primarily as an individual person but based on his or her organizational competencies. Therefore, he or she can be replaced by another person without causing too much trouble – either for the network or for the organization. A closer look at the alumni case, however, reveals another important aspect: Essentially, alumni-networks are not networks in a strict sense. Insofar as everyone who was a student of the respective university can participate in those networks, participation is conditioned by a universal criterion (even though participation is open exclusively to former members only). That is to say, alumni-networks are actually associations which, in view of the diffuse opportunities concerning the participants’ careers, nevertheless serve purposes of networking. Compared to the particularism of networks, the associational principle is based on a universal criterion of participation. 297

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This precisely legitimises the organization to encourage personal networking as well. Conversely, the absence of such a general criterion seems to be the reason why universities typically do not formally acknowledge so-called students’ societies that select participants according to highly particularistic criteria, and sometimes simply by ascription. Temporary substitution of personal networks by organization Another form of coupling organizations and networks of former organizational participants, to be briefly discussed here, refers to the organizational trend towards vertical disaggregation. The example serves to pave the way for considering the case of formal organizational networks afterwards. Among other things, vertical disaggregation means that organizations outsource personnel resources which they – depending on demand – pull in afterwards on a project basis again, either in view of costs or as a consequence of a political decision. Under these circumstances some organizations, as has been shown for the U.K. television industry for instance, do not hire project co-workers individually. Instead, they buy in performing artists, technicians, writers, directors, and other freelancers as complete “configurations of key actors” who “know and trust each other” (Starkey et al. 2000, pp. 299 f.). Faced with the high level of uncertainty concerning the success of new TV programmes, the organizations resort to existing networks of professionals which seem to guarantee high quality output, if not because of success, due to their well-rehearsed and proven knowledge bases. Correspondingly, these networks are dependent on organizations which recurrently highlight the combined knowledge potential of the latter and, moreover, procure income for network participants. Since organizations seem to temporarily turn these personal networks into relationships between organizational members, the authors’ characterisation as “latent organization” (ibid.) may be reasonably appropriate. However, this description tends to ignore that – as a consequence of the temporary appointments – the “latent organization” usually becomes activated by different organizations. That is to say, the personal network structure tends, in fact, to become independent of the individual organization that induced its emergence in the first place by turning to vertical disaggregation and rehiring. The different constellations of the relationship between organizations and personal networks discussed so far all turn out to revolve around aspects of organizational membership, whether referring to double inclusion (social dimension), to organizational task and position (factual dimension), or to temporary substitution (dimension of time). In this way, double inclusion is a precondition, in fact, of coupling organizations and personal networks, if coupling means that networks condition organizations – in as much as organizations condition networks. The relationship of coupling means that both contexts – organizations and networks – make use of the structural 298

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options provided by the respective other under its own operational premises. Indeed, both contexts tend to rely on these external options for their own operational reproduction, thus mutually feeding each other. Not only has the form of silent coupling demonstrated, which is quite common in various organizational contexts, that organizations, whenever acknowledging and using personal networks, do so according to their own specific premises and problems, but also the other examples. From the outset, these premises and problems are not defined in the social but in the factual dimension. When organizations couple with personal networks and make use of the structural options they have provided (i.e. knowledge, customer relations, reduction of decisional contingencies, outsourcing of risks etc.), they do this under the premises of their own defined problems. The networks as such remain outside of the organization. That is to say, they are treated as a relevant structure that belongs to the organizational environment – or they are substituted through organization. Organizations do not formally acknowledge being conditioned by the particularism of personal networks – even if they allow for conditionings through selected environments. They transform the particularistic elements penetrating their decision process – concerning, for instance, personnel recruitment, sales practices or contracting out – into a universalistic form in an ad hoc manner. They claim criteria of competence and competitiveness, efficiency and effectiveness, austerity and success as being the final guiding principles of their decisions. In this way, they ironically feed and at the same time protect the particularism of networks that they make themselves dependent on.

Formal organizational networks So far, we have discussed the relationship between personal networks and organizations. Ultimately, we also want to discuss the relationship between organizations and organizational networks. Organizations start to combine organizational addresses and the related reciprocal options. In principle, the mechanism of network constitution is the same as in the case of personal networks: Here too, the reflexive combination of addresses and respective options creates new options. Since organizations consist of decisions and since decisions characterise their mode of reproduction, (Luhmann 2000c), they are able to act and communicate in their own name and responsibility. On this basis, they are also potential candidates to be addressed in communication and to build networks. Organizational networks should, therefore, be expected to be as flexible or stable, bi- or multilateral, as any other network. Empirical research seems to underpin this. It proves that the “complementary strength” (Powell 1990) which makes organizational networks attractive to organizations is based on the reflexive observation of addresses and the “intelligent 299

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combination” (Teubner 1992) of respective options. Again, this indicates the formal similarity with personal networks. Organizational networks, however, can make specific use of the reflexive combination of addresses that have been shown to be the formal constitutive mechanism of network building above. This is due to the fact that organizations have the capacity to also decide on their own boundaries. For example, the strategic “outsourcing” of entrepreneurial functions demonstrates that organizations cannot only check their address book for attractive addresses; moreover, they can (co-)create new addresses for networking by using their own (certainly more or less restricted) resources. Based on decisions, new organizations are founded and equipped with a particular profile (e.g. small size, high innovation potential, regional accesses) that can be linked to the profile of the focal organization (e.g. large size, high financial strength, global access) within a specific organizational network. The driving force seems to be the expectation that new options and accesses may emerge through this particular way of combining addresses. The structural shift in demand in the context of globalisation that has taken place during recent decades has resulted in, among other things, tremendous growth and variety in organizational networks, mainly in politics and the economy. In respect of this, it may be appropriate to speak of a “network revolution” (Teubner 2000). Beyond structural conditions, this organizational “network revolution” at the same time seems to go back to the fact that the reflexive combination of organizational addresses has stepped out of the “darkness of informality” (Teubner 1996). Organizational networks have become the officially announced formula not only regarding organizational self descriptions but also the (self-)reflection of societal function systems (for the “network state,” see Teubner (1999); for the “network paradigm of industrial development,” see Hessinger et al. 2000). Thus, regarding the relevance of social addresses, the institutionalisation of “cultures of observation” (Fuchs 1992) takes place on a structural as well as on a semantic level. In both respects, it affects the inter-organizational as well as the intraorganizational relationships of observation. This has been discussed in organization research under the headings of the “decentralisation of organizational structures” and the “levelling off of hierarchies”. Resources and options regarding organizational units, departments and positions are no longer coordinated according to a logic of serial interdependence but by a logic of reciprocity. Subsystems become equipped with their own and particular addresses (that can be approached), and are expected to combine and expand their options by way of reflexive modes of observation. At the same time, this seems to make intra- and inter-organizational networks constitutively ambivalent, and indicates their structural point of weakness: Communicative events in organizational networks are, in 300

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principle, organizational events (they refer to member roles). Nevertheless, the organization remains latent, because organizations cannot process reciprocity and the particularism linked with it. The latency can always, however, be made organizationally manifest. This particularly entails the danger that the dynamics of organizational decisions tend to destroy the subtle structures of reciprocity. The same communicative event always has a double meaning – it is part of the reproduction of one or more of the participating organizations and of the network existing in between. If this is true, the capacity of organizations to create networks through decisions taken at the same time implies a high potential for instability in the respective boundaries. The reason for this is that organizations can directly intervene in these networks. For the organizational staff this includes a high level of insecurity: They are expected to behave in a way that allows communication as members of the organization, even though these communications are formally not covered by decisions. At the same time, they are expected to produce social options based on structures of reciprocity. If these efforts finally come to be seen as failures, they will be treated as a decisional outcome that was not formally covered by the organization. Responsibility falls back on the individual member. In other words: Organizations communicate trust in order to motivate their members to build intra- and inter-organizational networks, and they claim the possibility to renounce this trust – while leaving their members alone finally in the case of failure. In this case, they have no possibility of proving that their present cause of action rests on decisions taken in the past. Taken together, organizations have the particular advantage of being able to decide on their own boundaries and even to create attractive organizational address-profiles for combination in organizational networks. However, this advantage simultaneously implies the high risk of the networks collapsing, since it remains too close to the decisional mechanism of organizational reproduction. That is to say, organizations are in permanent danger of destroying the subtle mechanism of reproduction upon which networks rely (i.e. reciprocity and respective informality). Thus, organizational networks seem to be based on highly fragile processes of coupling that create a need for sensitive forms which allow the maintenance and smooth crossing of boundaries.

Conclusion This chapter discusses the relationship between social systems and networks. The actual sociological prominence of social network approaches poses a challenge to sociological systems theory which describes modern society as a functionally differentiated society. Social networks have empirically gained

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more and more relevance in the context of the recent globalisation processes. This has been the backdrop to actual sociological tendencies of redefining all kinds of social structures as social network structures, especially in the context of organization sociology. The chapter initially discusses the strengths and weaknesses of both the social network and the system theoretical approach and identifies complementary deficits. This is taken as a potentially productive starting point for a more constructive exercise; i.e. clarification of the relationship between the social systems of modern society which systems theory primarily deals with, and social networks, which are the primary subject of network approaches. This clarification effort, however, is undertaken on the basis of a system theoretical perspective. The reasons for this are at least twofold: There is principally no possibility of taking a neutral third position of observation that would be able to avoid starting out from its own theoretical premises. A theoretical decision right from the beginning cannot be circumvented. The decision taken here – to start out from systems theory – is based on two assumptions: a) The systems-theoretical combination of a general social theory and a theory of society allows the making explicit of some of the implicit premises of network theory. It allows understanding of the peculiar character of social networks in modern society; b) Systems theory provides the theoretical means of specifying the structural conditions for the emergence and reproduction of networks based on the general conceptual approach. In doing so, it allows the avoidance of both: on the one hand, the danger of merely adding an external “emergency wheel” to the general approach and, on the other hand, over-generalising the network concept by using it as a catch-all term. The chapter elaborates some aspects of this in two steps. It first introduces a concept of social networks that is general and formal enough to account for the rich empirical variety of networks in the various social realms of modern society (like franchising networks, networks of illegal immigrants, networks of scientists, women or neighbours) together with their modes of emergence and reproductive stability, which is the combination of addresses and the reliance on reciprocity. In the second step the productivity of this concept is exemplified by discussing the relationship between organizations and social networks. Only the results, some of which are finally summarized here, can justify the unavoidable bias towards starting out from one or another specific theoretical frame. In view of the so-called “network revolution,” it has been argued again and again that the distinction between organizations and networks is increasingly becoming blurred. In fact, communication forms shift constantly, changing between organizational and network communication, even within the organizational context. Nevertheless, there is no reason to abandon the difference in theoretical terms, since attributions of utterances can generally be expected to be unambiguous in order to fulfil their simplifying 302

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function within communication. However, communications can, in fact, fluctuate back and forth between organizational and personal addresses. They become multiple events that are operationally relevant to both, organizations and networks, even if this happens in different ways and by producing different structures and linkages. Against this backdrop, attributions may have to be analysed in more detail in further empirical research. How do organizations that formally deal with networks avoid notions of “particularism” (which tends to be observed as corruption), and how do they constrain “universalism” (which does not allow the use of the advantages that networks provide)? How do organizations balance out the subtle relationship between decision and reciprocity in intra- and inter-organizational networks? Any analysis of the relationship between networks and organizations should be able to reconstruct even those structural tensions – instead of simply replacing them with clear cut assumptions about “actors” and thereby making important differences and empirical questions disappear as if by magic. The systems-theoretical approach opens up a fresh and arm’s length view of networks which – due to aspects of trust and reciprocity – has too often been described as a “worthwhile” or “better” social form. Networks are not “better” but different. On the one hand, they are pre-modern: Whereas the mode of inclusion of function systems or organizations is universalistic, networks are particularistic from the outset, as their modes of operation and inclusion can demonstrate. On the other hand, they are innovative, and can thus be described as modern: They create new and unpredictable possibilities by combining options produced on the basis of systems differentiation. Nevertheless, concerning any normative evaluation, one should bear in mind that this “innovativeness” also holds true for modern networks of cooptation, corruption and terror. Systems theory allows an account of the plurality and specificity of networks. It makes visible the fact that they rely on the plurality of functional and organizational systems, providing them with highly individual profiles of addresses due to differing histories of inclusion and exclusion. This is precisely one of the preconditions for the variety and specificity of social networks. The possibility of combining the plurality of systems and their heterogeneous provisions, based on the option to link social addresses (individuals and organizations) freely, provides the basis for the emergence of an irreducible variety of networks. Furthermore, and due to the permanent creation of “remaining obligations,” reciprocity seems to be the social form that provides the conditions for the operational continuity of networks in time. The analysis of the relationships between organizations and social networks makes visible how they mutually feed each other and rely on the structural features of the respective other. This has been discussed in relation 303

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to the mechanisms of “double inclusion” and identified as a precondition for coupling between both. Moreover, we have discussed the similarities and differences of relating organizations to personal and organizational networks. In particular, the analysis of couplings between different structures leads to insights which the network approach ignores by reason of its exclusive reliance on the concept of social networks. One insight we assume to follow from our analysis is that the emergence of global structures (e.g. global structures of migration) cannot be adequately explained by referring either to organizations or to networks alone. Instead, the mutual interdependence of organizations and networks has to be taken into account. Whereas the systems-theoretical approach leads to new insights hitherto missing from network approaches, it admittedly fails to provide the elegant tools of formal analysis which are well-known from network approaches. However, it remains an open question whether or not this difference between the approaches has to be understood as a failure of systems theory or whether this is due to a reductionist network concept that excludes some key aspects from the analytic approach, even though only the latter enables consideration of the salience of networks in modern society. It seems that the well known critical objections that have been raised regarding the peculiar formalism of the network approach gain their substance particularly from those shortcomings which we tried to elaborate on here within the systemstheoretical framework, thereby denoting, among other things, the distinction between address connectivities and network structures.

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PART V Forms of Organization

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Chapter 14

Analysing Forms of Organization and Management: Stock Companies vs. Family Businesses Fritz B. Simon

Introduction Drawing on Von Foerster (1981) and Spencer Brown (1979) Luhmann conceptualises organizations as observing systems. Every organization observes itself and its environment and on the basis of these observations reproduces itself. We, as organization theorists, in turn, can observe and analyse these organizational observations. Depending on the particular observations we might distinguish between different forms of organization and different management styles; and we can examine to what extent the two fit together. The successful management of a family business, for example, requires a different mode of observation from that of a stock company. A useful tool for such an analysis can be found in Spencer Brown’s calculus of forms, which allows us to represent these complex constellations of observations in simple and comprehensible format. In the following I want to demonstrate the fruitfulness of this approach. The chapter is structured into nine sections. In the first section I will introduce Spencer Brown’s concept of observation, which lies at the heart of Luhmann’s conceptualisation of organizations as observing systems. This will also provide us with the formal apparatus for analysing organizational observations. In the second section I briefly explain the concept of autopoiesis. In the third section I will discuss the ways in which organizations may be observed and analysed. The fourth section is concerned with the distinction between different types of coupling between organizations and their relevant environments. In the fifth and sixth sections I examine how organizations observe themselves and their relation to the environment. In the seventh section I point out some unavoidable conflicts in the organization’s handling of its relation to its environments. In the eighth section two types 307

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of organization will be compared: stock company and family business. In the ninth section I try to analyse the consequences of introducing stock options into businesses as an incentive for the management. The chapter concludes with a brief reflection on the fruitfulness of the suggested approach to organizations.

Observation In the context of Niklas Luhmann’s systems theory (2000c) the term observation is used according to the definitions George Spencer Brown provides in his book Laws of Form (1979). He defines the operation of observation as the coupling of two different distinctions in two different spaces. These two spaces are called “space of the first distinction” and “space of the second distinction”. The first distinction is called “distinction”, the second distinction is called “indication”.1 Outside their mathematical context those terms can be rendered in more simple, everyday language as follows: in order to observe, every observer has to make two distinctions and couple them: (1) distinctions between different phenomena in a first phenomenal domain, and (2) distinctions between other phenomena in a second phenomenal domain, which function as indicators for the first distinctions. The process of observation thus results from coupling the two operations: distinction and indication. The sense or meaning of the indication is the first distinction. The act of drawing a distinction separates a space, state, or content on the inside of a boundary from a space, state, or content on the outside of the boundary (Spencer Brown 1969, p. 4). The two sides can be indicated by distinctions in the domain of language, i.e. by giving the two sides of the distinction different names (for example “inside”/“outside”). For instance, observers of biological systems can distinguish a living organism as an entity that is distinct from other living systems and/or the non-living environment by using their senses (perception/first distinction). Furthermore, they can give it a name – for example “my cat” – to indicate what they are aware of (indication/second distinction). By calling the inside of the distinction “my cat” the rest of the universe can be called “not my cat” (Figure 1). Usually we don’t realize that by making distinctions we always create a form with two sides. Because we don’t give the outside of the distinctions (environment) a special name we are not usually conscious of it: it is not indicated and therefore it is not observed. Where there is no indication there is no observation. 1

Note that this is a slightly different interpretation of Spencer Brown’s concept of observation from that provided in Chapter 1 in this volume.

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Inside, My Cat

Outside, Not My-Cat

Figure 1.

To illustrate distinctions Spencer Brown draws a circle as a “mark of distinction” on a plane surface (as shown in Figure 1). In this way, he illustrates that distinctions are always characterised by the creation of a boundary. One cannot reach the inside from the outside without crossing the boundary and vice versa. Applying this principle to distinctions in three-dimensional space will cause these distinctions to create boundaries between inside and outside, i.e. so called “entities” or “objects” and their environment. Spencer Brown offers a second way to symbolize distinctions, which can be used for mathematical purposes and for analysing complex structures and relationships of more complex structures of distinctions. It consists of socalled “tokens for the mark of distinction”, which he refers to as “crosses”. He calls these tokens “crosses” because of the double meaning of the term. “Cross” is not only a name for a special symbol but at the same time an injunction to cross the boundary from the outside to the inside of the distinction, that is to say, it induces a dynamic that brings forth the distinction (Figure 2).

Inside, My Cat

Figure 2.

When we apply these different types of symbol-systems we have two options for representing or describing the distinctions made by an observer: either by using circles or by using crosses. My suggestion for the following text is to use circles to symbolize first distinctions. This presupposes that these first distinctions are generated by causal processes that are different from the processes of the observation from an outside perspective (e.g. the biochemical processes that generate the body of a cat or the communicational processes that generate an organization). In contrast, crosses will be used to symbolize second distinctions (indications) in order to show how the former processes (or first distinctions) are described or represented or categorized in 309

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communicational processes. Whenever circles are used to represent communicational processes (as happens in organizations or other social systems) the crosses describing these processes can be considered as meta-communication. In organizations the meta-communication can become an integral part of the communication that keeps the organization going. Since all meta-communication is communication one has to be careful not to mistake the token of a mark of distinction for the mark of distinction as such. In other words: we have to avoid mistaking a symbol for the object it symbolizes; mistaking the communication about a phenomenon for the phenomenon. We have to avoid making the epistemological error of mistaking the characteristics of observations for characteristics of the observed phenomenon; mistaking, that is, the second distinction (indication) for the first distinction – e.g. eating the menu. Let’s have another look at an organism as a distinction – our cat – the better to illustrate the difference between first and second distinctions, i.e. between marks of distinctions and tokens of the mark of distinction. In Figure 1 the circle represents the mark of distinction. In the context of this paper, it represents the first distinction, i.e. the body of the cat. But in real life things are different: what stands for a mark of distinction/first distinction is the body of the cat. We resort to using circles in this paper because of the obvious difficulty of introducing real cats into a paper. The cross, in contrast, represents the second distinction, i.e. it indicates the body of the cat. It represents the name of an organism called “cat” which is being observed (either by an external observer or by itself). But let us be clear that the indication of “a cat” is “no cat”. This distinction is relatively easy when we refer to biological processes (cats) and the communication about biological processes (speaking about cats). It becomes much more problematic when we refer to social systems as communicational systems and the communication about communicational systems. The danger of mixing up the logical levels and creating epistemological errors increases immensely.

Autopoietic systems As outside observers we can distinguish organizations from their environments. From a constructivist perspective we have to decide how to conceptualise the causality (generating mechanism) of the creation of the distinction called “organization” (cf. Varela 1984). In the context of Luhmann’s systems theory the answer is clear: the processes that generate organizations as distinctions are communicational processes that delimit an organization as a social system from its environment (i.e. communication as a phenomenon in the space of first distinction). The logic of these dynamic processes

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by which an organization is separated from its environment can be characterised as autopoietic. The notion of “autopoietic systems” was developed by Humberto Maturana (1975; Maturana/Varela 1980) to explain the specific characteristic of living systems. As a biologist, he focused his attention on biological processes and the organization of their internal dynamics. As “autopoietic” he characterizes a structure of processes in which a network of interactions between the elements of a system creates these very elements through their own activities. In this way the boundary between inside and outside of an organism is generated and maintained. This is a self-organized and autonomous process without any creator outside of the system. To apply the notion of Spencer Brown: the first distinction is generated by physiological/biochemical processes which create a boundary between the inside and outside of a body. Maturana usually symbolizes autopoietic systems as circles with an arrow to illustrate that the distinction is actively created and autonomously maintained; it ceases to exist if these generating and defining processes are terminated. This principle of autopoietic reproduction can be regarded as characteristic for organizations as well. They too are created and kept “alive” as long as certain processes continue or are repeated. In this case, however, these autopoietic processes are not biochemical but communicational. Figure 3 shows two ways to illustrate this dynamic: (1) as a circle with an arrow, and (2) as a repetition of crosses: ▲ Organization

or

X

X

=

Organization

X = communicational processes that generate the distinction organization/environments Figure 3.

There is always a need for repetitive patterns of communication that keep the organization as an entity distinct from other social systems and environments. Only if those processes are realized will the organization emerge and only as long as they are realized will the organization survive. As soon as they stop, the existence of the organization comes to an end. 311

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The organization as observed system We now can use circles or crosses to represent organizations and their environments as observed phenomena in order to analyse conditions and relationships that are relevant to their survival. From the viewpoint of systems theory the unity that an organization and the characteristic and for its survival essential environments represent has to be conceptualised as the coevolutionary unit of survival (Figure 4). ▲ Environment c

▲

▲ Environment a

Organization

▲

▲

Environment b

Environment …n

Figure 4.

If we look exclusively at autopoietic systems as environments of organizations, then the circles in Figure 4 represent communicational, psychic or biological systems as environments. For the purposes of organizational theory, biological systems can be regarded as given, so long as psychic systems or other social systems are given. We can now focus our attention on the latter: if the respective circle represents a psychic (autopoietic) system, then the processes represented are psychic processes. If the respective circle represents a social system, then the processes represented are communicational (autopoietic) processes. To describe the organization and its relevant environments (i.e. other systems) that we sketched above we can use crosses (Figure 5). Unit of Survival

= Organization

Environment a

Environment b

Environment c

Environment d

Figure 5.

If we examine an organization and its relevant environments from an outside perspective – for example as sociologists – we may consider other communicational processes to be of relevance to the survival of the organization than the organization itself does. 312

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Strict and loose coupling Up to now we have provided notations to describe distinctions between “system” and “environment”. If these two together build a unit of survival, we can consider them to be coupled with each other. It is possible to distinguish different types of coupling. Karl Weick (1979) introduced the concepts of strict and/or loose coupling into organizational theory. If the elements of a system or the elements of a system and its environment are coupled in a strict way, a rather inflexible structure or structure of relationships emerges. If they are coupled in a loose way, the structure becomes more flexible. Both terms have to be seen in relation to each other, i.e. “strict coupling” and “loose coupling” are relative concepts: couplings are more or less strict, more or less loose. If we focus our attention on the coupling between an organization and its environment, we see that the various environments can be considered to be exchangeable to a greater or lesser extent. If we consider, for example, the relationship between a firm and a single customer, the coupling between the firm and the customer is relatively loose, because the individual customers are exchangeable. If we look at the coupling between the same firm and the market in which it sells its products, the coupling between the firm as a social system and the market as a social system is relatively strict, because there are not that many different markets in which a company can sell its products. An organization will possess greater or lesser degrees of autonomy depending on the type of coupling between it and its relevant environments. The management or leadership of this organization has to take the degree of coupling into account, if it intends to develop survival strategies for the organization. The less strict a coupling is between an organization (x) and an environment (y) (which can also be an autopoietic system, i.e. a psychic or social system), the less can the unity they represent be considered a unit of survival. Figure 6 shows how an outside observer can witness those different types of coupling as the emergence of larger or smaller unities:

x

x

y

Strict coupling

y

Loose coupling

Figure 6.

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Represented as crosses, both types of couplings can be symbolized as follows (Figure 7):

x

x

y

Strict coupling

y

Loose coupling

Figure 7.

To illustrate the impact of loose vs. strict couplings let’s have a look at the different relationships a company has with its employees and customers. Since there are contracts that bind company and employee together over a longer time span, the coupling between those can be considered relatively strict (Figure 8).

Coupling company/employee:

x

y

x = company, y = employee Figure 8.

What we have here is a cross that creates a bigger unit made up of company and employee. These two build (at least temporarily) a bigger unit of survival. Nevertheless, both coupled systems have the possibility of ending the contract and consequently the coupling. So, in this sense, the relationship between a company and an employee would not be necessarily described as strict coupling. The reason for this is that there are markets in which companies compete for employees and potential employees have to make their choice between different job offers. However, if we compare the coupling of a company and an employee with the coupling of a company and a customer who buys a product of this company just once, it becomes clear that the coupling of the latter is relatively loose (Figure 9). Coupling company/customer:

x

y

x = company, y = customer Figure 9.

In the scheme of crosses we can see that the two crosses of company and customer are not united by a further cross. Both are independent of each other, that is to say, both are free to couple themselves for the next 314

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transaction with other partners. Clearly, there is no co-evolution of the two systems, so, creating customer loyalty is a sensible goal for many companies.

Observation of a firm

…

▲ ▲ ▲ ▲ ▲ ▲ ▲

In an economic context, the survival of a firm can be defined as the ability of that firm to cover its expenses (e.g. bills, wages, interest on loans etc.). This is only possible if a firm manages to generate income. To that end, economic units usually operate in a way that is commonly referred to as “doing business”, which in most cases means producing goods or services that can be sold on a market. A firm, however, is active in markets not only as a seller but also as a buyer in that it buys products, ideas, labour and so on. To survive as an autonomously acting unit, in the long run it must be able to generate at least as much money as it needs in order to pay different creditors or stakeholders. As already mentioned, other social systems (e.g. markets) can be considered relevant environments for the survival of a business. However, not only social systems are relevant: since every company needs employees to fulfil typical functions, it must also take into account the multitude of psychic systems of its employees as a second type of environment that is relevant to its survival. In order to function independently of individual workers or employees, a company has to make sure its employees are exchangeable. A company can find enough employees on the job market to secure its survival. From an outside perspective the relationship between a company and its relevant environments can be illustrated by the following arrangement of circles (Figure 10):

Market of Products and Services

Market of Employees

▲

▲

▲ CapitalMarket/ Family of Owners

▲

▲

Employees as Observers

Firm

Market of States

Figure 10.

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Since the processes that keep a firm running are communicational processes, the crucial question is whether a company would apply the same distinctions in its self-description as an outside observer would apply in analysing the environments relevant to the survival of the company. Usually the majority of employees are not and need not be aware of the relevant environments. This kind of observation of the company (in both senses) is part of the responsibility of the management (Figure 11).

a

:

b

c

a = observation of the management b = firm c = employees as units of survival d = capital market

d

e

f

g

e = market of employees f = market of products/services g = market of states/political systems/tax systems

Figure 11.

The management has to take into account all these systems and environments, if it is to come to decisions that enhance the chances of the firm’s survival. If the management observes according to the structure of crosses shown in Figure 11 (which it does not need do) it sees the coupling of the company (b) with the employees (c) as relatively strict, and the coupling with the different markets (d, e, f, g) as relatively loose. If it applies a global perspective it might perceive the relationship between workers or employees and company also as loose. In the process of progressive globalization the degree to which the coupling with a certain state has to be considered strict changes almost from month to month. There are certainly companies for which the exchangeability of sites which could host their production is very limited, while others are free to move their plants around the world in a rather short time. Nevertheless, every management has to assess the extent to which the environments of the company are exchangeable. The management has to include in its reality-construction the respective system/environment-distinctions as well as the types of coupling between them.

Management and re-entry From Luhmann’s systems perspective the management – in contrast to the “manager” as a psychic system – has to be conceptualised as part of the organizational communication. Its main function is to introduce the distinctions between the company and the environments relevant to its survival 316

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into the communication within the company (cf. Baecker 1993). In other words: the management has to enforce the “re-entry” (Spencer Brown 1969, p. 56) of the firm/environments-distinctions into one side of the distinction, i.e. the firm (Figure 12).

h

:

b

c

a = reality-construction/-observation of the management b = firm c = employees as units of survival d = capital market

d

e

f

g

a

e = market of employees f = market of products/services g = market of states/political systems/tax systems h = interventions of the management

Figure 12.

In order to be able to observe itself, the organization has to make distinctions and indications in the domain of communication. The management can/must introduce specific distinctions into the internal communication of the firm (Simon 2002b). This way, the management enables the organization to observe itself, i.e. to realise a re-entry of the distinction organization/environment(s) into the organization. Therefore, the first, and probably in the long run most important function of the management is to focus the observation of the company on specific system/environment differences and interactions (h). The second function of the management is to influence the internal communicational and interactive structures of the company accordingly, in order to enhance the firm’s chances of survival. Figure 12 illustrates an example of intervention (h) of management, i.e. introducing its reality-construction (a) into the communicational processes of the firm. The management’s construction of reality (a) is structured according to specific distinctions: the firm (b) and the employees (c) are conceptualized as a co-evolutionary unit of survival, i.e. as strictly coupled. The different types of markets that build the relevant environments of this unit (d, e, f, g) are relatively loosely coupled with each other. The realityconstruction/observation (a) of the management couples the unity of the company and the employees strictly with the different markets, and the intervention of the management (h) re-introduces (“re-entry”) this observation into the communication that keeps the firm going.

Unavoidable conflicts There exist some fundamental contradictions and conflicts between systems and environments. More specifically, in the case of an autopoietic system, 317

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the more exchangeable its relevant environments, the more independent from, or indeed the less dependent on, those environments it is. For example, the larger the number of competent employees available on the market, the less dependent is the company on any particular employee. This is the reason why unions were created in the first place: for a company the single worker might be exchangeable as relevant environment, however, the entire workforce of a country or territory is not exchangeable. In theory the unity of all workers has more power to negotiate with the company than the single worker does. This works both ways: the higher the number of companies that show an interest in hiring a particular person, the more exchangeable is every company for this person and the less the power individual companies have as relevant environments for the survival of this employee. So, both communicational participants can preserve their relative independence by keeping their respective environments exchangeable (Simon 2004, p. 90). The same structure of conflict of interests can be witnessed in the relationship and coupling between company and investor. Strong competition among companies for the allocation of capital will increase the dependence of companies on individual investors and vice versa: strong competition among investors keen to invest in a particular company will increase that company’s power to define the conditions of the investment. In a nutshell, we can say that capitalism today is not dealing with the dyadic contradiction between capital and work as Marx defined it (a view in which the company as a unit of survival played no role at all). If we look at the conditions of company survival from the perspective of systems theory, we see that there are always unavoidable conflicts between autopoietic systems and their relevant environments. Basically, the management responsible for the well-being of a firm has to deal with two different conflicts: first, a conflict between the company and the workforce, both of which compete for money, liquidity etc. The same principle – i.e. that power is always on the side of the partner who is less exchangeable for the other – shapes the second conflict, i.e. the relationship between the owners/shareholders (capital) and the company. So the management always has to deal with a triangular conflict: company vs. workforce and company vs. capital.

Stock companies vs. family businesses The concept of exchangeability is of great explanative value in the analysis of the different relationships between companies and their respective stakeholders. We will demonstrate this with regard to the relation between investors and stock companies on the one hand and family members and family businesses on the other. In order to make decisions, the management of a firm has to take into account the various loose or strict types of coupling between the company 318

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and its environments. A stock company, for example, has to deal with a relevant environment of investors and financial markets; a family business with a family of owners. The coupling between company and investors in the stock market is less strict than the coupling of a family business and the owner’s family or its members. These different types of coupling have to be observed and taken into account in the process of managerial decisionmaking. It follows that the management’s observation/construction of a stock company will be very different from that of a family business. If we look at stock companies, top-managers have limited contracts like other employees. Because of that, the managers (as psychic systems) are likely to possess distinct personal interests that are ultimately also reflected in the managerial communications. In this sense the management can be said to represent different concerns from those of the organization as a whole. The management has to take this into account in its own observations. Another aspect that the management has to observe is its own interventions in the company’s communication and the particular impact these have. All these aspects have to be represented in the management’s observation of the firm and its environments. Again, this construction of reality can be symbolized by an arrangement of crosses (in order to reduce the complexity of the figure we will abstract from the market of states, as it does not mark any principal differences between family firms and stock companies). Figure 13 represents the observation of the management (a) of a stock company, which explicitly takes the interests (i) and the interventions (h) of the management into account, but which, in this case, does not see the employees (c) and the company (b) as strictly coupled:

a

:

b

c

a = observation of the management b = firm c = employees as units of survival d = capital market

i

d

e

f

h

e = market of employees f = market of products/services h = interventions of the management i = interests of the management

Figure 13.

The basic difference between a family firm and a stock company concerns the coupling between the company and its shareholders (see Figure 14).

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j

a = observation of the management b = firm c = employees as units of survival e = market of employees

c

i

e

f

h

f = market of products/services h = interventions of the management i = management j = family

Figure 14.

The figure shows that there exists a rather strict coupling between the owner family (j) and the firm (b). It is much more difficult for family members to disassociate themselves from the company than it is for an investor of a stock company. Usually they are not allowed to sell their shares on the market, because many owner families have rules, contracts, and by-laws that do not allow the trading of shares outside the family. This serves to secure the family as an acting unit with respect to the company. For the company, the owners are not exchangeable in the same manner as investors are for a stock company and vice versa. Families and their businesses can be characterised as “partners” involved in co-evolution (Simon 2001; 2002a, p. 17). Dealing with an owner family and/or its members means that the management can count on a more reliable relationship than it would with a (capital) market. This allows for longer planning perspectives and affects, among other things, the way in which the management deals with insider information and presents the company to the public. In other words, a different style of management can be applied, and decisions can be made according to different values, which are based on the rules and goals of the family rather than the rules, goals, and evaluations of investors and financial markets. Fig. 14 shows a rather strict coupling of employees (c) and individual managers (i) to the unity consisting of family and firm (b, j). Strict coupling is often, though not always, the case with family firms. A second aspect we need to underline is that in a family firm the management must be aware that its actions (h) influence not only the company but also the family. In these cases there is always a double re-entry, i.e. a re-entry into two social systems: the family (j) and the firm (b). The management is observed by the company and by the family, as it too observes the company and the family. Ideally they accomplish the coupling of both. This task is quite different from the task of keeping investors in a good mood, i.e. managing investor relations in a stock company. It takes different skills to gain the trust of an old aunt in a family, for instance, from those it takes to please a young analyst in the stock market.

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Effects of stock options If a company offers stock options to its top management, the consequences for the company can be far-reaching (Figure 15). The reason for this is that the reality-construction of the management changes tremendously (at any rate it is very likely that it will). In this case the management has to enforce a double re-entry both into the company (b) and into the stock market (d). What’s more, the management has to consider how the stock market views the company. It must intervene in the stock market in order to get a higher value for its own stock options. Its decision making will be oriented to the presumable interest of the investors, regardless of whether this is in the longterm interest of the company or indeed good for the survival of the company. In other words, the management becomes strictly coupled with the stock market (i, d). The negative side effect is that the management may be seduced into trying to trick the markets by faking balances for instance, or succumb to the by now well-known, deviant kinds of behaviour witnessed in the Worldcom and Enron cases.

a

:

b

c

a = observation of the management b = firm c = employees as units of survival d = capital market

i

d

e

f

h

e = market of employees f = market of products/services h = interventions of the management i = management

Figure 15.

The situation becomes more difficult, indeed paradoxical, if a family business goes public and becomes a stock company (Figure 16). In such a situation the management has to deal with family members as well as investors, i.e. with a family (j) and the capital market (d). Both can be considered relevant environments, and both have to be taken into account when crucial managerial decisions are made. The situation becomes even more complicated if the management is offered stock options. Since this is one of the most difficult situations possible, let’s examine it briefly.

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i

i

d

e

f

h

f = market of products/services h = interventions of the management i = management j = family

Figure 16.

As Figure 16 demonstrates, a conflict may arise between two different kinds of corporate cultures. The management (i) is strictly coupled with the unity consisting of firm and family (b, j) as well as with the stock market (d). This probably creates a conflict of values: if the management acts in the interest of the investors (an orientation that the stock options particularly promote) it runs the risk of contradicting the values of the family and vice versa. If the family judges that the actions and decisions of the management (i) are directed against the interest of the family or against the goal of the long-term survival of the firm, it will fight against the management. If in the view of the stock market (i.e. the analysts) the actions and decisions of the management (i) are directed against the standards expected from a stock company its shares will fall. The management is in a paradoxical position: inside and outside the strict coupling with firm and family, and, at the same time, inside and outside the strict coupling with the capital market. It has to manage a threefold re-entry in that it has to introduce (h) this contradictory construction of strictly coupled unities not only into the company (b) but also into the family (j) and into the stock market (d). Making the paradoxical logic of the chosen strategy and the patterns of managerial decisions appear coherent and plausible to both investors and family members is unavoidably a difficult task.

Concluding remarks The aim of this paper was to demonstrate the fruitfulness of applying Spencer Brown’s calculus of forms to some of the concepts of Niklas Luhmann’s systems theory for analysing different forms of organization and management. This formal apparatus has proven particularly helpful in the analysis of very complex relationships as it allows representing them in a simple and transparent way. It has already been used successfully in other areas, such as the analysis of the implicit (dis-)organization of schizophrenic 322

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thought (see Simon 1988, pp. 307–314). In this chapter it has helped us examine the very complex relationships between different organizations or organizational units and their relevant environments. The application of this model to stock companies and family businesses demonstrates that it can even be used to analyse planned structural decisions in order to anticipate problems and conflicts that can arise from the creation of new, strictly coupled units of survival.

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Chapter 15

On Defining the Multinational Corporation. A Systems-Theoretical Perspective1 Darnell Hilliard

Since the 1960s there has been an economic debate on the so-called multinational corporation. Observing an increasing internationalisation of productive activities and direct investments since the 1950s, economic theorists thought to have identified a new form of corporation that seemed to show new qualities that were clearly different from the national corporation and the historical forms of international business (for an overview see Dunning 1971; 1974). Therefore, economic theorists started to analyse the multinational corporation by trying to find a general definition of their object. But the classical as well as the current theoretical debate on defining the present multinational corporation is characterised by a deep disagreement in form and content (for a critical discussion on classical definitions see Aharoni 1971). On the one hand, there exists confusion about the type of operation to which the term “multinational” should refer, as well as about the degree of foreign operations that have to be performed by a corporation in order to speak of a “multinational” corporation. On the other hand, all definitions characterise present multinational corporations as corporations that operate in two or more national environments; that is to say, they define the multinational corporation with regard to the structuring of society into different nation-states. However, in view of increasing economic, political, legal, and cultural globalisation, is it really appropriate to describe the present environment of large corporations as a plurality of national environments? This chapter argues that Niklas Luhmann’s sociological systems theory contains several starting points for developing a more general definition of the multinational corporation, which, first, does not restrict the multinationality of a corporation to one specific type of operation (or: corporate 1

I want to thank Kai Helge Becker and David Seidl for very fruitful comments on earlier drafts of this chapter.

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division), and, second, takes into account that the globalised environment of present corporations can no longer be described as a plurality of national environments. In other words: concerning the first aspect, we refer to Luhmann’s systems theory because it conceptualises organizations (corporations) as social systems reproducing themselves by communicating decisions (and not by productive, financial, or technological operations). This general understanding of an organization (corporation) enables one to look at all divisions of a business organization. With regard to the second aspect, Luhmann’s systems theory conceptualises the social environment of present organizations not as a plurality of national environments, such as national markets, national economies, nation-states or national societies, but as a single world society that is differentiated into globalised function systems. In sum, these features of systems theory open up a perspective to re-define the present multinational corporation by describing the way in which this corporation form relates its decisions to the worldwide communicative contexts of the world society, thereby offering an alternative to the shortcomings of the economic debate. The chapter is organized in three sections. The first section outlines the two fundamental problems of classical and current definitions mentioned above. The second section introduces three central concepts of Luhmann’s systems theory: organizations are conceptualised as social systems that reproduce themselves as networks of decision communications. Corporations are conceptualised as a specific organizational form that reproduces itself by relating decisions to business opportunities. Finally, the present society is conceptualised as a single world society whose functional differentiation into different societal subsystems is no longer limited through any territorial boundaries. Proceeding from these systems-theoretical considerations, the third section outlines a sociological concept of the present “world corporation”. Here, the present world corporation is defined as a specific type of corporation that relates its decisions to a single business environment of business opportunities linked worldwide. In contrast to the existing conceptualisations of the multinational corporation the main attribute of present multinational corporations is no longer seen in the ability of operating in two or more national environments, but in the ability of maximising profit on a worldwide basis. This will be demonstrated with regard to three different corporate divisions: finance, production, and marketing. The final section summarises the main insights of the previous sections and points out some additional advantages of a systems-theoretical definition that have to be explored by future research.

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Classical and current approaches to the multinational corporation In this first section we will outline six prominent economic and organization-theoretical approaches to the multinational corporation. In doing so, we concentrate on pointing out the theoretical shortcomings that these definitions have in common. In particular, there are two problematic aspects of classical and current approaches to defining the multinational corporation: firstly, all approaches define the “multinationality” of a corporation by relating it – a priori – to one specific type of operation. And secondly, even in times of a globalised world society, each approach sees the main attribute of the multinational corporation in its ability to cross two or more national environments in one or another way.

Classical approaches Stephen H. Hymer’s thoughts on foreign direct investments are generally considered a starting point of the economic theory of the multinational corporation (Hymer 1977 [1960]). In Hymer’s model, the “multinationality” of a corporation refers to its basic operations, which are called direct foreign investments. The operation of direct foreign investment is distinguished from the traditional portfolio investment by the aspect of “control”. On the one hand, “control” may refer to the extent to which the decisions of one corporation are affected directly by the decisions of another corporation; on the other, to the legal ownership; that is, the percentage of the equity of a corporation owned by another corporation (Hymer 1977 [1960], pp. 32–33). How significant the extent to which the decisions of one corporation are affected directly by the decisions of another corporation should be (i.e. what percent of the equity of a corporation has to be owned by another corporation in order to speak of “control”), is not explicitly defined. However, in this perspective, the multinational corporation comes into existence by direct foreign investments. The operation of direct foreign investment may take different modes. “The form will vary; there may be collusion, tacit or overt; the enterprises may merge and become one firm; they may have a profit-sharing agreement (through minority interests, for example); for a time the enterprise may even compete; but if there is interdependence and if there are only a few firms so that they can recognize this interdependence”, a multinational corporation comes into existence (Hymer 1977 [1960], pp. 91–92). In Hymer’s view the “multinationality” of the multinational corporation refers to the crossing of two or more nation-states by direct foreign investments. Here, the main attribute of the multinational corporation is seen in the ability to face different nation-state based factors, such as different governments, different laws, different languages, and different economic and cultural conditions (Hymer 1977 [1960], e.g. p. 28). 326

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Robert Z. Aliber’s view on defining the multinational corporation marks another prominent approach within the theory of direct foreign investment (Aliber 1970, 1971). According to Aliber, the multinational corporation is defined by the fact that its financial capital (utilised for the acquisition of plant and production equipment) is moved across different national currency areas. Therefore, the distinction between domestic and foreign investment depends on the existence of different currency areas. In other words, the operational boundaries of the multinational corporation converge with the boundaries of different (national) currency areas. “The ‘foreignness’ of the investment reflects the movement across the boundaries … between currency areas. In the absence of such boundaries, the distinction between foreign investment and domestic investment disappears. Now the boundaries … of currency areas tend to be congruent with national boundaries” (Aliber 1970, p. 21). The significance of the explanatory variable “currency areas” is explained by the microeconomic relevance of different interest rates (caused by different factor endowments of capital) and different costs of capital (caused by different exchange-rate risks) within the international environment. The multinational corporation has, therefore, to consider a multiplicity of specific risks and opportunities when making investment decisions (Aliber 1971, p. 54). According to these arguments, the multinational corporation is characterised by its ability to move financial capital across two or more national or regional “currency areas”. John H. Dunning’s “eclectic” theory of the multinational corporation postulates that the multinational enterprise distinguishes itself from historical international transactions in two respects (Dunning 1971, p. 16). Firstly, it embraces the international transfer of separate, but complementary, factor inputs (viz. equity capital, knowledge, and entrepreneurship, but also goods and services) usually controlled by a single institution. That is, a multinational corporation not only exports singular factors of production to other countries, but also exports package deals, thereby controlling their utilisation. The second unique quality of this corporation form, Dunning argues, is that the factors of production that are transferred between countries are not traded, but rather moved and controlled within the corporation. Thus, the “multinationality” refers to the transfer of factors of production across at least two nations. In this regard, the following remark is central: “As a firm widens its territorial horizons, it changes its character to a certain extent” (Dunning 1971, p. 31). Dunning argues that a firm that graduates from supplying a regional market to supplying a national market, finds itself in competition with new firms and is confronted with expanded market structures. Similarly, a company with plants in more than one part of the country would have more flexibility in the organization of its production activities than a single-plant company. Finally, a company with production units in more than one country is faced with environmental conditions that 327

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differ from both of those forms. That is, John H. Dunning sees the specific quality of the “multinational” in the fact that multinational enterprises directly control the deployment of resources in two or more countries and the distribution of the resulting output generated between these countries. (Dunning 1974, pp. 14–15)

In contrast to the national corporation, the multinational corporation controls its production of goods and services in different nation-states. Thus, facing different national environments – that is, economic, legal, and political differences between nation-states regarding the conditions of production of goods and services – seems to be the specific feature of the multinational corporation, because “[n]one of these problems really face the multi-plant domestic firm. Within a country there is usually unrestricted (though not costless) mobility of factor inputs and goods; there is a single currency and rarely will there be any substantial differences in the rate of profits tax between the regions” (Dunning 1971, p. 32).

Current approaches John Cantwell’s evolutionary approach defines the basic operation of the multinational corporation as technology (Cantwell 1989 and 1995). In contrast to the traditional meaning of technology as an engineering concept that describes the mechanics of production processes and the physical characteristics of the products made, Cantwell’s definition relates “technology” to the entire process of production, i.e. to scientific as well as to organizational aspects of a given corporation (excluding financial and marketing innovations). It is primarily the “tacit” element of technological operations by which a single multinational corporation accomplishes its specific reproduction. The uniqueness of technological experiences, embodied in the existing organizational routines and skills, represents the specific aspect by which the multinational corporation distinguishes and differentiates itself from its environment (e.g. from competing corporations): “This is the part of technology which differentiates firms or MNCs, and which cannot be exchanged between them as it is derived from and tied to the localised and collective learning experience of the teams of a given company through their own development of production” (Cantwell 1995, p. 24). In contrast to the exchangeable public elements of technology, only its tacit and embodied elements constitute the “essence” of corporation-specific competitive advantages (Cantwell 1995, p. 25). Cantwell describes the “multinationality” of a given corporation by referring to the international interdependence of its local technology-based subsidiaries (Cantwell 1995, pp. 37–45). Thus, local technological innovations at one position are affected by the innovations of another position within the multinational corporation. This reproduction of

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technological operations within an “international” network of other technological operations of the corporation allows the corporation to distinguish itself from other (forms of) corporations: “MNCs are distinguished from other firms through their deployment of international networks for innovation” (Cantwell 1995, pp. 50–51). It is the fact that “tacit capability and hence innovation is differentiated across countries”, which constitutes the specific quality of this corporation form (Cantwell 1995, p. 48). The differentiation of the multinational corporation is described as a differentiation of technological capabilities, which is reinforced by increasing feedback between the corporation and its different environmental conditions; as a growing embedment in different national systems of innovations (Cantwell 1992, p. 77 passim). Thus, from Cantwell’s point of view, the “multinationality” of a corporation refers to its ability to transfer technological capabilities across different national systems of innovations. Drawing on the theory of interorganizational networks (Benson 1975; Cook 1977) Sumantra Ghoshal and Christopher A. Bartlett outline a network theory that defines the multinational corporation as a “network” of specific exchange relationships (for example, concerning the transfer of production equipment, marketing skills or management capabilities) between organizational units (including headquarters and different national subsidiaries) that are embedded in a structured context of different national environments: We propose here a framework that conceptualizes the multinational as a network of exchange relationships among different organizational units, including the headquarters and the different national subsidiaries that are embedded in … a structured context. (Ghoshal/Bartlett 1993, p. 79)

Ghoshal and Bartlett define the environmental reference of the multinational corporation as a structural network of different national organization-sets of suppliers, customers, partners, regulatory agencies, competitors, etc. The different members of a national organization-set may themselves be connected through exchange ties. Further, the different national organizationsets in which the corporate subsidiaries are embedded can also be connected through exchange relationships. “Due to such linkages among different local organization-sets, all members of all the organization-sets of the different units of M [= MNC] collectively constitute what we shall call the external network within which the multinational network is embedded” (Ghoshal/Bartlett 1993, p. 87). Each single national subsidiary reproduces the whole corporation not only by internal resource exchange with other subsidiaries, but also by its exchange relationships with an external network of economic, political and legal actors. That is why Ghoshal and Bartlett define “the MNC as an interorganizational system rather than as an organization” (Ghoshal/Bartlett 1993, p. 100). Thereby, according to Ghoshal and 329

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Bartlett the “multinationality” of a corporation refers to its internal as well as external exchange relationships across (and within) different national organization-sets. According to the previous analyses we can summarise two theoretical shortcomings these classical and current definitions on the multinational corporation have in common: 1. All approaches define the “multinationality” of a corporation by relating it to one specific type of operation. Hymer, for example, defines the multinational corporation with reference to direct foreign investments, Aliber refers to financial operations, Dunning to production operations, Cantwell to technological operations, and Ghoshal and Bartlett to operations of specific resource exchange. Obviously, there exists a theoretical confusion about the type of operation to which a definition of the multinational corporation should refer. If we want to decide whether a corporation is a multinational corporation or not, do we have to look at its financial or productive operations, at its technological operations or at another type of operations? How should we deal with corporations producing only in one country, but taking advantage of global financial markets; or transferring technology within one country, but marketing their products in many countries of the world; or recruiting management employees only within the home country, but having locations of research and development worldwide? Because of these unanswered questions we need a more general definition of the multinational corporation, which does not restrict the multinationality of a corporation to one specific type of operations (i.e. to a specific corporate division such as finance, production, marketing, etc.). We need a general definition in the sense that it considers that a modern corporation might operate in a very limited (e.g. local) manner in one respect and at the same time in a more or less unlimited (e.g. global) manner in another. 2. In each approach, multinational corporations are characterised with regard to their ability to operate in two or more national environments. In contrast to national corporations, multinational corporations are conceptualised as operating across different – more or less separated – national environments such as nation-states (Hymer), national currency areas (Aliber), national systems of innovations (Cantwell), or national organization-sets (Bartlett/Ghoshal). But in times of increasing economic, political, legal, scientific, and cultural globalisation of the present world society (see for example: Robertson 1992; Ohmae 1995; Meyer et al. 1997; Beck 1998a, 1998b; Dicken 1999) it seems anachronistic to consider nation-state based units the primary environmental reference of large corporations. We assume that the social environment of present corporations can no longer be described as a plurality of specific national

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environments to which the corporate operations refer, but as a worldwide societal environment whose boundaries have to be defined in functional, and not in geographical terms. “The adjective societal emphasizes that organizational sectors in modern societies are likely to stretch from local to national or even international actors. The boundaries of societal sectors are defined in functional, not geographical terms: sectors are comprised of units that are functionally interrelated even though they may be geographically remote” (Scott/Meyer 1991, pp. 117–118). Therefore, a definition is necessary that enables a description of the multinational corporation that takes into consideration these globalised structures of the present world society. In the following sections we react to these theoretical problems by drawing particularly on three concepts of Luhmann’s sociological systems theory: organization, corporation and world society. Luhmann conceptualises organizations as a specific form of social systems reproducing themselves as networks of decisions. Corporations are regarded as a specific type of organization reproducing itself by relating its decisions to business opportunities. This operational understanding of the corporation should enable us to develop a broader definition of the multinational corporation that is no longer restricted to the operations of a specific corporate division (financial decisions, productive decisions, marketing decisions, etc.). Further, Luhmann conceptualises the present environment of organizations not as a plurality of nation-state based units, separated through territorial boundaries, but as a single world society whose boundaries can no longer be seen as restricted to nation-state based boundaries. This understanding of the environment of organizations has far-reaching consequences for conceptualising the so-called “multinational” corporation.

Luhmann’s concepts of organization, corporation and society Organization and corporation In this section we want to outline four central points of Luhmann’s systemstheoretical concept of organizations (corporations) which are crucial for the argumentation presented in this chapter: (a) decisions as elementary operations of the organization, (b) two levels of organizational reproduction (double closure), (c) corporation as a specific type of organization, and (d) society as the organization’s environment. a) Luhmann conceptualises organizations as social systems, which reproduce themselves on the basis of decisions (Luhmann 1976a; 2000c; 2003). In other words, organizations are “made up of decisions, and capable of 331

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completing the decisions that make them up, through the decisions that make them up” (Luhmann 2003, p. 32). Being a specific form of communication, the elementary operations of organizations – decisions – are not understood as psychological operations of an individual, nor as an internal event within a human consciousness, but as a social phenomenon. Decision communications are not produced by “human beings” but by the organization itself. What is specific about decisions in contrast to other forms of communication is that they are “compact communications” which communicate their own selectivity (Luhmann 2000c, p. 185). In contrast to ordinary communications, which only communicate a specific content that has been selected, a decision communication communicates also – explicitly or implicitly – that there are alternatives that could have been selected instead. Any decision communicates a selection between the alternative preferred and the alternatives rejected. Decisions are decisions, and not only mere communications, because they communicate also the context of possible alternatives from which the alternative selected is chosen. These alternatives, however, are not merely alternatives which just happen not to have been selected, but they are constitutive for the alternatives selected: the meaning of every single decision depends to a large extent on what has not been selected, i.e. the context of the decision (Luhmann 2000c, p. 64). b) The autopoietic reproduction of organizations by communicating decisions implies a double closure of organized systems (Baecker 1999c, pp. 126–168; Luhmann 2000c, pp. 61–74): the first closure is realised by the fact that decisions are produced by the network of other decisions. Organizations reproduce themselves exclusively on the basis of decisions. No external operations can be part of the network of decisions nor can any decisions break out of this network. On the basis of its decisions, the organization has no contact to its environment. Decisions are only connected to other decisions and nothing beyond the decision network. Thus, in actual fact, the reproduction of decisions is the reproduction of the distinction decision/non-decision, i.e. of the distinction organization/environment. According to this conceptualisation every single decision constitutes and reproduces the “boundary” of the organization. The boundary reproduced by every single decision implies an operative closure in the sense that the organization can only be reproduced by operations constituted as decision/non-decision distinctions – other distinctions, for example, thought/ non-thought, cannot. On this operative level of merely reproducing decisions, the organization is “blind” with regard to the complete distinction with both its sides of decisions (system) and non-decisions (environment). On this level, organizations “see” only one side of the distinction that constitutes their operative boundary; that is to say, organizational decisions and not environmental non-decisions. The only thing that is important here is the continuous reproduction of decisions out of the network of decisions 332

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– regardless of which decisions are selected and which decisions are excluded; regardless of the meaning of every single decision depending on environmental criteria. But as long as it is communicated that any decision (i.e. any selection between alternatives) has been made, the autopoietic reproduction of the organization can be continued. The second closure of the organization is realised according to how decisions are made and are related to the organization’s environment. The “blindness” of decisions on the operative level is compensated through the re-entry of the distinction decision/non-decision, i.e. the distinction organization/environment, into the decision process of the organization. This second level of autopoietic reproduction of organizations is called selfobservation (see Luhmann 1986b for this term in general). Only on the level of self-observation regarding its basic operations is an organization able to observe the complete unit of each single decision constituted by the distinction decision/non-decision, i.e. the distinction organization/environment. Only on this second level of autopoietic reproduction can an organization see both sides of the distinction between decisions and non-decisions, i.e. the organization itself and its environment. The re-entry of this distinction into the decision process of the organization implies a self-referential aspect and an environment-referential aspect. While the self-referential aspect refers to decisions made out of decisions, the environment-referential aspect relates this process of decision-making to the environment of the organization, which determines the criteria on which the self-referential reproduction of decisions depends (e.g. market size, consumer preferences, competition structure, political and legal regulations, scientific knowledge, cultural values, etc.). By observing its own decisions through the distinction selfreference/environment-reference – which is not identical with the distinction decision/non-decision itself – the organization system is able to inform itself about its current state (the alternatives selected), its possible states (alternatives rejected), and necessary changes due to environmental factors. Which self-observations of its decisions are made depends not on the environment, but only on the internal conditions, i.e. structures, of the organization itself. Thus, neither on the level of its operations (first closure) nor on the level of its self-observation (second closure) does the organization get into direct contact with its environment. c) The concept of double closure enables Luhmann to distinguish different types of organization. On the operative level (first closure) all organizations are equal insofar as they reproduce decisions through decisions – regardless of which decisions. Organizations represent a specific form of social system because they reproduce themselves by decision communications – in contrast to ordinary communications. On the level of selfobservation (second closure), however, the general form of organization can be differentiated into different types: organizations can be different 333

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regarding which decisions are communicated and how these decisions are related to the environment-referential aspect of an organization; in other words, organizations can be different regarding the way in which the distinction organization/environment (reproduced by every single decision) is observed within the organization. For example, social services observe this distinction with regard to helping defaulters; schools observe it with regard to imparting knowledge to students; and churches with regard to proselytising irreligious people. While the self-referential aspect of any type of organization refers to decisions made out of decisions, the environment-referential aspect can imply very different criteria on which the self-referential reproduction of decisions depends (e.g. “welfare”, “teaching”, “proselytism”). Now we can address the question of what is – in Luhmann’s theoretical perspective – specific to the type of organization which is called “corporation”. The organizational type of the corporation comes into existence if, and only if, an organization observes the unit of its operative distinction decision/non-decision, i.e. organization/environment, with regard to exploiting business chances, i.e. profit maximisation (Baecker 1999c, pp. 237–242; see also Sombart 1919, pp. 101–103; Sombart 1928, p. 321; Gutenberg 1958, pp. 43–44). The environment-referential aspect of the corporation refers to those, and only those business opportunities that determine the risks and chances of profit maximisation (e.g. market size, market growth, competition structure, etc.) on which the self-referential reproduction of decisions depends. In other words political, economic, legal, scientific, ecological, and other societal aspects become relevant to the corporation’s decision-process only insofar as they imply chances or risks for profit maximisation. Thus, the corporation can be characterised as a specific type of organization as it not only reproduces decisions (at the operative level) but also relates these decisions to business opportunities in order to realise and maximise individual profit through accounting for cost and benefits (at the level of self-observation). d) A last point concerns the concept of the organization’s environment: Luhmann’s organization theory is a societal theory of organizations, because it conceptualises the organization’s environment as society. Society is the system that encompasses all communications. All communications that are produced are part of society and as such reproduce it. Hence there are no communications outside society; the borders of society are the borders of communication (Luhmann 1995f, p. 408). Here, the important point is Luhmann’s assumption that the opportunities for the autopoietic reproduction of organizations (e.g. the opportunities for maximising profit by business decisions) depend on the communication borders of society. In the course of societal evolution, society’s communication borders have expanded from local to territorial, national, and worldwide communication borders. Each of these communication borders has specific implications for 334

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the opportunities for the autopoietic reproduction of organizations: those of the medieval township (e.g. restrictive town regulations on organizational business behaviour – town-protectionism) are different from those of the early modern territorial state (e.g. uniform regulations on production and trade within a territory – mercantilism). Equally, those of the nation-state based society of the 19th century (e.g. nationalised rules on organizing business – liberalism, or rather, protectionism) are different from those of the present world society (e.g. transnational economic rules – neo-liberalism, or rather, neo-protectionism). According to these considerations, we can say that Luhmann’s organization theory examines the question of how an organization represents its environment, which is constituted by the communication borders of the surrounding society (all non-decisions) within the organization, and how the internally represented societal borders are related to the process of making decisions out of decisions. In contrast to economic, organizational, and managerial models of organizations, Luhmann’s theory does not focus primarily on specific relationships between a given organization and other organizations, between an organization and markets, between an organization and a nation-state, or between an organization and the economic system. Instead, Luhmann suggests that we analyse the very different relationships between an organization and society, i.e. the – historically changing – opportunities of organizations for reproducing themselves within society, against society (Luhmann 2000c, pp. 380–416; see also Chapter 9 in this volume).

From pre-modern societies to the present world society Luhmann distinguishes between different stages in the development of society (see Luhmann 1977a; 1982f., and 1997a, pp. 609–776): archaic societies were differentiated into equal subsystems, e.g. different tribes, clans or families. As the primary form of differentiation, it is the tribe, the clan or the family that constitutes a society and not vice versa: a society is constituted by a plurality of equal social units. Medieval societies were differentiated into unequal subsystems (e.g. different social strata or classes) on a primary level, and into equal relationships between town and land on a secondary level. In contrast to both these forms of societal differentiation, modern society is differentiated into different subsystems specialised in serving specific societal functions; for example, producing consensus regarding different interest groups (political system), distributing scarce goods (economic system), providing justice (legal system), etc. All of these functional systems of modern society are characterised as communication systems that reproduce not only themselves but also the all-encompassing system of society by specific communications (political decisions, payments, legal ruling, etc.). Thus, every single differentiation of the functional systems differentiates, i.e. expands, the communication borders of society. The primary form of 335

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functional differentiation of the modern society can be combined with other forms of differentiation on the secondary level. The early modern society of the 16th century is characterised by the combination of functional differentiation as the primary form of differentiation on the one hand, and segmentation into territorial states as the secondary form of differentiation on the other. The modern society of the 17th and 18th centuries realises the segmentation into mercantile states as the secondary form of differentiation; and the functional differentiation of the modern society of the 19th century is combined with the segmentation into different nation-states. Each of these combinations has restricted the expansion of modern society’s communication borders in one or another way. In contrast to these historical forms of (modern) society, Luhmann describes the present society as a society whose communication borders are no longer limited by any territorial borders. Luhmann argues that the present society has to be conceptualised as a world society in the double sense that it constitutes (a) one single, and only one single, structural network of communications covering the globe and (b) one single, and only one single, phenomenological world including all communication possibilities (Luhmann 1975a; 1990m; 1997a, pp. 145–171; Stichweh 2000b): Under modern conditions … and as a consequence of functional differentiation, only one societal system can exist. Its communicative network spreads over the globe. It includes all human (i.e., meaningful) communication. Modern [present, DH] society is … a world society in a double sense. It provides one world for one system; and integrates all world horizons as horizons of one communicative system. The phenomenological and the structural meanings converge. A plurality of possible worlds has become inconceivable. The worldwide communicative system constitutes one world that includes all possibilities. (Luhmann 1990m, p. 178. See also Stichweh 1998, p. 215 and 1999b, p. 292.)

(a) Concerning the first aspect, present society is characterised by the fact that there is only one single structural network of communications constituting only one single society. All previous societies were surrounded by other societies. All previous societies had been built up by geographically limited networks of communications, which were surrounded by other communication networks of other societies. In other words, there was a plurality of (local, regional or even national) societal systems that had only marginal (or even no) communicative contact to each other. In contrast, the globalised communicative network of present society is no longer limited to any territorial boundaries. Of course there are still territorial boundaries, but they no longer define the communication borders of the societal system (Luhmann 1982e, pp. 240–242). As a consequence of unlimited functional differentiation, each communication relates to other communications on the 336

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basis of a function-specific, symbolically generalised communication medium (e.g. money, power, law, etc.), which is indifferent with regard to territorial boundaries. Each of these generalised symbols of communication media (Giddens calls them “symbolic tokens”) disembeds communications from local contexts and relates them to the global context of world society; economic communications relate to other economic communications, political communications relate to other political communications, legal communications relate to other legal communications, etc., wherever they take place. (b) Concerning the second aspect, Luhmann characterises the present society as a single phenomenological world of communicative possibilities. Understanding the world in a “phenomenological” sense (Husserl 1962; see Farber 1967 for an introduction to Husserl’s phenomenological theory) does not mean that the world is just another word for the empirical globe on which social life takes place. It does not refer to some sort of physical reality, but to an emergent, namely social, reality that is constituted by communications, and only by communications. What is specific to the world of the present society is the point that there is – as a second consequence of unlimited functional differentiation – only one single social, i.e. meaningful, world, which includes all communicative possibilities, that is to say, all possibilities of drawing and observing social distinctions. Each symbolically generalised communication medium produces a universal world of endless communicative possibilities, which is no longer restricted by religious or moral considerations: the individual world-perspectives of economic observers are integrated by a general social understanding of “money” that opens up very different possibilities of making more money. Similarly, the individual world-perspectives of political observers are integrated by a general social understanding of “power” that spans very different possibilities of accumulating political power; and the individual world-perspectives of legal observers are integrated by a general social understanding of “law” that spans very different possibilities of ruling social conflicts. Every single world-societal communication not only produces and reproduces a single communicative system, but also a single context of social meaning, which includes all possibilities of dealing with economic, political, legal or other function-specific problems respectively (i.e. there are no other possibilities of social understanding outside such a communicative context constituted by a function-specific communication medium). Following this line of argument, Luhmann uses the term “world horizon” in order to highlight the point that the social context of each world-societal communication can no longer be thought as the unity of all things (aggregatio corporum) or the unity of all observable and unobservable ideas (universitas rerum). The social world of the present society, so Luhmann, can only be represented as an endless horizon of other communicative 337

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possibilities that is reproduced by every single communication on the structural level. The world itself as the unity of all actual and potential meaning of communication cannot be represented by any single communication. That is to say, each attempt to represent the unity of all actual and potential meaningful communication just produces other possibilities of constructing meaningful communication (e.g. of using and earning money, of maintaining and accumulating political power; of ruling social conflicts, etc.). In other words: the world itself has became unobservable for each social observer because there is no longer any meaningful environment from which this meaningful world could be distinguished. The world appears rather as a meaningful horizon within which possibilities of constructing meaningful communication refer to other possibilities of constructing meaningful communication (and so on), and beyond which are no other possibilities of constructing meaningful communication. While this general form of world society started to emerge around the 18th century, an entirely globalised world society did not come into existence before the second half of the 20th century (see Willke 2003 for a systemstheoretical analysis based on Luhmann’s concept of world society). The present world society is no longer characterised by the combination of functional differentiation into various societal subsystems, and segmentation into different territorial units. Rather, its functional differentiation is combined with its differentiation into globalised structures of expectation within each of these societal subsystems: for example, global economic relationships, political agreements, legal rules, etc. These are caused by the transnational activities of a historically new level of global organizations such as WTO, GATT, OECD, World Bank, or INGOs (see Luhmann 1997a, pp. 165–166). Only because of the emergence of such globalised structures of expectation, which are described in more detail in the next section, has one single structural network of communications as well as one single phenomenological world become possible. Only these organized structures of expectation have ensured that communications can be connected continuously to other communications worldwide, on the basis of a similar social understanding of economic, political, or legal behaviour. Now, we want to explore some theoretical consequences for (re-)defining corporations that reproduce themselves within such a globalised world society.

From the medieval business organization to the present world corporation In this section we will outline a sociological concept of the world corporation (as a particular form of corporation) that is based on Luhmann’s systems-theoretical insights. Let us start with Luhmann’s assumption that the 338

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form of a corporation depends on the communication borders of its surrounding society and the way in which these borders are represented within the corporation.

Historical forms of business organization Medieval business organizations of the 14th and 15th centuries (e.g. craft organizations, trade organizations, family organizations) came into existence by distinguishing themselves from the communication borders of a local township within these communication borders; that is to say, by observing the distinction organization/township. They reproduced themselves by relating their decisions (self-referential aspect) to opportunities for covering the essential requirements (e.g. food, housing, clothing) of their members (environmental aspect). These opportunities for covering essential requirements were limited strictly through several regulations of the medieval town: for example, political and legal rules concerning the import and export of raw material and goods, as well as the production of goods; market rules on buying and selling goods; theological and moral rules on social and economic behaviour, etc. (Sombart 1919, pp. 70–91). Early modern corporations of the 16th century came into existence by distinguishing themselves from the communication borders of a territorial state within these communication borders. They no longer reproduced themselves by making decisions on covering the essential requirements of their members but by making decisions on maximising profit (Sombart 1919, pp. 101–172; Gutenberg 1958, pp. 43–44). In other words, their reproduction was characterised by relating self-referential decisions to environmental business opportunities. Those business opportunities were enabled through several societal developments that were connected to the combination of the functional differentiation of society into autonomous subsystems as the primary form of differentiation, and the segmentation into territorial states as the secondary form of differentiation (e.g. the replacement of local economies by territorial economies, which were connected to each other through “international” trade relations based on the symbolically generalised communication medium of “money”; the replacement of local political systems by political systems which were specialised in serving territorial consensus between different social groups by implementing unified social rules on the basis of symbolically generalised “power”; the substitution of local legal systems with legal systems which were specialised in serving territorial peace by implementing unified legal norms on the basis of symbolically generalised “law”, etc.). On the other hand, corporations were faced with several limitations regarding the expansion of their business environments beyond territorial borders (e.g. import and export rules made by their home states).

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Trade organizations of the 17th and 18th centuries (e.g. English or Dutch East-Indian companies) came into existence by distinguishing themselves from the communication borders of a mercantile society within these communication borders. Here, the self-referential aspect of the distinction organization/mercantile society re-entering the organization by every single decision is related to an environmental aspect that is imagined as a society in which different (European) states struggle for political and economic resources. What is specific to these trade organizations – which were used by their home states as one central instrument of mercantile foreign policy – is the fact that they reproduced decisions on maximising profit as well as on accumulating (political) power. In contrast to the early modern corporations of the 16th century, their business environments were no longer restricted to the territorial borders of their home state. On the other hand, however, their business opportunities were limited to certain trade routes, trade partners, branches of trade, commodities, etc., besides which other disregarded and unexploited business opportunities had existed (Chaudhuri 1978; Gaastra/ Bruijn 1993). Large corporations of the late 19th century (e.g. Singer, Standard Oil Company, Bell Telephone Company, Edison Electric Light Company, Bayer, BASF, Hoechst) came into existence by distinguishing themselves from the communication borders of a nation-state based society within these communication borders. They reproduced themselves by relating their selfreferential decisions to expanded (environmental) business opportunities that were enabled through various processes of nationalisation, which at the time were taking place in most states (nation-state building) of modern society: e.g. the abolishment of social inequalities, which was connected with hierarchical societal strata through the performance principle; the transformation of feudal property into private property; the abolishment of all noneconomic barriers of market entry, such as privileges and monopolies guaranteed by the state; unified rules of business procedures, nationwide business jurisdiction; unified structures of communication and traffic; general freedom of production and trade; legal acceptance of foreign corporations, etc. The modern society was represented within those corporations as a collection of – more or less – similar national business environments allowing them to capture new opportunities for maximising profit on the basis of mass production and mass distribution (Wilkins 1970; Teichova et al. 1986; Wilkins 1991). But, for several reasons we cannot discuss here, firstly, the business opportunities of each – European as well as American – corporation were limited to a small number of nation-states, and secondly, those “multinational” business opportunities were not observed as interrelated business opportunities constituting a single, worldwide business environment.

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The present world corporation In contrast to the different forms of corporation described above, during the 20th century a specific form of corporation came into existence by distinguishing itself from the communication borders of a globalised world society within these communication borders. In other words, since the middle of the last century we have been able to observe a form of corporation that comes into existence by the re-entry of the distinction organization/world society into its decision process. What is specific to this form of corporation is the fact that the self-referential aspect of the distinction re-entering the organization by every single business decision is related to an environmental aspect that is represented as, and only as, an unlimited “world horizon” of business opportunities. In the last section we pointed out that Luhmann himself introduced the concept of the “world horizon” in order to characterise the present society. Here, we want to use this concept in order to characterise a particular form of corporation. We want to call this form “world” corporation. We suggest that if, and only if, a corporation relates (i.e. observes) its decisions (with regard) to an endless world horizon of business opportunities, should we speak of a world corporation. Any historical form of corporation has related its decisions to a business environment, which has had itself an environment of other business opportunities that had not been taken into account by the decision-process of the corporation: the local business environment of medieval business organizations was surrounded by other local business environments; the territorial business environment of early modern corporations was surrounded by other territorial business environments; the European-Asian business environment of East-Indian trade organizations was surrounded by other business opportunities referring, for example, to transatlantic or African trade; and the few national business environments of the large corporations of the late 19th century were surrounded by other local and national business opportunities somewhere on the globe. In contrast to these historical forms of corporation, present world corporations relate their decisions to a business environment that includes all business opportunities existing on the entire globe (see Hilliard 2005 for a more detailed analysis of the evolution of present world corporations). Here, the term “world horizon” refers to the fact that the decisions of the corporation are related to a business environment which itself has no other business environment(s). In other words, world corporations can no longer rely on protected markets, national contexts, or territorially bounded political and legal power, nor on the implicitness of a national consumer culture. Rather, these corporations have to take into account several world societal developments such as the globalised structures of (a) a world economic system (e.g. more and more globalised commercial relations because of which it has become meaningless to speak of “national” economies), (b) a world economic policy (e.g. 341

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worldwide political agreements on market and trade liberalisation, supported by different global organizations such as WTO, GATT, OECD, or the World Bank), (c) a world economic law (e.g. worldwide harmonisations of national laws referring to the import and export of goods and services), or (d) a worldwide consumer culture (e.g. globalised preference structures). Globalised structures of this kind open up an endless horizon of business opportunities, which cannot be reduced to specific national or regional boundaries: worldwide possibilities of buying and selling goods and services, worldwide possibilities of sourcing and distributing, worldwide possibilities of financing and producing, worldwide possibilities of recruiting human and technical resources, etc. These world-societal developments have created a business environment for corporations in which a corporation’s competitive position in one country significantly depends on its position in other countries or vice versa (see also Porter 1986). Therefore, the corporation’s world horizon of business opportunities refers not merely to an addition of more or less isolated (national or regional) business opportunities but to a single environment of interrelated business opportunities in which the rivals compete against each other on a worldwide basis. Consequently, a world corporation must – in some way – make its decisions on a worldwide basis in order to exploit the interrelations among these various business opportunities. Following this line of theoretical argumentation we can now define more precisely what makes up the new quality of the corporation form that is represented by present world corporations: rather than being constituted primarily by an increase of possibilities of maximising profit, it refers to the nature of profit maximisation itself. With regard to world corporations, the nature of profit maximisation refers to a specific range of economies of scale and scope that is are realised by decisions that take into account the differences and similarities between all the different business environments existing on the globe. In the next section we will illustrate these general considerations by applying them to three corporate divisions: finance, production and marketing.

Finance, production and marketing of the world corporation Concerning the division of finance, a world corporation might come into existence if decisions (on raising and investing capital) are made in view of a single world horizon of financial opportunities; in other words, if decisions are not primarily related to (a plurality of separated) national financial environments, but orientated to the worldwide interrelations between different local financial environments as well as local and global financial markets. This type of interrelations concerns interest rates, inflation rates and tax burdens, currency risks, investment conditions such as investment incentives, protection of investment, investment-income benefits, etc. (Lessard 342

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1986). Here, the specific quality of profit maximisation can arise, firstly, from arbitrage of cross-border rate differences between different financial environments via internal financial transactions (e.g. advancing of funds to a subsidiary through an equity or a loan, a transfer of goods or intangibles at less than an arm’s-length price, or a guarantee that enables it to borrow locally); secondly, it can arise from arbitrage across different tax regimes through shifting income into jurisdictions with relatively low rates or relatively favourable definitions of income (e.g. via the pricing of interaffiliate financial transactions or transfer prices of real inputs and outputs); thirdly, it can arise from exploitation of exchange rate-volatility by shifting this risk to hedging transactions such as currency futures, swaps, foreign-currency borrowing, or to suppliers and customers by the choice of invoicing currency. Concerning the division of production, a world corporation might come into existence if decisions are related to a single world horizon of linked production opportunities. The specific quality of a world corporation’s profit maximisation can arise, firstly, from relating the decisions on locating its diverse production activities (number, size, and location of plants; choice of technology and equipment; assigning the production of materials, components, and products to specific manufacturing facilities; vertical span of the manufacturing process) to a worldwide production environment, which includes all possibilities for production (Flaherty 1986). These decisions define the set of plants and their manufacturing processes, as well as the physical flows of material and products among them. Besides decisions on centralising production within one local factory, which can manufacture sufficient volume to supply the world market with a single product design at low cost, because of huge economies of scale, specific profit can be gained by decisions on decentralising manufacturing (of similar or dissimilar products) across different production environments. For example: first, by exploiting (a) differences in location-specific risks and chances across worldwide location options, (b) differences in operating costs across worldwide technology options (e.g. taking advantage of short-run price movements), (c) differences in capital costs and exchange rates across worldwide financial options, (d) differences in product stages across worldwide market options (e.g. taking advantage of the introduction of new products by building on an existing base, or of fine-tuning subsequent moves in response to changing market conditions through downstream investment). Second, (a) by taking advantages based on intangible (technology) assets that can be transferred easily within a corporation, but only with difficulty outside a corporation, or (b) by taking advantage of using one’s own technology in different foreign factories (e.g. gaining a specific return on a corporation’s technology that would not be possible through an arm’s-length sale of this technology). 343

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In addition to that, the specific quality of a world corporation’s profit maximisation can arise from relating the decisions on the coordination of its dispersed production activities (i.e. the sharing and use of information about manufacturing and technology support by different facilities) to a worldwide environment of possibilities for production. For example: (a) by decisions on procurement, i.e. on obtaining material, subassemblies, components, and equipment needed for manufacturing from outside suppliers (e.g. profit by lowering cost and improving quality through sending procurement specialists – who help their counterparts identify and negotiate with local suppliers – from one local plant to another); (b) by decisions on aggregate production planning, i.e. on the specification of what volume of which products will be produced on what date in a plant for a defined period (e.g. profit by (i) equalising production requirements in one local environment with free capacity elsewhere, (ii) by shifting orders among different business environments to hedge exchange rate fluctuations, or (iii) by transferring significant information about products and their material content, as well as new parts and products across different business environments through close coordination between the monthly plans of the various plants); (c) by decisions on manufacturing engineering, i.e. on all engineering activities related to different local business environments (e.g. profit by saving manufacture costs by transferring technological improvements developed at one local plant to other similar local plants, transferring manufacture responsibility and capability for one product from one local plant to another, etc.). Concerning the division of marketing, a world corporation might come into existence if decisions are related to a single world horizon of linked marketing opportunities (Takeuchi/Porter 1986; Dahringer/Mühlbacher 1991; Jeannet/Hennessey 1995). Here, the specific quality of a world corporation’s profit maximisation can arise from relating the decisions on locating its various marketing activities to a worldwide business environment which include all possibilities for marketing. For example, centralised production of advertisements and sales promotion materials can produce economies of scale and faster accumulation of learning in both the production and development of goods; a centralised sales force stationed in the home market or in regional headquarters can provide support to local subsidiaries by sending them highly skilled sales specialists; centralised service support can generate economies of scale in complex repair functions, or analyse field data from around the world and establish appropriate servicing procedures; centralised advertising can produce economies of scale by selecting one advertising agency to handle its worldwide advertising opportunities (economising in needed coordination) or by using media with relatively high global spillovers. Further, new ways of maximising profit can be seen in decisions on decentralising the corporation’s marketing activities to each national or regional business environment in which a corporation 344

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competes on a worldwide basis, i.e. by being responsive to national or regional business opportunities in performing its diverse activities (pricing, distribution, advertising, sales promotion) market by market. The specific quality of a world corporation’s profit maximisation also can arise from decisions on coordination are related to a single world horizon of linked marketing opportunities: firstly, from on decisions on performing marketing activities using similar methods worldwide (reinforcement of the corporation’s reputation or image when either buyers or information are globally mobile; reinforcement of the corporation’s differentiation when customers receive the same treatment by the sales service anywhere; economies in training and in purchasing the marketing inputs). Secondly, from decisions on transferring marketing know-how and skills from one business environment to another (e.g. a shared market-entry approach can reduce costs because the most successful practice can be applied to a new business environment; shared marketing information regarding shifts in buyer-purchasing patterns, life-style changes, new merchandising ideas, early market signals by competitors etc., can imply specific opportunities for maximising profit through knowledge-based competitive advantages). Thirdly, from decisions on sequencing new products or marketing practices across different business environments (e.g. cost reduction by employing already developed products or programmes). Fourthly, from decisions on the integration of the activities of various marketing groups across national business environments (e.g. economies in the utilisation of the sales service because of avoiding duplication in selling efforts; advantages of differentiation through offering a single contact for global buyers or an exclusive aftersale service).

Conclusion In this chapter we have argued for a new conceptualisation of the multinational corporation. We started off with a discussion on the existing approaches, pointing out two central shortcomings: firstly, all approaches define the “multinationality” of a corporation by relating it to just one specific type of operation. Each writer, however, sees a different type of operation as crucial: direct foreign investments (Hymer), financial operations (Aliber), production operations (Dunning), technological operations (Cantwell), or operations of specific resource exchange (Ghoshal/Bartlett). Secondly, all approaches characterise the multinational corporation with regard to the crossing of two or more nation-state based environments: the crossing of national currency areas (Aliber), national systems of innovations (Cantwell), or national organization-sets (Bartlett/Ghoshal). This reference to a collection of nation-state based environments, however, seems to blind

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out the “real” quality of such corporations: in times of increasing globalisation of the present world society and its various function systems, the main attribute of multinational corporations can no longer be seen in the ability of crossing different national boundaries and facing them as a plurality of more or less separate national environments, but in the ability of accounting for cost and benefits regarding a single business environment of business opportunities linked worldwide. On the basis of this criticism on economic and organizational approaches, we introduced the sociological concept of the “world corporation” referring to various insights of Luhmann’s systems theory. In contrast to historical forms of corporations, we defined present corporations as world corporations, if – and only if – they relate their decisions to a single business environment of business opportunities linked worldwide and enabled through differentiation into globalised structures of expectation; that is to say, if they maximise profit on the basis of a specific range of economies of scale and scope, which are realised by decisions that take into account the differences and similarities between all the different business environments existing within a globalised world society. We suggest that this systems-theoretical definition of the world corporation represents a fruitful strategy for facing the two theoretical problems mentioned above: firstly, it does not restrict the “multinationality” of a corporation to a specific type of operations such as financial operations, productive operations, marketing operations, etc. If we take (business) decisions as the basic operation of corporations, it depends on the given empirical case, in which respect a corporation reproduces itself as a world corporation. Thus, a corporation might be described as a world corporation, if it realises and maximises profit by relating its financial decisions, its productive decisions, or its marketing decisions (and so on) to a worldwide business environment. In other words, our definition enables one to think of the world corporation as a world corporation with relation to very different types of operations, or rather corporate divisions, by doing away with any bias towards any specific type of operation or corporate division. Secondly, this systems-theoretical definition takes into account that the social environment of present corporations can no longer be regarded as a plurality of separate nation-state based units to which the corporation’s operations refer, but only as a single world-societal environment, which is differentiated into globalised function systems. By assuming a single world horizon of interconnected business opportunities, the specific quality of corporations can be re-conceptualised as the ability to exploit a specific range of economies of scale and scope, through decisions that take into account the various differences and similarities between all the different business environments existing within the present world society. In addition to these two advantages of a systems-theoretical definition of the world corporation we see several other advantages, which have to be 346

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explored by further research in detail: first, conceptualising the primary environmental reference of large corporations as a single world society that is differentiated into various globalised function systems enables one to analyse not only corporation/market-relations or corporation/economyrelations, but very different societal preconditions for the realisation and reproduction of the corporation form we called world corporation. Historical studies have to explore in detail (a) which economic, political, legal, scientific, and cultural developments had enabled a single world horizon of interconnected business opportunities for corporations; (b) which societal structures (for example, caused by a specific form of societal differentiation or a low level of functional differentiation) had made it difficult for corporations to maximise profit on a worldwide basis; (c) which societal structures of expectation seem to be necessary to stabilise the reproduction of world corporations. Second, conceptualising the basic operations of world corporations as decisions that are related to a worldwide business environment enables one to ask (a) why corporations take into account a world horizon of interconnected business opportunities within one or more corporate divisions, and not within other divisions; (b) which operative preconditions within the non-globalised divisions must be given so that a corporation can act within one or more corporate divisions as a world corporation; (c) which operative aspects within the globalised division(s) seem to promote the globalisation of decision-making within the non-globalised divisions. Third, conceptualising the new quality of corporate being as the ability of maximising profit on a worldwide basis through decisions that take into account the various differences and similarities between all the different business environments existing within the present world society enables one (a) to avoid any reduction of the world corporation’s new quality to a simple growth of isolated opportunities of maximising profit; (b) to explore the complex range of known and unknown economies of scale and scope, i.e. to become aware of very different motives for maximising profit on a worldwide basis; (c) to study the specific techniques of accounting for cost and benefits, which are necessary to maximise profit on a worldwide basis.

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PART VI Implications for Management and Consulting

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Chapter 16

Communication Barriers in Management Consulting Niklas Luhmann

I Whenever management consulting is under discussion, the layman (a category that includes practically all scholars) first of all thinks of applied science. It is debatable whether microeconomics or financial science, social psychology or perhaps even sociology ought to be the paradigmatic science on which consulting can be based. The answer may well depend on the problems posed by each individual case; for complex problems that touch on several disciplines at once, an “interdisciplinary” orientation is considered advisable. In all of the disciplines, the basis of consulting consists of a specific competence derived from empirically established generalizations. Known statistical probabilities are applied to each individual case, even though they are meaningless in individual cases. One makes such mistakes discreetly, only to compensate for them by means of detailed analyses of the object in question. In certain rare cases, these analyses are subsequently evaluated for the purpose of controlling and correcting the scholarly hypothesis. In this model of the relationship between consultants and companies, there are no deep-seated problems of communication. For whatever reasons, the consultants may be inclined to present their knowledge as certain and their proposals as based on careful work. In so doing, they surpass reality in a way that cannot itself be included in their communication. As is generally the case with application-oriented research, management consultants too are the perpetrators, as well as the victims of a certain “rhetoric of application”.1 At precisely the same time that they are active for economic or other reasons, they fall victim to the difficulty of addressing the specific communicative relationship in which they participate within this relationship (it is well known that the Palo Alto School has identified this problem as the cause of paradoxical communication). However, once one has begun to trust the concept of applied science, this difficulty does not constitute a fundamental problem; at most, it causes disturbances and derailments of 1

See Mulkay (1987).

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communication. If one trusts in the concept of applied science, one also trusts in the communication that comes with it. For what would science be, if it could not be communicated? For a long time, the resulting practical difficulties were written off as being due to “complexity”. Ever since the publication of a famous essay by Warren Weaver – an essay from which, in the meantime, an entire literature has sprung2 – it has been known that for large and complex systems, among which business corporations must doubtless be counted, there are no adequate scientific methods and findings; for science has methods only for systems that are small enough to be described with a few variables, or for large, but homogenous, quantities that can be processed statistically. However, in view of the tight corner in which research found itself, the only advice to be given was to continue trying anyway and to gradually expand scientific competence concerning this problem of complexity. In this process, one guideline for the reduction of complexity could be to focus on the particularities of the individual cases and avoid generalizations. To this purpose, management-consulting companies cultivate the “experiences” that inevitably accumulate with a large number of individual projects. Now, the problem is how these experiences can be recorded, publicized, and discussed within the consulting group – in seclusion, as it were, and apart from dayto-day business. However, this merely returns us to the problem of induction and the problem of illegitimate generalizations; in addition, the stories and the very convincing “practical examples” acquire a questionable predominance. Some communication problems can be settled, if one assumes that the consultants possess scientific competence and have to include communication concerning their competence in their communication with the company. Certain expressive means can accomplish this – for instance, a white laboratory coat and a knowing countenance. However, these means will be sufficient only if the advice given can be implemented strictly on technical grounds. “Strictly technical” means, in this context, “without knowledge of the theoretical connections”. In the field of application under discussion, such a reduction to the strictly technical is not useful, precisely because of its complexity. In such cases, theories must be “understood” in the process of their application. Application tests whether the implied marginal conditions actually hold true and continue to hold true, or whether they have to be modified and even abandoned when new information affects their presuppositions. If the consultants want to avoid being incorporated permanently into the action network of the company, thereby being recruited and “employed”,3 they must transfer a sufficient amount of information so that 2 See Weaver (1948). Examples of more recent work and conference volumes are: Lanzara and Pardi (1980); Université des Nations-Unies (1986); Bocchi and Ceruti (1985). 3 The currently practiced compromise is temporally limited employment for consultants.

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the company can act not just according to their suggestions but according to the theory that lies behind them. However, the more embedded a theory is in further theoretical connections – that is to say, the more its scientific quality increases – the less such a procedure can be implemented.4 Like the economic system itself, the consultants who attempt to establish a scientific basis for their proposals are forced to simplify and popularize their external communication – that is, to change the language. Furthermore, it is noticeable that in the field of research dedicated to the theory of the firm, fashions change constantly. The meaningless names of these fashions (such as “organizational development” or “strategic planning,” etc.), at the same time, do suggest a completely new orientation of research and consulting and thus can serve as self-congratulatory labels in the scientific, as well as the economic, competition between consulting firms.5 Undoubtedly, it is not a matter of giving up the model of applied science altogether because of these weaknesses, and of adopting a counter-model while keeping the flag flying. There is no counter-model available for such a switch. We only want to pose the question of whether it is indeed correct that everything a consultant knows or finds out can actually be communicated in the same way as science can be communicated. In addition, we would like to examine whether there might be conceptions that would encourage precisely the cultivation of such non-communicable knowledge.

II The model of applied science suggests that we should aim for the production of the highest possible degree of agreement; it also suggests that communication is the means to achieve this goal. It acknowledges that communication may be difficult, but insists that it can be improved from the point of 4

Nowadays, however, the theory of science assumes that the limitation to “adjacent” theoretical connections is precisely typical and that it would be impossible in science to bring about a change in theory without this limitation. Cf. Polanyi (1962), p. 59, and (1983), pp. 72 f. Also, Philippe van Parijs (1981), p. 50. This merely means that science itself has a problem with its own complexity. 5 Even systems theory is often perceived in this sense, as a “scientific program” or a program for applying science. Of course, nothing is to be said against that. However, to conclude, therefore, that systems are nothing really given but merely analytical constructions or models, would be a serious, undue reduction. This is the modus operandi of a theory of science whose method derives from a naïve conception of the theory of science (see e.g. Lenk and Ropohl 1978, esp. Ropohl’s introductory contribution; concerning the application of the theory to microeconomic research; see Lenk, Maring, and Fulda 1985). The naïveté that no theory of science should allow itself consists of a lack of reflection: namely, the reflection that the system concept is also applicable to the person who uses it for his analyses, and therefore cannot very well be understood as a construct without empirical reference. In other words, one ought not to confuse the relativity of all statements in regard to a particular observer (system references), and the specific case of the system of science functioning itself as the observer.

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view of its own problems. By contrast, a systems-theoretical analysis may urge an entirely different thought upon us: namely, that consulting firms are interested in the preservation of their own practices.6 They value system boundaries, which they reproduce in their own operations. They must prevent their best employees from being recruited by their client firms. They must be able to end consulting relationships that have lasted too long, even when their clients do not require it or when it explicitly goes against a client’s wishes. Often, they will view the multiplicity of tasks, the similarities and differences of problem areas in client firms, and the methodology of their own modus operandi as learning conditions that allow them, in the long term, to improve not only their market position but also the interest and motivation of their employees. While the demand for management consulting is often created through internal conflicts in a firm (this is equally true for successful and less successful, or even almost ruined, firms), the consultants must set a high value on being able to stay neutral in the face of internal conflicts. If they agree with one side, it has to appear like a “coincidence”, and should, whenever possible, be justified by reasons that are unique to the internal dispute. Often, conflicts within a firm will make it advisable to search for a third alternative that will not be perceived as taking the already established point of view of one of the quarreling factions. Thus, consulting often has the function of providing open or latent conflict therapy. How its effect expresses itself on the firm’s balance-sheets may then become a side issue. Seen from a systems-theoretical perspective, a consulting group thus preserves and reproduces itself in an environment that emerged as a consequence of the group’s own differentiation and is given for it. Its preservation and reproduction as a system-in-an-environment cannot be reduced to the sum of all system-to-system relations, not even if the sum of these individual relations could be expressed by means of a monetary amount per time unit, the profit or loss of the consulting firm. In distinguishing systemenvironment relations from system-system relations, we acquire a tool for posing the problem, one which could gain importance in the treatment of communication problems; for no system can communicate with its environment. Communication always requires an addressee: that is, another system, one which must be understood in turn as a system-in-its-own-environment if one intends to communicate with it.7 6

There is no need to understand this principle in the narrow sense: that is, merely as the preservation of the economic profitability of the firm. It also applies when a consulting firm, perceiving more opportunities than it can exploit during a boom period of its particular market, tries to confirm its “identity” even when turning down lucrative inquiries. 7 In this sense, our case study concerning consulting firms is merely an example for a much more general problem; for no system can communicate with its environment, although every system must reproduce itself in its environment – or it ceases to exist.

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This means that the unity of a system participating in communication and the unity of its environment can neither be included in the communication nor expressed by means of communication. The unity of the difference between system and environment is merely being reproduced in communication. If we proceed from the distinction between system and environment and thus from systems theory, we gain a certain insight into the problem of incommunicability (we are not obliged to proceed in this manner; to do so is and remains the decision of the observer). That a group of consultants, as in our case, cannot communicate itself completely (but is nonetheless capable of communicating internally about this impossibility of complete communication) is due to the fact that communication is the operation by means of which the group carries on its own autopoiesis, and thus the means by which it regenerates its own unity, as well as the difference between this unity and its environment.

III In the process of applying this general insight to the case of management consulting, I intend to explicate this insight in several steps. There will be some obvious parallels with other forms of therapy (psychotherapy, family therapy, systems therapy, etc.); such parallels have become elements of the self-understanding of many management consultants because of regular contacts with these forms of therapy that are initiated by communications under the influence of science. However, in the following we will not pursue these possible expansions of our inquiry. Instead, we will limit ourselves to management consulting. Thanks to our earlier treatment of complexity, we can now recognize the positive function of a difficulty that we hitherto looked at from a rather negative angle. The complexity of the theory nexus at the base of the consultants’ judgments and proposals is not just an obstacle on the way to success. It also ensures the continued non-identity of the systems. By accepting demanding theoretical foundations, the consulting group gains the possibility of holding its own language aloof and thus avoids being drawn into the jockeying for position and the factions that occur within the client system. In this sense, incomprehensibility can serve as protection. “Assumptions guided by theory enable consultants to remain in the position of observers and to avoid assimilation to the role of participants.”8 Whether such theories, according to scientific criteria, are true or untrue (or, in most cases, merely promising and connective), and whether or not they prove effective, is only of secondary importance in regard to this problem. They mark and 8

This point is made by Exner et al. (1987), pp. 267 f. with reference to Kind (1986).

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protect the unity of the system that employs them. The functions of marking and protecting the unity of the system may remain latent for both sides of the consulting relationship; in fact, they must remain latent for the client side. If one tried to communicate about these functions within the relationship, communication would become “paradoxical” in the precise sense of the term, as it has been defined by systems therapy. Once we have accepted this, additional prospects open up. Thus, the consultants may well search for and employ theoretical principles that cannot be accessible to the companies that hired them, at least as far as the structure of these principles is concerned. The consultants might be particularly interested in “latent” structures and functions. As soon as they begin to observe how a company observes or, rather, how observation is enacted in a company – in other words, how distinctions are drawn and indications made – they can assign a meaning to the problems of this system that is not at the disposal of the system itself. And even if it were possible to transmit this meaning, the transmission would affect the meaning semantically and turn it into a different meaning; and even this meaning would be observed differently depending on the system from which it is observed. Thus, the insight into latent problems, functions, and structures does not necessarily exclude the possibility of trying to include this latency in the communication; of making the “unconscious” conscious, very much as in psychoanalysis; and of thereby achieving certain effects. However, the meaning of the schema “latent/manifest” reaches much farther than this enactment of consulting strategies. Consultants who work with this schema of observation have to make the choice of whether they want to expose the latent functions and structures or whether such a course of action is not advisable. In precisely those cases in which they notice that latency itself has a function – for instance, the repression of unsolvable problems – they will go about exposing such latency hesitantly as long as they can neither predict nor control its effects. At the very least, they will suspect that exposing the “fundamental lie” of the observed system might lead to catastrophe. “Catastrophe”, in this context, is to be understood as another principle of stability and thus, in all likelihood, as another “fundamental lie”. Latency is not just any sort of absence. It is not a normal side effect of structural or operational selections, arising from the fact that something in particular is marked instead of something else. Latency is a specific mode of absence; it is a “sustaining” – one might almost say a “subjective” – mode of absence on the basis of which structural selections really become possible. It should also be said that it is not a matter of the “unmarked space” – the colorlessness of light, the noiselessness of air, the whiteness of paper – in other words, the medium that makes the tighter couplings of specific forms really possible. Rather, it is a matter of a specific type of prohibition that itself remains inaccessible. Different theoretical interpretations of this fact 356

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are possible – for instance, in Sigmund Freud’s or perhaps in René Girard’s sense. If we look at the proposed theory on which I base my argument (a theory which itself is sustained by such a prohibition), we see that every distinction that is used operationally can itself be distinguished; however, at some point we can no longer ask: distinguished from what? And why?9 Now that the perfume of psychoanalysis has lost much of its flashiness and fascination, we can put the problem under consideration into a more general form with the help of the cybernetics of second-order observation. The central issue is that the observer of an observer has and can use (or not use) the possibility to see that which the observed observer cannot see. All observation (including second-order observation) deals naïvely with its own distinctions. It must presuppose the reference of such distinctions: that is, it must assume that the distinction (let’s say: cause/effect; guilty/not guilty; profitable/not profitable; protecting the environment/destroying the environment) designates something real. In other words, it uses its own distinction as a blind spot that organizes the possibility of observation. This blind spot can be replaced only if it is exchanged for another blind spot. Thus, every system’s own basic distinction becomes a natural necessity, while a distinction used by others becomes merely an artificial, contingent, chosen, and replaceable schema. But it is precisely this differentiation that can be seen and communicated only if one has confidence in the distinction “natural/ artificial” and uses it naïvely, namely by presupposing it.10 This turn towards second-order cybernetics can be clarified if we compare such cybernetics to classical theories of reflection. If we formulate the basic problem as the reflection of reflection, we end up with an infinite regression and, even worse, with a hierarchical architecture that signals our own superiority. The reflection of reflection takes place at a “higher” level and promises better insights. However, we also know that an infinite regression cannot amount to an infinite improvement. Instead, all too soon the point of minimal utility will be reached, to speak in economic terms. Second-order cybernetics dispenses with this comprehensive architecture and thus avoids any gesture of superiority.11 The relations of observation remain strictly horizontal relations, no matter how intricate, demanding, and recursively ordered they may be. Precisely in regard to the salient point – that is, the 9

This might well be the reason why George Spencer Brown (1971) bases his logical calculus on the injunction: “Draw a distinction!”. 10 When we speak of “presupposing” something, we explicitly refer to that which once upon a time was called “the subject”; however, we no longer assign a substantive meaning to this concept, but an operational meaning, a meaning related to events. 11 On the critique of this pretension of theories of reflection and on the demand for a strictly horizontal arrangement in the post-modern style, see also: Latour (1988a), pp. 168 f. However, Latour then (pp. 175 f.) turns explicitly against the (incorrectly presented) language of observers observing observers.

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operationally necessary naïveté concerning one’s own basic distinctions – there is no hierarchy. At most, there are the following questions: What is productive for which purpose? And how much complexity can be built up on the basis of the connectivity of one’s own distinctions and indications? By now, plenty of theoretical concepts have emerged that overtly or covertly take advantage of the possibility of observing that which observed observers cannot observe. Management consultants, for instance, can recognize (or believe to recognize) that a high level of personal attribution of successes and failures may, at the same time, serve as an indicator of concealed structural problems that nobody can touch without burning their fingers. In such cases, one speaks of “designated patients”. “Symptoms are readily attached to persons (and groups); among other things, such localization serves to protect the structure.”12 This view corresponds to the general insight of systems therapy, which often is called “systems” therapy precisely because of this very insight: namely, that problems, for the most part, cannot be cured at the place where the client localizes them. One variant of this theory can be found in the theory of mimetic conflict and the violence it provokes, violence that does not affect the causes of the conflict but instead affects certain chosen victims.13 According to this theory, the problem is produced by rivalry: that is, the unbearable equality of needs and desires that leads to the establishment of violent differentiations (conversely, the socalled Palo Alto School of systems therapy took the collapse of differences as the starting point of its method of problem identification). In turn, such diagnostic theories are distinctions – distinctions, however, that cannot be transferred to the client whose problems they help to shift. They merely serve as the consultant’s instrument for the construction of functional equivalences, or as the background assumption for the construction of “injunctions”, by means of which the system is to be moved to another, less painful, view of the problem. We are not questioning the scientific value of using such concepts in the service of intervention. Also, we leave open the question of the extent to which they have been used successfully in practice to date. We are only interested in the assumption on which they are based. This assumption implies that a system could be overstrained through insight into (or communication about) its own structures. The old concept of “latent” structures applied merely to regularities that could be recognized only by means of specific data collection and statistical analysis.14 This poses merely methodical problems and perhaps problems of complexity, but not communication problems. The other version of latency, derived from psychoanalysis, is more 12

Exner et al. (1987), p. 268. See Girard (1982). 14 Empirical social scientists prefer to use the term “latent structure analysis”. Following Paul Lazarsfeld they thereby refer to a specific measuring method with dichotomized indicators. 13

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likely to admit the question of whether enlightenment is a responsible option or might have destructive consequences, for which reason it might be averted. Second-order cybernetics provides yet another variant of this concept. In this theory, specific latencies – namely, the non-distinction of the distinction that is cognitively operational in each case – appear as the absolute condition of the possibility of cognition. Thus, the difference of distinctions itself becomes problematic; distinguishing distinctions is of no help, since such a procedure merely reiterates the same problem.

IV If one splits up that which is given as “unmarked space” (in Spencer Brown’s sense), as “matter” (as it is used in Aristotelian philosophy), or as “world” (in Husserl’s sense) by means of the distinction between system and environment, a strange effect ensues. The two sides of this distinction are given only in the distinction itself. That is to say, they are given only for those who use this distinction: namely, the observers. The unity of the system can be found neither in the system nor in the system’s environment. The unity of the environment can be found neither in the environment nor in the system. The unity of one side as well as the other is, in the strict sense, nothing but the unity of the distinction that separates and thereby unites these two sides. Only the observers can see the unity of the system, since only they can distinguish the system from the environment. An observer need not be an external observer; in fact, in the case of the system “society”, there is no sufficiently complex external observer. The system itself can be the observer. But in that case, the observer must conduct the observation of the system within the system itself and use some of the system’s operations in the process. This amounts to the drawing of a boundary between operations of reflection, which use the distinction between system and environment, and other operations that produce and reproduce the difference of system and environment (according to the way the observer can see it at that time). This state of affairs, including the problem of reflection it contains, makes evident the advantages that can be gained by separating external and internal observation, other- and self-observation. Self-observation is always bound to include reference to itself and thus, in the course of its execution, to change that which it intends to observe. External observation can objectify the system it observes. However, this objectivization also happens only by means of its own operations of observation (that is to say, by means of operations of observation that depend on the underlying structure and distinction). Thus, possibilities of observation that could not be realized merely by selfobservation within a system can be gained from the difference between internal and external observation. This difference presupposes system 359

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difference: that is, in our case, the separation of firms that provide management consulting from those that receive it. It can be observed from both sides by means of the proper distinction; this is true even for a third observer who might be interested in a theory of management consulting (as are we right now). The choice of distinction that must be made operationally in any given system is always based on an irreducible arbitrariness. However, this only means that one has to rely on observing who operates with what kind of distinction. This somewhat complicated interlude was necessary in order to make clear that the differentiation between external and internal observation gives rise to communication barriers that cannot subsequently be dissolved. This is especially true when both sides internalize the distinctions and then are in a position to observe the difference between the two sides, the two systems, the two perspectives, etc. Since every observation qua operation needs to be based in the system, the separation can never be “sublated.”15 The advantages of this separation can be exploited only if one accepts the separation. Even if the systems communicate intensely, this does not change anything, since the difference is and remains presupposed in the communication. A new system arises out of communication: the contact system of the consulting relationship. Now, this system can also be observed with regard to its own states, its own developments, and its own selections. Communication does complicate the system/environment relations; however, it does not change anything about the fact that everything said is said by an observer,16 and that every determination must be determined by a system relying on a distinction.17

V It might not be a good idea to ask believers or even theologians whether it makes sense to distinguish between God and man. They will answer with the distinction “believing/unbelieving” – that is, a distinction that permits them to designate their system. Entrepreneurs who are asked why they distinguish between profit and loss will, in all likelihood, refer the questioner to the psychiatric care unit of their company. Committed environmentalists would gasp for air if one contested the usefulness of categorizing their information by means of the distinction “protecting the environment/destroying the environment”. Systems theorists may feel much the same way if they are 15

In light of this concept of “sublation,” let us only remark that Hegel made such an attempt in his Logic and marked it with the concept “Spirit”. However, ever since then nobody has tried again. 16 This is actually a quotation! See Maturana (1975), p. 324. 17 Evidence for the increased acceptance of this view in organizational science can be found in Probst (1987), esp. pp. 68 ff. and passim.

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prevented from conducting their analyses by means of the distinction “system/environment”. After all, in all these cases, we might say: Let’s do it differently; however, this might at the same time mean: From now on, this is no longer a concern of mine. In everyday communication, things and events, states and changes, are talked about. The designation of that, about which one talks, is possible only by means of distinctions. For the most part, these distinctions remain merely implicit; they are a side effect of the designation of something as “this” (and nothing else). Language is fully adjusted to this mode of communication. Among other things, language is able to designate distinctions (as in the example above); but even then, the context of distinctions within which the distinctions in question are thematized, and from which they are distinguished in turn, remains merely implicit. Let’s test this assumption. If one poses the question of the distinction between God and man to theologians, it is not clear from which distinction this particular distinction is distinguished: from the distinction between God and the Devil? Or God and creation? Or God and Christ? Or perhaps even man and animal? Or man and system? – etc. If the question is directed towards the distinction that is fundamental in each case, the burdens of communication increase, but the problem does not disappear. In the final analysis, operational positivity – the autopoiesis of communication – remains preponderant. It does what it does, always by means of particular distinctions. It can be very useful for the practice of management consulting to return to the question of the distinctions by means of which communication manages to designate something: that is, the means by which communication manages to choose and determine specific topics. The consulting group may also develop theory preferences for certain distinctions with which it works: for instance manifest/latent, structure/function, system/environment, perpetrator/victim (Girard), first-order observer/second-order observer, etc. As soon as one’s own distinctions are distinguished from those of the client system (formulating the problem in this way is itself a distinction of distinctions), the presupposition of a common world vanishes. By means of this distinction of distinctions one becomes aware of the fact that criteria, as well as learning processes, are different in each case; whenever they are put into action, they depend on a certain schema and they are used in relation to a specific distinction. Now, here, a choice must be made (once again by means of a distinction): namely, whether one prefers to reconstitute a common world or to insist on the differences and continue working with incongruent perspectives. In the former case, communication becomes difficult and eventually amounts to a refined illusion. The latter possibility could be called a refined incongruence.18 18

It hardly needs to be said again that in this case, as in previous cases, a problem is decomposed by means of a distinction.

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This analysis goes far beyond all theories that were invented centuries ago using such concepts as simulation and dissimulation. It barely has anything in common with psychoanalysis, and even less with the therapeutic methods and goals of psychoanalysis. However, it hints at the possibility that the logic of distinctions is linked to the process of differentiation. In order to differentiate themselves, systems use blind spots specific to themselves; that is, they use distinctions with which they identify blindly. This is not likely or even possible in every society. However, modern (or, as some would prefer to say in reference to this issue, postmodern) society is expansive enough to make this form of differentiation possible; in fact, one might even expect such differentiation. Indeed, one counts on communicatively unbridgeable differences, on a pluralism of “values”, “ideologies”, or “discourses”, to use a recent term. A study of management consulting can show that the problem of differentiation is not at all limited to intellectual and emotional mega-concepts and, furthermore, that it is not merely a problem of society in its entirety, of political goals, social movements, and the organization of excitement and alarm. On the contrary, it also makes everyday distinctions possible in areas where a common world-view and common goals have hitherto been assumed as given or at least as intended. The more theoretical and conceptually precise such an analysis is, the more likely is its empirical verification. Evidently, management consulting moves from strictly microeconomic goals and a strictly microeconomic analysis (which merely attempt to copy the world of the entrepreneurs and seek to improve their position) to a mode of observation and description that, while not giving up this orientation, attempts to reconstruct unity through difference. In the relationship between consultants and company this leads to communication barriers – to incommunicabilities that arise not only on the tactical (i.e., simulation!) but also on the structural level. To put it differently, the consultants’ imaginations become dependent on distinctions that they can, by themselves, neither distinguish nor communicate any longer; instead, they must use them operationally (the alternative, therefore, cannot be yet another distinction; it must be the cessation of further distinctions). This move does not take place at the cost of communication. It does not lead to a situation that would no longer allow the communication of all that has been communicable hitherto. A more likely conjecture might state that an increase in communication, an intensification of system-tosystem relations above a certain threshold, is possible, but only by means of a single difference; that is to say, it is possible as the increase of communication by means of incommunicabilities. In fact, the experience of this phenomenon is nothing new. It had already been noticed in the seventeenth century in matters of love and religious conduct. In both cases, the increase of (socially reflected) communication and the issue of sincerity were central. 362

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VI Finally, the critique of the model of applied science is also of importance for the following questions: How are the consultants observed from the viewpoint of the client company? How are they selected? And, one might almost say, what kind of consulting do they receive? If we stick with the classical model, the only question of concern is how well consultants know that which they can know. This question presupposes a reality that is independent of observation. However, this condition is by no means a given, as even the theory of science now admits.19 The description of reality depends on the observer. This leads to the question: Which observer do we choose if we want to know what is going on (undoubtedly, most often we will choose ourselves, of course)? In the best-case scenario, we might be able to neutralize the differences between observers by using an “injunctive” logic that formulates operational injunctions (that is, an operational calculus) that lead to the same result for everyone, if they are heeded.20 However, as soon as it is no longer merely a matter of formally (logically) processing distinctions (forms), but rather of processing a content-related choice of specific distinctions, the difference between the observers – and that means the difference between the consultants – becomes relevant. They can be distinguished from each other according to which distinction each one of them employs as that distinction which is not put into question. In other words, they are observed in regard to that which cannot be observed by them. They are selected because of their specific blind spots. Of course, normally, such a degree of circumspection and lucidity can hardly be assumed. Instead, names provide some orientation: personal names, names of companies, names of theories. Reputation is condensed into names. Differences in reputation, as well as the history of already existing contacts, direct the selection. However, if this is indeed the case, then it is not possible for the company in search of management consulting to fully rationalize the choice of consultants and subsequently to fully rationalize how each should be treated. Indeed, for these purposes, communication barriers would once again be indispensable. It would be necessary that the form of the observation (that is, the distinctions by means of which consultants construct that which is reality for them) could be chosen. Observers can neither see themselves nor the distinction they employ, because it guides them invisibly, very much as if it were a particular perspective. This simply means that consultants are chosen and subsequently observed in regard to that which they cannot see. Furthermore, communication about this blind spot is not possible. 19

See von Foerster (1981). On the application to the relation between knowledge and intervention see also Sgritta (1988). 20 Spencer Brown (1971). On the application to problems of therapy, cf. Simon (1988).

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The problem is not, first and foremost, a problem of deliberate suppression. Neither is it primarily due to the impossibility in practical communication of saying everything all at once, or the subsequent problem, which is that the sequence of communication does not allow the pursuit of every hint of a potential meaning. The real problem lies in the difference between the levels of first-order and second-order observation: that is, in the difference between the observation of things, events, objects, and the observation of observers. Strategy and the restriction of communication for practical reasons can be used in order to preserve this difference. But even when communication is not controlled in such a way (such control could in any case happen only in a very limited fashion and only by means of psychic systems), one recognizes on the level of second-order observation that it is impossible to integrate everything that can be seen from this level into the first-order level. If there is a second-order observation at all, goals such as “enlightenment” or “the application of knowledge” have no bearing any longer; the autological component of this second-order level of observation forces this insight upon us. Consequently, “knowing better”, gestures of superiority, leadership pretensions, and the hierarchization of the difference between levels must be avoided.21 In the absence of such things, we gain the chance of letting difference qua difference become irritating, stimulating, and eventually productive. And this, to be sure, would be true even if the consultant were able to convince the client company to institutionalize such a difference of first- and second-order levels within the company itself – namely, as the difference of levels of communication about communication about communication. – Translated by Peter Gilgen

Acknowledgements This text was originally published in German in Luhmann, N. and Fuchs, P. (1989) Reden und Schweigen (Frankfurt am Main: Suhrkamp), 209–227.

21

Laudan’s study (1984) is an attempt to use this same hierarchical interpretation of the differences between levels of communication in order to explain how, in science, highly probable dissension is turned into consensus. But Laudan’s theory rests on a purposive concept of action and would fail if the conceptualization of the difference between levels were detached from this base.

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Chapter 17

Strategic Management from a Systems-Theoretical Perspective Jan-Peter Vos

Introduction This is certainly not the first study that has questioned the reasoning behind the strategic management approaches that have gained attention in the past. Several authors have criticised strategic management approaches for being overly rational (e.g. Daft and Weick 1984; Mintzberg and Waters 1985; Weick 1987; Pettigrew 1988; Knights and Morgan 1991; Whittington 1993; Rajagopalan and Spreitzer 1996; Barry and Elmes 1997; Calori 1998). Others have questioned the lack of evidence regarding their assumptions by emphasising that the environment cannot be observed independently of the organizations with which it interacts (e.g. Child 1972; Weick 1987; Knights 1992; Stacey 2000; Baecker 2003). Each of these scholars, in his own words, has stated that organizations need to interpret themselves rather than their environment. Within organization studies, Karl Weick extended this line of reasoning the most by suggesting that strategic sensemaking is selfreferential (Weick 1995, p. 23). Until now, unfortunately, the insight that the environment can only be observed internally has not received much attention within mainstream organization studies. To stress this point further: strategy researchers prefer to obscure rather than acknowledge the selfreferential circularity between organizations and their environments. Extending Weick’s argument that strategic management is self-referential, this chapter aims to offer a better understanding of the role played by selfreference in strategic sensemaking. However, acknowledging that strategic management appears to be self-referential is one thing, making use of it on a theoretical level is another, and this should not be underestimated. An approach ideally suited to this is the theory of social systems, as developed by Niklas Luhmann. After all, Luhmann’s theory is explicitly focussed on the self-referential constitution of social systems (e.g. Luhmann 1984b; 1995f, and 1997a). 365

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This chapter is structured into five sections. Before we embark on a journey into the theoretical labyrinth of social systems theory, we will show how the traditional approaches to strategic management obscure the role of selfreference by making either the environment or the capabilities of organizations the point of reference for the definition of successful strategies (first section). After that, the shortcomings of the common denominator of these either/or approaches, i.e. the paradigm of adaptation, will be discussed (second section). Subsequently, social systems theory is used to shed new light on the relationship between organizations and their environments (third section). These insights are then used to outline an approach to strategy research that solves the circularity problem by treating strategic management as self-referential (fourth section). Finally, some conclusions are drawn with respect to the theoretical contributions of a systems-theoretical perspective on strategic management.

The fallacy of either/or approaches to strategy In the strategy literature, the self-referential circularity between organizations and their environment in defining strategies is obscured by making either the environment (“outside-in”) or the capabilities of organizations (“inside-out”) the point of reference for a definition of successful strategies. By means of the “outside-in” approach of Porter (1985) and the “insideout” approach of Prahalad and Hamel (1990), it will be illustrated that such either/or approaches to strategy are self-defeating. Porter (1985), for instance, states that creating and sustaining a competitive advantage means reckoning with competitive forces within a sector of industry in order to distinguish oneself from competitors. The competitive forces determine the rules of the game concerning business in a sector of industry. According to Porter, organizations are wise to the extent that they obey these strategic rules. In Porter’s approach to strategic management, organizations should not change the strategic rules, as this would lead to a stuck-in-the-middle position. The only way to become distinctive is to either adopt a “cost leadership” strategy or a “strategy of differentiation”. Since the strategic rules within a sector of industry are supposed to be objective, all competitors can observe the same strategic rules and accordingly choose their strategy, which is supposed to make them distinctive. Ironically, this results in a situation in which strategy no longer means doing things differently, but doing things the same way as your competitors. After all, if all organizations adopt either a strategy of “cost leadership” or “differentiation”, the only way to distinguish yourself from your competitors is to adhere to a “stuck-in-the-middle” strategy, which should be avoided at all costs according to Porter. As a consequence, this “outside-in” strategy is

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undermined by the paradox that organizations become indistinct by trying to become distinct from their competitors. The most popular strategic management movement of the 1990s is not free of self-defeating reasoning either. In recent years, the two most used buzzwords in strategic-management literature were “core competence” and “core capability”. According to Prahalad and Hamel (1990), the founding fathers of this concept, who heavily disputed the “competitive advantage” concept of Porter because it only led to short-term strategic success, core competences offer organizations a sustainable competitive advantage in the long run. To sustain their development, organizations should use their core competences in diverse and independent markets. Thus, in contrast to the “outside-in” approach it is the internal competences that are to determine how the organization acts on the external markets (“inside-out”). However, in order to identify its core competences, the company ultimately has to take the perspective of the customers; it is the customer who determines which competencies lead to distinctive competitive advantages. In their book Competing for the Future Hamel and Prahalad (1994) state that the question of which capabilities of an organization should be considered core competences, eventually boils down to the question of which capabilities, in the view of customers, lead to distinctive competitive advantages. This implies that short-term strategic success is a key issue for the positive development of sustainable long-term competitive advantages. Ironically, it also implies that organizations can only start to define strategies “inside-out” by observing themselves from the outside. As a consequence, this “inside-out” strategy is undermined by the paradox that organizations become dependent on customers by trying to become independent of them. The fact that paradoxes can be brought to light within the two most successful (!) strategic-management approaches of the past two decades should not be interpreted as a shortcoming of these approaches per se. As will be illustrated later, paradoxes appear to be omnipresent in organizations due to the self-reference involved in dealing with their environment. Strategic management approaches can only be criticised for denying their paradoxical foundation. This denial has forced both the “outside-in” approach of Porter and the “inside-out” approach of Prahalad and Hamel to treat either the environment or the capabilities of organizations as the ultimate point of reference for explaining strategic success. As we have seen, this leads to selfdefeating reasoning, which makes the approaches practically irrelevant. As a result, either/or approaches to strategy fail to grasp the specifics of the way in which members of organizations deal with strategy. In the next section an attempt is made to offer an explanation for the perseverance of the either/or approaches to strategic management.

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The paradigm of adaptation The problem with either/or approaches to strategy can be traced back to the paradigm underlying strategic thinking in general (see Mintzberg 1990 for an overview): the paradigm of adaptation. Igor Ansoff, the founding father of modern strategic thinking, wrote: “[The paradigm] concerns the logic which guides the process by which an organization adapts to its external environment” (Ansoff 1987, p. 501; italics added). In order to reveal the problem with this logic, we will first examine the problem of strategic management, as defined within the paradigm of adaptation, and how researchers try to solve it within this paradigm. After that, we focus on the paradox that is obscured by the paradigm of adaptation, making it impossible for organizations to use it. Within the paradigm of adaptation, strategic management is related to the problem of defining successful strategies for dealing with an environment that is ever changing. In the Strategic Management Journal – the non plus ultra outlet for strategy research – studies attempting to find such successful measures abound. The hidden assumption within these studies is that organizations trying to observe their environment can conceptualise it as something that exists independently of their own existence. In other words, the environment is out there for all to see. Following this line of reasoning, the solution to the adaptation problem is rather straightforward: observe what is going on and take measures accordingly. From a systems-theoretical point of view, this solution is conceptually based on “The Law of Requisite Variety” or “Ashby’s Law”1. This law states that in order to be in control, a system needs at least as many control measures as there are external variations (Ashby 1956, pp. 206–207). This “requisite variety” ultimately implies that organizations need to establish a point-to-point correspondence to their environment (Luhmann 1995f, p. 25). However, since the environment is much more complex than any organization can be, such a point-topoint correspondence is impossible (Schreyögg and Steinmann 1987, p. 94; Luhmann 1995f, p. 24). As a consequence, an organization can never capture the full complexity of its environment; every observation of the environment is ultimately just a simplified construction. This leads to the crucial question: what are companies ultimately supposed to adapt to? It cannot be the environment as such because of its incomprehensibility, and it cannot be the organizational construction of the environment because then organizations would just adapt to themselves. Thus, by obeying the “Law of Requisite Variety” one stumbles upon indecision: we cannot decide whether to adapt to the external environment or not. This is paradoxical: while adapting to the external environment one cannot decide whether one is actu1

To the credit of Ashby it should be mentioned that he never intended cybernetics in general and his law in particular to be of empirical relevance (see Ashby 1956, pp. 2–3).

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ally adapting to it or not. This paradoxical indecision is obscured by the “Law of Requisite Variety” – and this is a crucial point – because the observation of the environment is not regarded as being problematic. Notwithstanding this basic assumption, strategic management appears to be obstructed by self-reference: the outside of an organization appears to be an internal projection. The either/or approaches presented in the previous section fail to acknowledge the self-reference involved in strategic management: Porter states that the strategic rules of an industry sector can objectively be determined, and Prahalad and Hamel state that organizations can objectively decide upon their core competences by observing their customers. As such, both approaches find their conceptual base in adaptation to the environment. The inability of strategy researchers to comprehend the self-referential foundation of strategic management can probably be best illustrated by means of a recent discussion with respect to the dynamic capabilities view (Teece and Pisano 1994; Teece et al. 1997). This dynamic capabilities view is the scientific counterpart of the management-oriented, core-competence approach. Priem and Butler (2001, p. 28) have argued that the dynamic capabilities view is undermined by the tautology that “competitive advantage is defined in terms of value and rarity, and the resource characteristics argued to lead to competitive advantage are value and rarity”. Barney (2001, pp. 41–42), and Eisenhardt and Martin (2000, p. 1116) reacted by stating that all strategic management theories are tautological in this sense. According to these scholars, the question should not be whether theories can be restated in a way that makes them tautological, but whether theories are able to generate hypotheses that can be tested empirically. From this reaction it is clear that the authors acknowledge that they, as organization researchers, construct their object of investigation but at the same time have missed the crucial point, i.e. that the hidden tautology is exactly the tautology organizations face while deciding upon their valuable and scarce resources. In other words, the authors fail to see that self-reference constrains strategic decision making. Perhaps we need to embrace the notion of self-reference rather than obscure it, as the paradigm of adaptation does. Such a stance is exactly what social systems theory offers us, as will be described next.

Self-reference and social systems theory To illustrate the implications of the turn towards self-reference, we will first present a new paradigmatic stance towards adaptation. This stance will then be used to describe how organizations can deal with the impossibility of directly observing their environment. Then, we shall describe various ways in which organizations need to deal with self-reference in order to maintain 369

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themselves throughout time. Lastly, a methodology is presented for studying this self-maintenance empirically.

The system/environment-distinction Embracing the notion that organizations can be observed as self-referential systems sheds new light on the relationship between social systems and their environment (Luhmann 1995f, pp. 181–185). Within the theory of selfreferential systems, each system has its own environment. This is a different conception of the system/environment distinction from that of open systems theory (which the paradigm of adaptation is based on), where the environment is conceptualised as including the system (Figure 1). The main implication of considering system and environment as exclusive of each other is that the environment is specific to a self-referential system. As such, the totality of all existence that is conceptualised within open systems theory as “the” environment is something that has no meaning within the theory of self-referential systems. According to this theory, systems are conceptualised as the unity of the distinction between system and environment (Luhmann, 2006). This unity is regarded as the world (“Welt”) of the system and relates to the ultimate form of complexity that social systems need to deal with in their existence (Luhmann 1995f, p. 208). The concept of world does not refer to an all-embracing ontological concept of an objective social reality (Luhmann 1995f, p. 208). Rather, world relates to the totality of existence that is specific to a single system, because a social system cannot observe its world independently of itself due to the self-reference involved (Luhmann 1988b, p. 42). To put it differently, a social system is part of the reality it observes. As a consequence, a system cannot adapt to its environment as something independently given.

“Welt”

Environment

Environment

System

System

Open Systems Theory

Self-Referential Systems Theory

Figure 1: The system/environment-distinction in various disguises.

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The paradigm of self-adaptation Luhmann accepts the paradox that adaptation towards the environment is only possible as self-adaptation. For social systems theory, the paradigm of adaptation should therefore be substituted by a paradigm of self-adaptation. According to Luhmann, the move to self-reference implies that the concept of adaptation recedes to a secondary rank, without losing its significance (Luhmann 1995f, p. 349). The paradigm of self-adaptation contains the paradigm of environmental adaptation in the sense that a self-referential system can naïvely decide to treat its environment as independent of itself. This implies that the “Law of Requisite Variety” is only wrong from the perspective of an observer of a social system and not necessarily “wrong” from the perspective of the social system itself. It is only a contingent, i.e. a neither necessary nor impossible, way of reducing complexity. For a self-referential system, the primary question in dealing with environmental change relates to the way in which the system distinguishes itself from its environment (Luhmann 1995f, p. 349). The paradigm of self-adaptation has a serious implication for the way the interaction between organizations and their environment should be conceived. All change, whether an adaptation to the environment or not, is regarded as self-change despite the fact that the environment remains a stimulus to change (Luhmann 1995f, p. 350). Because of the paradigm of self-adaptation, Ashby’s “Law of Requisite Variety” should be reformulated as the “Law of Requisite Reflexivity” (Vos 2002, p. 50): in order to stay in control, an organization needs to be able to deal with its inabilities by means of self-observation. This law states that social systems should be able to develop new ways of observing their environment and themselves, depending on the situation at hand.

Dealing with self-reference The reflection of a social system upon its own existence can be described as self-observation. During such self-observations the system/environment distinction reappears within itself. There is a “re-entry” (Spencer-Brown 1972; Luhmann 1994b) of the system/environment distinction into the system. This re-entry implies that the system/environment distinction is used to observe what is observed by means of the system/environment distinction, i.e. a distinction is used to observe the same distinction. Self-observation is therefore clearly self-referential, and as such paradoxical, because the same distinction is used twice to observe something different. That is, the distinction is both the same and different at the same time (Luhmann 1990c, p. 379). Due to the self-reference involved, a social system cannot observe what it is observing and how it is observing at the same time. That is to say, during self-observations one cannot simultaneously observe the self and the act of self-observation. This temporal problem indicates the paradox of self-

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observation: while observing itself, a social system does not observe itself. In other words, during self-observation the “self” is its own “blind spot”. Broadly speaking, the self-reference involved in self-observation is displayed in the form of tautological and paradoxical reasoning (Luhmann 1990h): a system is respectively what it is, i.e. a self-observing system observing itself, or it is what it is not, i.e. a self-observing system that is not observing itself. The fact that self-observation becomes trapped in tautological and paradoxical reasoning, indicates that there is a limit to the knowledge social systems can obtain about themselves and their environment: social systems cannot get to the bottom of their existence. Note that this “unbearable lightness of being” that is characteristic of social systems only comes to the fore because of the act of self-observation: if the system had refrained from selfobservations, it would never have been tempted to describe its existence as an existential problem. It is therefore quite ironic that, during selfobservations, a social system stumbles upon a problem that it has already solved, i.e. its existence (see also Czarniawska in this volume). The fact that social systems fail to see through their existence does not imply that self-knowledge is impossible. It merely indicates that selfobservation is a highly contingent affair, in the sense that the identity of a social system is something that appears to be entirely dependent on the way the system identifies itself with respect to what it is and what it is not (i.e. its environment). While identifying its identity, a social system becomes trapped within the chicken-and-egg problem that the system is what its environment is not, and the environment is what the system is not (Figure 2). Making sense of this chicken-and-egg problem is similar to the problem of the Baron of Münchhausen who tried to pull himself out of the swamp by his own hair. While the system distinguishes itself from the environment it finds out that its environment is an internal construction. As a consequence, the system does not import information from the environment but selfproduces information about the environment. In the words of Von Foerster (1981, p. 263): “The environment contains no information; the environment is as it is”. As such, during self-observations, making sense of the environment involves “asymmetrising” the tautology that the environment is what it is. Likewise, due to the self-reference involved in self-observation, the system needs to “asymmetrise” itself in order to produce information about itself. The chicken-and-egg problem that undermines self-observation can be solved when the system “de-tautologises” either itself or its environment. By just doing it, by just carrying out a self-observation this “asymmetrisation” takes place. That is, by carrying out a self-observation, a social system is able to identify something about itself or its environment. Depending on the starting point of the self-observation, either the tautology that the system is what it is, or the tautology that the environment is what it is escapes its self372

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System

The system is what the environment is not

Self-Observation The system is what the organization is not

Environment

The environment is what it is

Figure 2: The self-referential problem of self-observation.

referential closure, i.e. becomes “de-tautologised”, and offers a clue for subsequent “informed” actions (Figure 3). In terms of strategic management, the first solution depicted in Figure 3 relates to “outside-in” selfobservations and the second to “inside-out” self-observations. An “outsidein” solution, for instance, could start with the observation that the environment is hostile or “hypercompetitive”. This would enable the social system to learn something about itself, i.e. whether the system is offensive or defensive. Solution I “Let us assume the environment is …”

Organization

Environment

“… then we are …”

t=2

t=1

Solution II “Let us assume that we are …”

Environment

Organization

“… then our environment is …”

t=2

t=1 Time

Figure 3: Solving the self-referential problem.

Dealing with self-reference thus requires acting naïvely in the sense of acting first and thinking later. Only by being naïve is a social system able to make

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itself existent or to “temporalise” complexity and in the meantime create its world (Luhmann 1995f, p. 33; pp. 46–47). As we have seen, this world is “imperfect” because it is impossible to grasp its unity from within: “it is the world after the fall from grace” (Luhmann 1995f, p. 208). The “original sin” of self-referential systems, so to speak, relates to the paradoxical operation of them ignoring their ignorance.

Self-reference and self-reproduction One may wonder at this point what exactly the benefits of conceptualising strategic management as a self-referential phenomenon are. After all, first the validity of “outside-in” and “inside-out” approaches to strategy is questioned and subsequently these two approaches prove to be the only valid solutions possible in dealing with self-reference. The point is that by focussing on the self-referential aspects of strategic management, it is possible to observe both approaches as two functional equivalent solutions to the adaptation problem. By this manoeuvre it becomes possible to explore strategic management in a descriptive manner rather than in the prescriptive manner of mainstream strategy research. Consequently, the way organizations deal with strategy and the consequences of their strategies can be described in more complex ways. As will be explained next, this description can take place on the level of operations, processes and systems. Within social systems theory, three types of self-reference can be distinguished that are linked to these three levels of systemic aggregation (Luhmann 1995f, pp. 443–444). According to Luhmann, the elements of social systems are communications (see Chapter 1 in the present volume). On the level of operations, self-reference relates to basal self-reference, which involves the recursive relation between communications as such. This recursion relates to the self-reproduction or autopoiesis of communications based upon communications. Take, for instance, a discussion between two managers about the undesired consequences of a decision they made in the past. This discussion enables the managers to decide upon measures to counteract the undesired consequences. The operational self-reference in this example relates to the recursive relationship between the past and the present decision; in other words, the past decision has “produced” the present decision. The second type of self-reference is called reflexivity and is accounted for on the level of processes. In a process, communication takes place in the light of an expected reaction to it. If, for instance, a manager informs the other members of the management team about a serious sales problem, which he is unable to solve, the manager expects that the other managers will help him to come up with possible solutions. Reflexivity happens when during a communication process the communication refers to the communication process as such: for example, a member of the management team 374

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observes that the management team is not communicating very effectively about the sales problem. The operations of organizations become structured throughout time because of processual expectations, even to the extent that expectations may determine what organizations are able to communicate about. As such, the reflexive expectations both enable and constrain the operations of organizations. Finally, on the systemic level self-reference is referred to as reflection. Reflection involves communication about the system/environment distinction. As such, it is an operation by which an organization identifies itself in contrast to its environment. As we have seen, this self-observation relates to the re-entry of the system/environment distinction into the system. Through reflections made, organizations make sense of what their environment has to expect from them, e.g. the expectation that shareholders do not want to be surprised when it comes to company results, which may lead management to plan shareholder meetings frequently to render the company more credible as a source of investment. Naturally, these expectations may differ from the “real” expectations of those in the environment. Strictly speaking, organizations do not need any form of self-referential reflection to reproduce themselves, i.e. they “only” need to continue operating. Processual reflexivity and systemic reflection, however, are necessary operations for coping with organizational and environmental change that may obstruct the self-reproduction of organizations. For instance, by ignoring persistent sales losses, a company may put its continuation at risk.

Scientific observation of social systems The starting point of social systems theory is a problem; that is, the ultimate complexity brought forth by the distinction between system and environment. Social systems need to reduce this complexity in order to be able to reproduce themselves. Luhmann’s functional method can be seen as a means of analysing the way in which social systems solve this problem, and of identifying functionally equivalent solutions to it. For example, if inflation solves problems of distribution in a relatively conflict-free way (with whatever side effects), inflation is a functional equivalent to national planning, which is politically riskier, because it is richer in conflict (Luhmann 1995f, p. 54). The goal of functional analysis is to compare such functional equivalents to find out their risks or dysfunctionalities. As such, the achievement of the functional method resides in the broadening and limiting of what is possible by opening up better and, above all, more complex possibilities of analysis and comparison (Luhmann 1995f, pp. 54–55). Accordingly, the theoretical achievement provided by the functional method relates to the construction of problems. Functionally equivalent solutions to problems are of theoretical relevance because they offer a means of describing how and explaining

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why social systems evolve as they do. To facilitate this, Luhmann uses the distinction between first and second-order observation, which he borrowed from Heinz Von Foerster’s second-order cybernetics (1981). First-order observation relates to the act of observation as such, e.g. the observation of an organization’s competitors by the organization itself. Likewise, second-order observation relates to the observation of other observations; for example, a strategy consultant may observe how the organization observes its competitors. We can use this distinction between first- and second-order observation as a guide for our research on organizations: if one observes in the first-order mode, one puts oneself in the position of the organization and tries to observe what it observes while observing. In contrast to that, the mode of second-order observation implies a critically distanced position towards the organizational observations. The researcher observes the way in which the observational schemas of the organization influence how it observes. The aim is to observe what social systems cannot observe due to the specific way in which they observe; in other words, the blind spots of social systems (Luhmann 1990h, p. 139). The act of self-observation by organizations is, in fact, a second-order observation of themselves. In order to prevent observational confusion, we need to distinguish between the first- and second-order observations of organizations by themselves, and by strategic-management researchers (Table 1). The first-order observation by organizations relates to their strategies as such; their second-order observations relate to their strategic selfdescriptions. The first-order observation by strategic-management researchers of the first-order observations by organizations relates to the description of the way in which organizations have “de-tautologised” the chicken-and-egg problem of Figure 2 to become operational. The secondorder observation of this by strategic-management researchers involves the description of the blind spots of the first-order observations by organizations. The first-order observation of the second-order observations by organizations relates to the way in which organizations have “deparadoxised” themselves in order to observe or describe themselves. The second-order scientific observation of this relates the description of the blind spots of these self-descriptions of organizations.

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It should be clear that the observation of the way in which organizations deal with the self-referential problems of strategic management backfires on the strategic management researchers. That is, to enable the scientific observation of observing organizations, strategic-management researchers need to “de-tautologise” and “de-paradoxise” also themselves. Due to the selfreference involved, a systems-theoretical perspective on strategic management is of a radically constructivist nature. Only by acknowledging this are we able to explain that the “outside-in” and “inside-out” approaches to strategic management are constructed by scholars to observe the strategic management of organizations, i.e. these approaches to strategic management do not necessarily relate to the way in which organizations perceive their own strategies. By linking the concepts of first- and second-order observation and the self-reference involved with this it is possible to outline a research approach to strategic management that unifies the existing “outside-in” and “inside-out” doctrines of strategy. This will be done in the next section. Table 1: Self-reference and levels of observation. First-order observations by organization researchers (i.e. to observe what organizations observe)

Second-order observations by organization researchers (i.e. to observe what organizations cannot observe)

First-order observations by organizations (i.e. their strategies as such)

Observing how organizations “de-tautologise” themselves in order to operate strategically

Observing the blind spots of operational organizations, i.e. observing what organizations cannot observe due to they way they perceive their world

Second-order observation by organizations (i.e. their strategic selfdescriptions)

Observing how organizations “de-paradoxise” themselves in order to reflect upon themselves strategically

Observing the blind spots of reflexive organizations, i.e. observing what organizations cannot reflect upon due to way they reflect upon their world

A self-referential framework for strategy research At the start of this chapter, we indicated that the existing approaches to strategic management obscure their self-referential grounding. In this section, the insights of social systems theory will be used to outline a research 377

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framework for strategic management, which acknowledges that neither the environment nor the capabilities of the organization offer exclusively the starting points for defining strategies. First, we shall explore how the functional method may aid in examining the strategies of organizations on the level of operations, processes and systems. In addition, the role of first- and second-order observation in this respect will be made clear. Subsequently, the developed framework will be related to existing strategy research to illustrate its potential. In the previous section it appeared that self-observation is a highly contingent affair, in the sense that an organization is able to describe itself in a multitude of ways. As such, each self-description is a reduction. Social systems theory uses the self-referential forms of tautology and paradox to characterise theoretically these contingent reductions. The move to self-reference implies that strategy research needs to be able to analyse both “outside-in” and “inside-out” self-descriptions of organizations – as opposed to the existing either/or approaches. Each of these alternatives is a functionally equivalent solution to the self-referential problem of adaptation to the environment being only possible as self-adaptation. When analysing the way in which organizations deal with this problem from a scientific point of view, the focus is on the decisions made by organizations to enable their self-reproduction (cf. Luhmann 2000c). The focus on strategic decisions should not be interpreted as an indication that decision making is considered to be subjectivist by nature, or the “essence” of managerial work (cf. Simon 1960), but rather, that strategic decisions are symbolically enacted upon (cf. Weick 1987) by means of communication that transcends the level of individual members of the organization (Luhmann 2000c)2. The functional method aids in exploring the way in which organizations “de-tautologise” and “de-paradoxise” (Luhmann 1990h, p. 139) their strategies in order to develop theories that make a difference (cf. Weick 1999). As indicated above, this can be done on three levels of aggregation. Note that these levels of aggregation correspond to the widespread categorisation used in strategy research between the strategy content, process and context (Pettigrew 1987; De Wit and Meyer 1994). • On the level of operations, it is possible to analyse how organizations decide upon the content of their strategies by enacting strategic concepts (e.g. added values or core competences) that enable and constrain them to formulate strategies (i.e. to asymmetrise themselves). • On the level of processes, it is possible to analyse how organizations decide upon the expected results of their strategies by enacting strategic 2

As such, the members of an organization remain in the environment of the organization, which only means that the organization cannot determine the psyche of their individual members and vice versa.

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routines (e.g. management team meetings) that enable and constrain them to reflect upon the expected and unexpected results of their strategies (i.e. to structure themselves). • On the systemic level, it is possible to analyse how organizations decide upon their strategic context by enacting strategic roles (e.g. employer and competitor) that enable and constrain them in the reflection on the distinction between themselves and their environment (i.e. to identify themselves). The three types of self-reference (i.e. basal self-reference, reflexivity and reflection) and corresponding levels of aggregation are not linked by Luhmann to the methodological concepts of first- and second-order observation, at least not explicitly. Nonetheless, by doing this, some useful indications can be obtained for the kind of knowledge that systems theory and the functional method can contribute to strategy research (Table 2). Table 2: Functional analysis of strategic management. First-order observations

Second-order observations

Strategic content

Describing specific functional equivalents to make sense of the content of strategies by observing the way strategic concepts are enacted

Comparing various functional equivalents to formulate the content of strategies and thus find out their functionalities and dysfunctionalities

Strategic process

Describing specific functional equivalents to make sense of the results of strategies by observing the way strategic routines are enacted

Comparing various functional equivalents to structure the strategic process and thus find out their functionalities and dysfunctionalities

Strategic context

Describing specific functional equivalents to make sense of the strategic context by observing the way strategic roles are enacted

Comparing various functional equivalents to identify the strategic context and thus find out their functionalities and dysfunctionalities

The functional analysis of strategic management by means of first-order observation aims to explore the way in which members of organizations give meaning to their organization’s strategic content, process and context. In addition, by means of second-order observation, the functional analysis of strategic management is aimed at observing how organizations may or may not jeopardise their existence because of their strategic manoeuvres. The theoretical aim of the framework is to describe how and to explain why strategic management takes place in organizations as it does. By adopting this stance, strategy researchers can analyse strategic management as being both intentional and unintentional. In the remainder of this section, the framework will be described in more detail. 379

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Making sense of strategic content by means of strategic concepts Strategic content, as it is used here, does not refer to the planning of strategies as such but to the concepts used within the process. This implies that when we focus on the content of strategies by means of first-order observation, the use of management concepts or symbolic generalisations such as “core business”, “core competence”, “added value” and “leverage” can be uncovered. While the rise and fall of management concepts such as these is a phenomenon worthy of further critical exploration (e.g. Johnson 1990; Collins 2000; Ortmann and Salzman 2002), it cannot be denied that they benefit organizational sensemaking processes (e.g. Duimering and Safayeni 1998). Apparently, it is not important what strategic management concepts mean, it is what organizations and strategists make them mean. Take, for example the notion of “core competence”. Throughout their entire book, Prahalad and Hamel (1994) remain vague about what core competences actually are. Notwithstanding this, since the launch of the core competence concept, several authors have made checklists that enable managers to determine whether their organization has core competences (e.g. Stalk, Evans and Shulman 1992; Bartness and Cerny 1993). In management-oriented “guru” literature, many strategic management concepts can be found that should aid organizations to define strategies. While it is easy to question the scientific validation of strategic concepts, it is less easy to question their validity. After all, strategic concepts are used by managers, consultants and researchers to highlight issues about organizational life that would remain underexposed without them. Strategic concepts function as means by which organizations “de-tautologise” and “de-paradoxise” themselves in order to become operational. In other words, strategic concepts “asymmetrise” chicken-and-egg problems: for instance, that the markets to be served depend on the products offered, and the products to be offered depend on the markets served. Theoretically, each strategic concept is regarded as contingent, which implies that no strategic concept can claim superiority above others, since that would contradict its lack of necessity. Therefore, strategy gurus seem right and wrong at the same time. They are right in formulating various ways of becoming competitive and wrong in their one-sided preference for highlighting specific ways of becoming competitive. The second-order observation of the content of strategies is aimed at comparing and evaluating functional equivalents, in the way organizational members make sense of the content of their organization’s strategies by the strategic concepts they enact or wish to enact. For instance, what are the differences between the strategies of organizations that define strategies “outside-in”, and those of organizations that define them “inside-out”? The theoretical relevance of this perspective is to indicate the functions of strategic 380

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concepts by defining problems in such a way that more complex ways to analyse and compare the content of strategies arise as a result. This stance includes the problematic of the strategy concept as such. Strategy as a concept “only” dates back to the 1960s (Rumelt et al. 1994). Knights and Morgan (1991) highlight an interesting paradox in this respect: if the concept of strategy is considered to be so important for the survival of organizations, how did they survive so long without having a concept of strategy? The authors argue that the concept of strategy constitutes the problems to which it claims to be a solution (Knights and Morgan 1991, p. 255). In line with this, the second-order observation of strategic content should focus on the problems that are solved by deciding upon strategic concepts and the problems that result from these decisions. For instance, the concept of strategy as such provides both organizations and strategy researchers with a means of rationalising organizational successes and failures. The problem with this rational model is that it fails to describe the specifics of the way in which strategic decision-making takes place (Mintzberg and Waters 1985). Strategies appear to have emergent qualities that evolve from operations taking place throughout an organization (Quinn 1980). That is, strategies can be both intentional and unintentional and strategic concepts function as a solution to the problem of how to rationalise strategies a priori and a posteriori. Theories on strategy content may explain the ability and inability of organizations to redefine their strategy. Weick, for instance, stresses that “loose coupling” between strategic decisions made throughout time may well increase the potential of organizations to reproduce themselves (Weick 1977). That is, loose coupling increases an organization’s potential to produce unexpected, surprising strategic operations (Luhmann 2000c). The focus on such operational variations, with respect to the second-order observation of the content of strategies, enables strategy researchers to explain why the enduring enactment of strategic concepts such as the corecompetence concept may prevent deviating strategic sensemaking, which results in the transformation of a “core competence” into “core rigidity” (Leonard-Barton 1995).

Making sense of strategic process by means of strategic routines The strategy process relates to decisions concerning the use of strategy routines by organizations for structuring their expectations or aspirations. Just like the strategy content, the strategy process has gained significant attention in the past (e.g. Quinn 1980; Pettigrew 1992). Regarded first as a rational process by the likes of Chandler (1962), Cyert and March (1963), Ansoff (1965), and Hofer and Schendel (1978), the concept of emergent strategies arose later on (e.g. Quinn 1978; Mintzberg and Waters 1985; Weick 1987; 381

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Johnson 1988), and now strategies appear to have chaotic and selforganizing qualities (e.g. Brown and Eisenhardt 1998; Stacey 2000). The cited authors predominantly focus on the decision processes concerning strategy. Others have adopted a postmodern perspective, focussing on power and political issues that influence the strategy process (e.g. Knights and Morgan 1991; Knights 1992; Barry and Elmes 1997). The notion of the strategic process as it is used here combines both perspectives, and aims at discovering the expectations of expectations (structures) that keep the self-reproduction or autopoiesis of strategy formulation going. The first-order observations aim at uncovering the routines that structure the communication processes concerning the way strategies are formulated, implemented, evaluated, etc. (cf. Hendry and Seidl 2003) and that may lead to a “dominant strategic logic” (Prahalad and Bettis 1986; and Bettis and Prahalad 1995) that enables and at the same time constrains organizations to formulate strategies. The second-order observation of the strategy process is aimed at comparing functionally equivalent ways in which organizational members make sense of the strategy process by means of the strategic routines they enact or wish to enact. The theoretical relevance of this perspective is to indicate the functions of strategic routines. Take, for example, the strategic importance of a routine enacted by Naskapi Indians in Labrador to decide on the most profitable direction for hunting (Weick 1977, p. 203). These Indians answer the question by holding dried caribou shoulder bones over a fire. As the bones become heated they develop cracks and smudges that are then “read” by an expert. These cracks indicate the direction in which the hunters should look for game. The Naskapi believe that this practice allows the gods to intervene in their hunting directions. This bone-reading routine functions as a means of complicating the decision process, in order to solve the problem of fixed patterns of hunting activity that may result in the local extinction of game. As such, the routine is a functional equivalent to a table of random numbers (Weick 1977, p. 204). Theories on the strategy process may explain the ability and inability of organizations to live up to their own expectations by means of the way in which they structure their self-reproduction. For example, by using an evolutionary model on the strategy process, Burgelman (1996) found that Intel failed to make a success of their DRAM business because of the various departmental routines that led to the favouring of other businesses.

Making sense of strategic context by means of strategic roles There is a vast amount of literature on the way in which the strategic context influences organizations. Take for instance, contingency theory (Burns and Stalker 1961), resource dependence theory (Pfeffer and Salancik 1978), population ecology (Hannan and Freeman 1977), and institutional theory 382

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(Selznick 1957). Unfortunately, these approaches leave little room for organizations to decide on their own course of action. A more managementoriented research area relates to “corporate governance”, or “stakeholder theory”, which focusses upon the way in which organizations observe themselves in relation to their environment. As such, it is closely related to the concept of strategic context as presented here. Since the publication of the landmark book by Freeman (1984), the idea that organizations have stakeholders has become commonplace in both organization studies (e.g. Alkhafaji 1989; Brummer 1991; Donaldson and Preston 1995; Jones 1995; Frooman 1999; Henriques and Sadorsky 1999; Jones and Wicks 1999; Scott and Lane 2000; McWilliams and Siegel 2001; Tirole 2001) and management literature (recently e.g. Cummings and Doh 2000, and Waddock and Smith 2000). According to Freeman, the stakeholder approach is about groups and individuals who can affect an organization, and about managerial action taken in response to those groups and individuals (Freeman 1984, p. 48). The analysis of stakeholders concerns three questions: “Who are they?”, “What do they want?” and “How are they going to try to get it?” (Frooman 1999, p. 191). The first-order observations of the strategic context of organizations could focus on the way in which organizations self-referentially deal with the expectations of stakeholders, and how these expectations are used as a measure of corporate identity by organizations (Gioia and Thomas 1996; Scott and Lane 2000). This conception of corporate identity highlights the fact that organizations have to make sense of several distinct and probably contradictory demands, depending on the stakeholders thought to be of relevance. Thus, identity should be viewed as a multidimensional incoherent construct. The second-order observation of the strategy context is aimed at comparing and evaluating functional equivalents, in the way organizational members make sense of the strategy context by means of the strategic roles they enact or wish to enact. The theoretical relevance of this perspective is to indicate the functions of strategic roles by defining problems in such a way that more complex ways to analyse and compare the strategic context arise as a result. For instance, as Seidl (2003b; 2005) has pointed out, strategic self-descriptions have an integrative and an operative function. The integrative function of a self-description of the strategic context is to represent the organization to the organization, which gives the organization a sense of unity when comparing its different parts to each other. As such, the “outside-in” stakeholder approach and the “inside-out” mission statement are functionally equivalent solutions to the problem of presenting the organization to the organization. The operative function of self-descriptions is to give direction to the decision making regarding the strategic roles to be enacted. Theories on the strategy context may explain the ability and inability of organizations to adapt to their environment by means of self-adaptation. 383

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Gioia et al. (2000, p. 67), for instance, use the concept of adaptive instability to explain how the discrepancy between the way in which Shell saw itself and how others perceived the company caused the major controversy over Shell’s plan to dispose of the Brent Spar offshore storage and loading platform in the Atlantic.

Conclusions The main argument of this contribution has been that existing approaches to strategic management obscure the self-referential relationship between organizations and their environment. By acknowledging this self-referential relation, it becomes possible to unify existing strategic-management approaches and to observe strategic management in more complex ways. We started out by showing that existing approaches to strategic management are self-defeating. It was argued that this was due to the paradigm of adaptation, which is based upon the basic assumption that organizations can observe their environment as something existing independently of themselves. Social systems theory offers a way out by conceptualising the relation between organizations and their environment as a self-referential one; that is to say, organizations can only perceive their environment as an internal projection. Within this conception, strategic management means dealing with the paradoxical problem that adaptation to the environment is only possible as self-adaptation. It appeared that by being naïve, or ignorant of their ignorance, organizations are able to escape their self-referential imprisonment. As such, ignorance is a conditio sine qua non of organizations reproducing themselves. Subsequently, a framework was presented that enables the conceptualisation of strategic management as a self-referential phenomenon. With respect to mainstream strategy research, the application of social systems theory, and the proposed turn to self-reference for strategy research the following conclusions can be drawn. It is surprising that in the book Fundamental Issues in Strategy: A Research Agenda, edited by Rumelt, Schendel and Teece (1994), no contributions could be found that addressed the self-referential problems concerning the paradigm of adaptation in the same or in other terms. No reference whatsoever is made within the book that strategic management involves making sense of self-referential phenomena such as tautology and paradox when it comes to observing the environment. This leads us to the conclusion that the distinction between organizations and their environment, as conceptualised within mainstream strategy research, is superseded. After all, within general systems theory, ideas about self-referential observation date well back to the previous century. Unfortunately, the current state of the theory of self-referential systems does not give detailed guidelines for applying this theory to the empirical 384

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exploration of the role of self-reference. The fact that so little empirical research is carried out on the basis of self-referential systems theory is still a serious shortcoming of this theory because, as they say, the proof of the pudding is in the eating3. Following on from this observation, it seems rather ironic that the theory of self-referential systems, with all its idiosyncratic terms, is necessary to explain how social systems such as organizations make themselves possible by means of ignorance. In spite of this observation, it was found that the theory of self-referential systems is quite straightforward in its application. Therefore, it is surprising that it is so hard to find detailed instructions for the functional analysis of social phenomena such as organizations. Hopefully, this contribution will lead to more discussion in this respect. Lastly, with respect to the application of the self-referential framework to strategy research as presented here, it should be stressed that the assumption that organizations need to deal with self-reference backfires on strategic management research as a whole. If we take the self-referential closure of both organizations and ourselves seriously, it seems that the only knowledge we have to offer to practitioners takes the form of “ironic compassion” on their attempts to make sense of their environment and themselves. After all, now we know that also strategy research has its blind spots, a “sense of modesty” seems appropriate towards both organizations and ourselves. Based on the arguments presented in this chapter, the suggestion is to go ahead with the aim to restrict ourselves to describing how organizations make sense of the strategy phenomenon (cf. Nicolai 2000, pp. 301–302). By doing this we can extend our “learned ignorance” (Cusa 1981) with respect to strategic management. For now, however, we should ignore our ignorance of how to observe the potential of the move to self-reference.

3

Note that due to the radical constructivist nature of social systems theory, empirical research can never function as the ultimate test with respect to the truth of it. After all, empirical findings are self-produced “facts” that do not speak for themselves but only to the system that has produced them. Notwithstanding this observation, more empirical research, which has been inspired by systems theory, may persuade more scholars to take social systems theory more seriously.

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Chapter 18

Management Accounting from a Systems-Theoretical Perspective1 Tobias Scheytt

Introduction Within positive accounting theory, systems of management accounting and control are mostly interpreted as instruments that are aimed at improving business. From this perspective, such systems help to depict organizational reality in a neutral and objective way. Systematically, the purpose of such management accounting systems is recognised as a means of reducing complexity in organizations to a level that can be handled. In relation to practice, they provide the basis of “proper” information for managerial decisions and the resulting possibility for coordination of different managerial functions (like human resource management, operations, finance, strategy making). This forms the general basis for translating complex issues into “rational” decisions – on the basis of “professional” methods for planning and controlling (Belkaoui 1997; Emmanuel, Otley, and Merchant 1999; Kaplan, Young, and Atkinson 2003). This view is both unchallenged and unquestioned as are the presuppositions it is based on. However, like all theories that focus on organizations adopt a specific epistemological and ontological position (Burrell and Morgan 1979), this positive accounting theory is also based on a specific world-view. When analysing the epistemological and ontological background, it becomes obvious that approaches to management accounting of that kind are implicitly rooted in an idealistic worldview. Positive or “rational” accounting theories (“RATS”, as labelled by Jönsson and Macintosh 1997) see the management of organizations as a matter of rational choice and agency. From this point of view, it is consistent to argue that management accounting systems have to provide representations that replicate the organizational reality as exactly as possible. Critical accounting 1

I am grateful to Kai Helge Becker, David Seidl, and particularly Kim Soin for their helpful comments on earlier versions of the chapter.

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theory (“CATS” in the words of Jönsson and Macintosh 1997) is usually held as being the direct opposite to rational accounting theory. Critical approaches state that management accounting is far from being neutral and objective but serves particular interests, has distorting effects, puts psychic pressure on the workforce in organizations and is a tool that can be utilised to support existing power structures. However, critical accounting theory also systematically assumes that the effects caused by the use of management accounting systems are clearly identifiable and can be consistently described. Both the rational and the critical tradition therefore embody the ideal of a strong correspondence between what is observed and the observation delivered by management accounting systems. The following reflection is based on the argument that the ontological presupposition common to rational and critical approaches leads to two shortcomings: first, it simplifies the interrelation between observation and the observed. Second, it disregards the main function of management accounting systems namely, to construct a framework that fundamentally shapes communication patterns within organizations. This chapter aims at exploring an alternative viewpoint for the epistemological and conceptual underpinning of management accounting theory. It argues for a constructivist – and more specifically: a social systems theory – approach in order to conceptualise the function of management accounting. It outlines that management accounting plays an important role in the formation of the selfobservations of organizations in that it specifically pre-defines decisions in organizations. The chapter is structured as follows. First, a summary of the ontological and epistemological positions of both, positive and critical management accounting theory is given. For the positive strand, the chapter draws on management accounting theory in the German-speaking area as this tradition exemplifies a rather unquestioned position that management accounting is a tool for representing the world “outside”. For the critical strand, it refers to the Anglo-Saxon discussion with its profound and critical examination of the diverse effects that are caused by the application of management accounting systems. Second, an alternative understanding of the role management accounting plays in organizations is outlined. The intricate interrelation of management accounting systems and communication is described with respect to social systems theory. Third, the function of management accounting is discussed in relation to social systems theory’s notion of decision. The self-referential character of management accounting is emphasised as “organized” self-observation of an organization. Finally, a brief conclusion is drawn which indicates the consequences from this framework for the theorising of management accounting.

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Management accounting and the objectification of reality For an outline of positive accounting theory it is useful to relate to the management accounting discourse in the German-speaking area as it exemplifies in a clear manner the specific underpinnings of this theoretical approach. The scientific discourse on management accounting and control is – for specific historical reasons that cannot be explained here in detail – different to the international discussion. In brief, it is one specific epistemological aspect that is of particular relevance to management accounting research in the German-speaking area: management accounting theory usually has a normative orientation, in that the main aim of theory building is to improve praxis by making recommendations on how to design processes of controlling and managing business. In the German-speaking discussion, this notion has led to a variety of contributions that strive for a positive description of the role of management accounting techniques (Jacobs and Haeracleous 2002): Management accounting tools have to support management in grasping “what is really going on” in an organization and hence to take control of business processes. In general, the basis for these conceptualisations is a realistic ontology: accounting systems are seen as neutral tools for “imaging” (not imagining!) an organization which neither distort an organization’s reality nor intervene in the context in which they are applied. In order to understand the assumptions underlying management accounting theory in the German-speaking area, one has to consider a further important characteristic that stems from the broader discourse on business administration. Since the early stages of its development, German business administration theory is coined by a notion of an over-arching theoretical framework, namely that of Betriebswirtschaftslehre (general business administration theory) that encompasses several sub-disciplines (like marketing, logistics, finance, leadership, etc.). Although management accounting practices are widespread in organizations’ reality, its status as an autonomous sub-discipline within Betriebswirtschaftslehre is generally doubted. As it is a relatively young part of general business administration theory, the differentiation of management accounting from other subdisciplines, that were already “on the scene”, like for example, cost accounting or information systems management, is seen as problematic. In this sense, advocates of other sub-disciplines regularly question what the inherent theme and specific significance of management accounting theory could be. As a consequence, the management accounting discourse is, since its infancy, coined by a quest for the “core” of management accounting that can be identified as a distinctive characteristic (Weber/Schaeffer 1999). With respect to the claim for a specific scientific object, the mainstream focused in the last decade primarily on the notion of coordination. Coordination as the main function of management accounting denotes prac388

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tices that enable or support goal-oriented interventions. As decisions about the concrete design of processes and structures within organizations form the main task of business management, it is the coordination of these processes and structures that is the core task of management accounting (Horváth 2003; Küpper 1997; Weber 2004). Management accounting theory, as the “science of coordination”, has therefore to provide solutions that support management, since these coordination problems cannot be efficiently handled by management itself, due to its diverse tasks and duties. Weber (1992) distinguishes two different types of coordination applicable in organizations: “coordination through personal communication by order or self-organization” and “coordination through technocratic communication by programs or plans”. Personal communication, on the other hand, is a suitable coordination mechanism where the complexity of the “controlled” organization is rather low – e.g. in small and medium-sized enterprises. As for larger organizations, their complexity, their dynamic environment and the pressure to develop strategies and goals for the operational systems enforces “coordination by plans” which is therefore in this view the most efficient way of coordinating. This interpretation is based on an understanding of the functions of management that relates to the (first-order) cybernetics of the “classical” management cycle. Management is seen as being carried out within different sub-systems, that is, the planning system, the information system, the control (namely, monitoring) system, the personnel management system, and the organizing system (Küpper 1987). The coordination of these management sub-systems is identified as “secondary” coordination and is the domain of management accounting practice whereas the planning and coordinating of operational processes (“primary” coordination) remains the domain of management practice (Weber 1992; Horváth 2003). However, not only in terms of this structural differentiation, but also from a processual perspective the coordination of management activities is seen as necessary. The progress in different phases of the management process is understood as an object of coordination practices. Management accounting, from this perspective, is to support the management in the “cybernetic circle” of planning (definition of goals, formulation of plans), implementation of plans (breaking down strategic plans into operational programs), realisation (without the possibility of any discretion on behalf of the task performing actors), and control (with the result of a feedback towards plan definitions or towards a search for possibilities to enhance performance). The analytical differentiation of the management function into domains or sub-systems and its analytical split into several phases is understood as a necessary response to the increasing complexity within and around organizations. Management accounting has therefore to ensure the “coordination of the whole management system to achieve goal-directed management 389

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action” (Küpper, Weber, and Zünd 1990, p. 283; transl. by the author). Planning methods, budgeting, goal hierarchies, management standards, and the determination of transfer prices are the “generic management accounting tools”, by which the “rational” coordination of the management subsystems has to be executed (cf. Küpper 1997, pp. 25–29). Rationality in this context means “to proceed consciously and goal-oriented” (Küpper 1997, p. 59; transl. by the author). Or, as two of the most influential exponents of the German-speaking discourse stated (Weber and Schaeffer 1999), theories of management accounting and control systems have to have the objective of “assuring” the rationality of management. The notion of rationality that underlies this conceptualisation is the very basic means-end rationality in Max Weber’s (1968) sense. Accordingly, the notion of the organization is that of a mechanism that acts like the ideal type of a Weberian bureaucracy, or, to use Morgan’s (1986) metaphors, as a “machine-like” functional mechanism. Undoubtedly, this approach acknowledges that the reality of organizations is coined by dynamics, conflicts, inefficiencies, micro-politics, personal interests etc. From its normative point of view however, these phenomena are just distortions from an imaginable optimum of a means-end rationality. And, it is management accounting whose main task is to pursue the idea of a perfect rational organization and to eliminate any disturbances that pulls the organization away from this path. This very short description of the basic features of German-speaking management accounting theory already indicates some conceptual characteristics that are incompatible with the state of the art of current management and organization theory. For example, the very basic insight that all organizations are shaped by the diverse and often contradicting individual interests and that organizational actors tend to look after their own interest in decision-making situations (for example, March 1996) is neglected by the notion of an ideal type of rationality whose realisation is at least seen as possible. Furthermore, the notion that there is one rationality standard that has to be realised contrasts with the basic insight that organizational actors follow diverse rationality concepts and that therefore talk and action in organizations necessarily differ (Brunsson 1989). Additionally, it is disregarded that rationality is in organization theory conceptualised as a construct organizational actors have to make sense of in each situation within the ongoing organizational processes (cf. Weick 1995) and that therefore no rationality standard can be “implanted” into an organization, even if it is the very basic standard of a means-end rationality. But it is not only the rationality standard which is a critical feature of German management accounting theory; it is also the notion of management that shows conceptual shortcomings. This is largely because its understanding of management refers to modernist, Taylorism-like conceptions. 390

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Consequently, the notion of coordination adopts the same conceptual narrowness. And, the view that planning precedes action (and for example that structure follows strategy), is in contrast to the more complex views of the management process, which are sceptical about the “standards” of rationality of management (Cohen, March, and Olsen 1972). The idea that managerial and operational (e.g. the management accountant’s) tasks, while systematically overlapping, can be individually assigned, suggests a problematic view of power relations as it disregards the processual character of task assignment. On a more technical level, it remains unclear how the microprocesses of coordination are (or should be) actually formed, i.e. what the specific contents, procedures and outcomes of such processes are. The issue of communication that is crucial for the actual process of coordination tends to be neglected. It is not surprising that the interpretation of the organization as a neutral body, and of management as a “rational” activity, is methodologically followed by a positivist research orientation. The usefulness of a theory is therefore judged with respect to its abilities to copy the reality of organizations. One could argue that critical accounting theory contradicts the epistemological and ontological suppositions of positive accounting theory and is therefore an alternative way of conceptualising the function of management accounting. Although this tradition encompasses different theoretical perspectives, the overarching view is that positive accounting research is not value-free but serves certain ideologies (see, for example, Tinker, Neimark, and Merino 1982; Chua 1986; Armstrong 1987; Laughlin 1987; Dillard 1991; Roslender 1993; Miller 1994; Roslender and Dillard 2003). It is argued that in positive accounting theory the intricate interrelation between management accounting and the social and organization context in which it operates (Hopwood 1983; Puxty 1993; Miller, 1994) is simplified via an abstract distinction between the organization and the ways in which it is observed, measured and controlled. This led to the development of the socalled “new accounting research” which is “distinguishable by its (fuller) recognition of accounting as constitutive of, as well as constituted by, the social and organizational relations through which it travels, and with which it engages” (Morgan and Willmott 1993, p. 4). However, one aspect of critical accounting theory corresponds to positivist approaches and is particularly important for the conceptualisation of the function of management accounting. As Jönsson and Macintosh (1997) explain, critical accounting theorists try to reveal the conflicts under the surface of a seemingly stable social world and to identify the class and group struggles that are kept hidden behind the façade. In order to establish this critical attitude, critical accounting theory must, in a way similar to positive accounting theory, presuppose an ontological constant, from which the coercive and distorting nature of accounting practices can be identified. As 391

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Jönsson and Macintosh (1997, p. 375) highlight, critical accounting theory is therefore Foundationalist in that it asserts that analysis of a social order must have a firm theoretical grounding and in that it posits ex ante the presence of ubiquitous deep structures running below the surface of daily social existence. […] The ultimate goal is to enlighten academics, practitioners and students alike about this underside of the accounting world. Such an idealistic impulse holds out the hope of a more democratic, humanistic and less coercive world.

Despite the diversity of the different approaches it is thus the taken for granted ontological basis that is common to both, positive and critical accounting theory. It is the notion of an ideal (organizational) world in the case of positive accounting theory, in which problems are solved in the manner of a perfect means-end rationality. Similarly, critical accounting theory relates to theoretical constructs (or normative ideas) that identify the organizational world as distorted and exploiting the individual. Hence, although the background ontologies are clearly opposed, it is their function in the process of theory building that is identical in both approaches.

Management accounting and systems theory: coordination, communication, and control We can conclude from the brief discussion of positive and critical management accounting theory that the character and the outcome of management accounting processes are more complicated than the simplifying view of management accounting as a neutral and objective tool (or, from a negative perspective, as a means for distortion and coercion) indicates. Hence, management accounting practices cannot be fully conceptualised within a theoretical framework that is based on an idealistic (Hegelian) world-view, which underlies these approaches. This is also indicated by the manifold and sometimes ambiguous functions that management accounting has in organizational life, for example, in corporate scandals, fraud, embezzlement and mismanagement and also by the nature of reactions to this by auditing and risk management practices (Power 1997; 2004). Hence, with respect to this tangle of diverse intended and unintended effects, the function of management accounting cannot be explained by approaches, which are based on the above mentioned dualistic configuration of management accounting system vs. organizational reality – whether it appears in the form of positive or in the form of critical accounting theory. The sometimes surprising outcomes of the implementation and application of management accounting systems would, from this perspective, indicate that decisions and actions would be irrational in relation to what the systems prescribe. Hence, on the basis of a 392

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dichotomy of a focal organization and a management accounting system as a (mis-)representation of this organization, it would be impossible to adequately consider the multi-faceted functions management accounting systems have. To overcome the dichotomous configuration, it is useful to refer to the basic fact that management accounting systems are designed and used by an organization in correspondence solely to its own requirements, but not to any outside references. This corresponds with the situation when a management accounting system is implemented in an organization. In simple terms, a management accounting system is developed within and by the organization that implements it for its own purpose. In this process, the systems has to be established, formed and used by the organization or, in the words of Karl Weick (1995), the organization has to “make sense” of the system and the information provided by it. The essential question is then how management accounting can be described as a recursive process – without the need to relate to an outside reference, whether a rationality standard, an ideological presupposition, or a notion of an ideal world. Logically, such an approach has to argue that the function of management accounting systems cannot be identified a priori and without reference to the focal organization. Rather, the meaning of management accounting is “constituted in use” (Hedlin 1996, p. 193). Expressed in ontological terms, such an interpretation has a de-ontic orientation in that it explains the use of management accounting as a process without specific presuppositions, or as an operation that an organization applies to itself as a means for selfobservation and self-description. By this conceptual rearrangement that philosophers would call a “linguistic turn” (Wittgenstein 1961) management accounting systems adopt a prominent role in the organizational language game (cf. Mauws and Phillips 1995). Against this backdrop, management accounting is an operation, rather than a task, a tool for, or a process of representation. This operation can be understood as a medium for shaping the ongoing process of communication in organizations or as a selfdeconstruction of an organization (see, for a similar argumentation, Chia 1997). And, if we take into consideration that communication is a medium in social life by which coordination takes place, we can argue that coordination is brought about by communication. This contrasts with positive accounting theory, where management accounting systems exert the coordination function via technical adaptations, for example by coordinating different management tasks or phases in the management process. Hence, one can conclude that management accounting systems shape communication and thereby constitute coordination. But how are we to understand the exact functional mechanisms by which management accounting systems inform communication, and hence coordination? In the following, it is suggested that social systems theory (Luhmann 393

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1990d; 1995f; 1997a; 2000c; Baecker 2001b) provides a framework by which the functions of management accounting can be conceptualised on the basis of a very simple operation, namely, the distinction between that what is (or can be) communicated – and that what is not (or cannot be) communicated. I do not have the space here to give a detailed introduction into the concept of social systems theory (see for that purpose Luhmann 2003). In the following, however, those basic configurations of social systems theory which are relevant for a conceptualisation of management accounting as operation of self-observation shall be sketched. In systems theory words, organizations are complex and intransparent systems (Luhmann 1997b). Certainly, this insight is anything but new for management accounting theory. Already Anthony’s groundbreaking work on “management control systems” (Anthony 1965) emphasises that organizations are complex systems which need specific techniques and practices for control. Also, the German term for management accounting, Controlling, indicates this system-oriented view. However, while Anthony sees the system of an organization as an entity that can be controlled from the outside (e.g. by a manager controlling a business unit), systems theory states that organizations are autopoietic systems which control themselves in a self-referential mode. The notion of autopoiesis of social systems was derived from the work of Maturana and Varela (1980) on the self-reproduction of natural systems. The main consequences of this theoretical switch are twofold. First, while a system is structurally coupled with its environment, it is operationally closed. That is to say, while material (information, resources etc.) is mutually exchanged between a system and its environment, the ways in which systems (re-)produce themselves are solely based on their own resources (material, processes, information, cognition etc.). Second, to maintain the border between system and environment is crucial for the existence of the system. A confusing complexity of information is offered to the system by the outside world, thus the system has to reduce this complexity and thereby to separate itself from its environment to protect its own functionality. In contrary to the theory of bio-systems (Maturana and Varela 1980), where physical and chemical processes are understood as the type of information that forms the basis of self-reproduction, it is, in the case of social systems, communication that is the basic operation of the system. These characteristics of communication in social systems theory are the reason, why this framework is particularly useful for a conceptualisation of management accounting. Therefore, the role and function of communication for social systems shall be briefly explained. Social systems are defined as consisting of communications, which are the “elements” of the system, and references between communications, which are the “relations” between the “elements”. Individuals (or “psychic systems” in the terminology of Luhmann 1995f) are therefore seen as part of the environment of the social 394

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system. Hence, communication is not to be understood in the common sense of discussion, conversation, talk, or discourse, carried out by individuals or groups. Rather, a social system is formed by a network of ephemeral phenomena of communication acts, appearing and immediately disappearing within the system. Therefore, communications obtain their relevance only through following communications that refer to them (Luhmann 1995f). This construction forms the de-ontic basis of social systems theory: communications are not referred to facts or deeds, but solely to previous communications. Hence, communications are analogous to self-observations: a communication reacts to previous communications and is therefore an observation of an “element” of the system, and will be addressed by subsequent communications, hence is object of future self-observations. One could argue, that this interpretation of a social context replicates a mechanistic world-view, as the concept of system – particularly with reference to the first generation of systems theory (Wiener 1961; Bertalanffy 1955) – is generally associated with a notion of control, in which social relations are seen to be steered in a quasi-technical or strictly functional manner. However, what distinguishes social and technical systems is the fact that communication is an operation that is shaped by a fundamental contingency. A communication cannot fully determine how an ensuing communication will relate to it. Rather, the meaning of a communication can be understood only in retrospect, in its relevance for future communications which relate to it. Hence, while the sequencing and chaining of communications as the sole operation of the system seemingly is a socio-technical mechanism, it is nevertheless a priori contingent, whether and how future communication will link to present communication. The reference to communication in social systems theory is related to the position of epistemological constructivism (Luhmann 1990i). Accordingly, social systems are, in this view, understood as black boxes. This understanding refers to the observation that factors which cannot be fully identified influence the functional mechanisms of the system. Hence, a social system is a so-called “non-trivial machine” (von Foerster 1984), in contrast to “trivial machines” which can be controlled in a technical manner: the system is non-predictable, due to the complexity, which exceeds its own “processing capacity” for the production of self-knowledge. Therefore, the system is, to a certain extent, intransparent even for its own self-observation: “The system cannot produce a complete description of itself” (Luhmann 1997b, p. 359; transl. by the author). However, this intransparency does not imply that systems are generally uncontrollable. Rather, a system is able to, and has to, stabilise itself recursively by the ongoing flow of communications carried out within itself Luhmann (1997a, pp.190 ff.). The contingency of communication is also relevant for understanding the role of management accounting. If we make the “linguistic turn”, we have 395

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to accept that controlling a business as the main goal of management accounting is not a technical process, but is also contingent and fuzzy, as it is carried out by and in communication. As Baecker (2000, pp. 59 f.) highlights: Any control is an act of communication and can only be successful to the extent that communication is successful. […] Any insight into the communication dynamics of control is a deconstructive one. As soon as we enter the concept of communication, out goes the concept of causality. Communication means to be unsure about cause and effect. We have to wait for causes to effect their effects, and for effects to be caused by causes as soon as communication comes into play. Communication is the concept that steps in as soon as Gregory Bateson’s statement that “the cause is not the effect” is taken seriously. This means that “something” is going to happen for a cause to effect its effect, and for an effect to be caused by a cause. Causes have to select their effects, and effects have to select their causes in a world that is characterized by both over-determination and under-determination, i.e. by there being lots of causes and lots of effects floating around, with no definite relationship between them.

If we consider this “fuzzy” nature of communication (and hence control), we face two consequences. First, we realise that management accounting systems, even though well-known as systems for steering and controlling organizations, are neither instruments for copying the organizational “world” in representational forms, nor instruments from which one-to-one conclusions on future operations can be drawn. Second, the role communication plays within the social system is not only that of a transmitter of information from a sender to a recipient, but also a medium in the cognitive process of the whole social system. This also holds for management accounting systems: They influence organizations via communication, but not by representing economic measures. Despite the fact that management accounting is a “fuzzy” practice – because it is carried out via “fuzzy” communication – one can learn from observations of management accounting praxis, that it is nevertheless understood as a powerful tool having a potential for controlling strategic as well as operational issues in a variety of organizational types and settings. This apparent contradiction can be solved if one refers to the form of communication specific to organizations. In the next chapter, the notion of decision as the form of communication specific to organizations shall be therefore further explored.

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The function of management accounting: delivering distinctions, defining decision premises According to Luhmann (2000c), the basic operation of organizations is decisions. Hence, decisions and communications are analogical in the case of organizations: a decision communicates what has been decided. As is the case with communications in all social systems, the meaning of a decision in an organization results from its reference to previous decisions and ensuing decisions that refer to it. Hence, the web of decisions is the fabric of an organization. But how, then, does management accounting intervene in this network of decisions? At first sight, one could argue that management accounting affects decisions by providing facts and figures or, in systems theory words, by performing operations of self-observation that are validated when a decision refers to them. However, the systems which deliver the facts and figures don’t come out of the blue; rather, these tools and techniques have specific requirements insofar as the organization has to choose the scope and the design of these tools and techniques. Thus, the formation of a management accounting system also originates in a decision situation. One can conclude that establishing a management accounting system means to make a decision that pre-forms the basis to which ensuing decisions can refer to. For understanding this recursive structure it is useful to relate to two further elements of social systems theory namely, the interpretation of Spencer Brown’s (1979) notion of distinction on which Luhmann’s notion of decision is based on, and, second, the meaning of decision premises in Luhmann’s concept of the organization (2000c, pp. 222 ff.). As already indicated, it is the very fact in social systems theory that the “point from which all further investigations must begin (is) not identity but difference” (Luhmann 1995f, p. 1). Hence, communication is an explication of an observation, and the way in which an observation is performed is that one draws a distinction. The discussion of observations as distinctions (cf. Luhmann 1997a, pp. 120 ff.; 2006) draws on Spencer Brown’s work on the “calculus of form” (Spencer Brown 1979). The basic proposition is that “only by drawing a distinction one is able to indicate something and thus know what to refer to” (Baecker 1999b, p. 7). But this distinction should not be understood as a definition in the sense of a “classical” representational epistemology. Rather, a distinction contains more than just an indicative act, by which certain characteristics of an entity are categorised. Spencer Brown (1979) states that the distinction includes three elements: the indication of “something” (in Spencer Brown’s words: the “marked state”); furthermore, the non-indicated rest (“unmarked state”); and finally, the distinction itself, by which the marked and the unmarked state are separated. To relate this to the function of management accounting, we can argue that management accounting systems pre-form specific distinctions that are 397

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used in further operations of the organization. In this sense, implementing a management accounting system is a process of drawing a distinction between that, what can cognitively be addressed by ensuing decisions and that what cannot be cognitively addressed. In designing its management accounting systems an organization therefore distinguishes “patterns” for future self-observation. For example, if a company implements a Balanced Scorecard (cf. Kaplan and Norton 1996) for strategic control, it has to define objectives which are related to strategic goals and to define measures on which the focus of (management) attention is directed. This is a process, however, of distinguishing those objectives and measures which are seen as relevant from those that are – from this moment on – irrelevant. It is obvious from this description that the implementation of a management accounting system in an organization is significant for future decisions. Such a system aligns the focus of observations in relation to what is indicated by it and fades out all the rest, that is, what is not indicated by the drawn distinction. If, then, a decision has to be made, it has to be related to the information provided by the management accounting system. For example, if a Balanced Scorecard is once implemented as the central means for managing performance, no other mode or type of observation will be any longer relevant for the measurement of units or processes. For example, a company might start on the basis of a Balanced Scorecard to identify those business divisions that do not contribute much in pursuing its visions, or operations which do not contribute to the overall performance – and transform these observations into a decision on, for example, outsourcing of a unit or a restructuring of processes. Therefore, economic quantities can only be assessed (and get thereby relevant) through the lenses of this particular management accounting system once it is implemented. The logic of these mechanisms correspond to what Luhmann (2000c, pp. 222 ff.) names “decision premises”. With this concept, borrowed from the work of Simon (1951), Luhmann denotes those factors that pre-define a decision situation, but are themselves the result of previous decisions. The premises serve in future decision situations as a means for orientation. This does not mean, however, that the content of future decisions is completely fixed by decision premises. But regardless of whether conformity to, or deviance from, the premises is the result of a decision, the references a decision relates to are in any case delivered by the premises. As Luhmann states, decision premises “focus the communication on the distinctions that are laid down in the premises” and are utilised in that one does not have to “repeatedly unwrap the full complexity of (decision) situations” (Luhmann 2000c, p. 224; transl. by the author). Although not explicitly mentioned by systems theory, one could argue that management accounting systems are important examples of decision premises, considering their significance in decision situations. The influential role 398

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management accounting systems play in decision situations, though, should not lead to the conclusion that an organization is completely “blind” and dependent on the distinctions provided by the management accounting system. Certainly, from “within” the distinction, for example in a specific decision situation, the distinction is the “blind spot” for any observer (von Foerster 1981). However, as is the case with all distinctions, the implementation of a management accounting system results in more than the indication of a “marked state”: the act of distinguishing also constitutes the complete form of the distinction which includes both sides of the distinction – the marked and the unmarked state. This complete form of the distinction, however, can only be observed from the outside. For example, an external consultant can examine a management accounting system in order to figure out whether the system is suitable for the purposes of a company. But this is obviously another mode of operation than using information provided by the system in decision situations. In systems theory words, the observation of the complete form of a distinction comes about by a “re-entry” (Spencer Brown 1979, pp. 113 ff.) of the distinction into the realm it distinguishes. Hence, as soon as a distinction is drawn, its functions can be grasped only by means of a second-order observation. On this level, the complete scene of a decision situation becomes visible: an observer who observes a distinction in a second-order observation, for example an investment decision, does not only observe the two sides of the distinction – that means to agree or to disagree with the decision taken; the observer also observes the “form” that make such a choice possible, for example, the figures and ratios that are relevant in the decision process and led to the selection of a particular investment alternative – and no other; and it is possible to observe that what “hides” (Baecker 2001b) behind the distinction, for example, the debates and political processes that led to the selection of one particular alternative in the decision situation. However, it is clear from the analysis of this “distinction theory”, that such a second-order observation is an exceptional form of observations and that this operation is difficult to perform within an organization that “sticks” to its first-order observations delivered by the implemented management accounting systems.

Conclusion The aim of this chapter is to suggest social systems theory as a framework for analysing the significance of management accounting for the self-observation of organizations. With respect to the notion of the organization as an autopoietic, operationally closed system, management accounting was depicted as a source for distinctions which serve as observations in the communication processes within organizations. Furthermore it was explained that the tools and measures that are the used for the production of these dis399

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tinctions are, reciprocally, a result of the ongoing communication process within the organization. Two main conclusions can be drawn on the basis of this brief outline of a systems theory approach to management accounting. First, this conceptualisation allows integrating management accounting theory with basic concepts of advanced organization theory. For example, the function of management accounting can be related to sense-making as the basic requirement in processes of organizing (cf. Weick 1995). In this perspective, management accounting intervenes into the processes of sense-making in that it penetrates the cognitive patterns to which communication acts in an organization have to relate. Basic notions (or: distinctions) enacted in the organization are “defined” by management accounting, for example what is related to as costs, prices, accountability, success, and failure. Management accounting can thus be defined as the function, by which the semantic principles underlying the communication processes within the organization are constituted. This leads us into the second conclusion which concerns the epistemological and ontological status of management accounting theory. On the basis of a social systems theory approach it becomes obvious, that the function of management accounting is not representing the world outside, but constructing the “reality” in an organization. This perspective responds to the claims for a de-ontic conceptualisation of management accounting without the need to relate to an outside reference, whether a rationality standard, an ideological presupposition, or a notion of an ideal world. As Luhmann (1997b, p. 369) emphasises, one of the consequence of a systems theory approach is that One will have to refrain from representational epistemology at all, if one acknowledges that systems do not operate outside their borders in their environment, and therefore cannot communicate their states at all. Operationally closed systems can only operate within their borders, even if the meaning of border suggests to them that there has to be another side. With their own operations they are unable to pierce their borders and therefore they are unable to compare internal and external states of affairs.

Consequently, if management accounting is conceptualised on the basis of social systems theory, its function cannot be defined as the representation of organizational realities. Seen from the level of a second-order observation, it is also obvious that management accounting systems are not a stable means for the observation of organizational realities; indeed, these systems are temporal and transient phenomena. Therefore, their potential does not depend on the rightness or falseness of the data they provide but in their potential to form the distinctions to which one has to refer to in processes of selfobservation. 400

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To sum it up, the analysis of management accounting systems based on the social systems theory approach is not merely a speculative reflection. It can be stated that this approach provides comprehensive insights in how management accounting systems affect patterns of communication and observation in organizations and hence, what the “real” function of management accounting is. Thus, a systems theory perspective makes management accounting accessible to an interpretation that goes beyond an instrumental description of management accounting techniques and incorporates technical aspects into the cognitive effects that are the result of the application of such instruments. The “outcomes” of management accounting systems are the pre-definition and validation of the “language” used in a focal organization (cf. Baecker 1992b). They distinguish via their application what can become a communicable “fact” – and what cannot. It is this specific function that is peculiar to management accounting – and it is this specific function that constitutes the influential role management accounting plays in today’s organizations.

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PART VII Glossary and Bibliography

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Glossary to Niklas Luhmann’s Terminology David Seidl

Action: actions are (fictive) constructs of social systems for observing, and communicating about, their communications. While communications are the unity of three selections (utterance, information and understanding), the concept of action captures merely the first two (utterance and information). The observation of communication as an action is thus a simplification. When social systems observe communications as actions, they treat them as the products of persons (“actors”) rather than of the social system itself. Autopoiesis: autopoiesis means self-reproduction. A system is autopoietic if its elements are reproduced through its own network of elements. This does not mean that the system itself has at its disposal all of the causes necessary for self-reproduction. It merely means that the system has at its disposal a sufficient range of disponible causes, so that it can secure its own reproduction under normal circumstances. Code: a code is a two-sided distinction, where the two sides are the exact opposite of each other; for example true/false, just/unjust, present/absent. Many social systems reproduce themselves on the basis of a communication coded in a particular way. The communications of the legal system [functional differentiation], for example, carry the code legal/illegal. That is to say, each legal communication communicates something as being legal or illegal. Similarly, the communications of the interaction system carry the code present/absent. Cognitive routine: cognitive routines are particular types of decision premises. They refer to the way in which the environment is conceptualised by the organization. Cognitive routines, for example, inform about characteristics of the customer. Communication channel: communication channels are particular types of decision premises. Luhmann refers to them also as the “organization of the organization”. They determine who can communicate with whom about what. Communication: in contrast to the classical notion of communication as the transfer of information from a sender to a receiver, according to Luhmann’s concept, communication is understood as the synthesis of three selections: information (what is communicated), utterance (how and why it is communicated) and understanding (the distinction between utterance and information). Communication as this unity of the three selections is an emergent phenomenon that is not attributable to a single individual: it presupposes at least two individuals. Complexity: complexity refers to a situation where there are more elements than can be related to each other. Complexity in this sense implies the necessity of selection.

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Contingency: contingency is formally defined as the negation of necessity and impossibility. Contingency means a situation where different selections are possible. Luhmann speaks of “open contingency”, when the selection is still to be made, in contrast to “closed contingency”, when the selection has already been made, i.e. when a different selection could have been made. Decisions transform situations of open contingency into ones of closed contingency. Decision premise: The concept of decision premise denotes the structural preconditions for decision making. Luhmann distinguishes between decidable and undecidable decision premises. Decidable decision premises refer to those decision premises that are the result of individual decisions. Every decision is a (decidable) decision premise for further decisions in the sense that further decisions can take it as a given point of reference for their own selection. A particular type of decidable decision premises consists of decision premises that are explicitly decided on, of which there are three forms: decision programmes, communication channels and personnel. Undecidable decision premises are decision premises that are not produced by individual decisions but emerge as a by-product of the decision-making process. There are two types of undecidable decision premises: organizational culture and cognitive routines. Decision programme: decision programmes are a particular type of decision premise that define conditions for correct decision making; they are often also called “plans”. There are two different kinds of programmes: conditional programmes and goal programmes. Conditional programmes define correct decision making on the basis that certain conditions are given. They generally have an “if-then” format – “if this is the case, then do that”. Goal programmes, in contrast, define correct decision making by defining specific goals that are to be achieved, e.g. “profit maximisation”, and in this way structure the given decision possibilities. Decision: decisions are a particular type of communication. In contrast to ordinary communications, which only communicate a specific content that has been selected (e.g. “I love you”), a decision communication communicates also – explicitly or implicitly – that there are alternatives that could have been selected instead (e.g. “I am going to employ candidate A and not candidate B”). Because of that, decisions are paradoxical [paradox] communications: the more they communicate that there are real alternatives to what has been selected, the less the selection will appear as justified and thus the less the decision will be accepted as “decided”. The more the selected alternative is justified as the right selection, the less the other options will appear as alternatives and thus the less the decision will appear as a “decision”. De-paradoxization (synonymously: de-paradoxification): the concept of deparadoxization, or de-paradoxification, refers to the transformation of paradoxes into forms in which the paradoxicality is disguised. Paradoxes cannot be solved or eliminated; they can only be shifted “out of sight”, i.e. postponed, suspended, transformed or replaced by using other distinctions. Element/operation: the elements of autopoietic systems [autopoiesis] are the system’s operations. In the case of social systems, for example, the elements/operations are communications, and in the case of psychic systems they are thoughts. These elements/operations are momentary events, which occur only once and only in the briefest period necessary for their appearance. As a consequence, autopoietic sys-

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tems are forced to incessant reproduction if they are not to disappear. The system’s elements are defined as elements merely through their integration into the system. Outside or independently of the system they have no status as elements; that is to say, they are “not ontically pre-given”. Elements can, of course, be composed of different components, which can be analysed independently of the system, but as elementary units they are only defined through the functions they serve for the system as a whole. Environment: the environment is not a kind of pre-given world outside the system, but it is co-produced together with the system. The environment is as much a product of the system as the system itself. In this sense, the environment is the organization’s construction, which is not to say that its reality is denied. Functional differentiation: differentiation refers to the formation of systems within systems. The differentiation is functional if the subsystem acquires its identity through the fulfilment of a particular function for the system as a whole. Luhmann speaks of functional differentiation particularly with regard to society. Modern society is differentiated into different functional systems. Each of these systems serves exclusively one particular societal function. There is, for example, the legal system, the economic system, the system of education, the system of art. All of these systems are autopoietic systems [autopoiesis] that are merely structurally coupled [structural coupling] to each other. Most of these systems reproduce themselves on the basis of a particular code. Human being: human beings are conglomerates of several autopoietic systems: psychic system, cells, brain, and organism. This conglomerate does not form a systemic unity. Its different parts are merely structurally coupled. Interaction system: interaction systems are a particular type of social system, which produces itself on the basis of particular communications: communications among people present. They presuppose the participants’ reflexive perception of their physical presence. Interpenetration: interpenetration is a particular type of structural coupling. The prime example of interpenetration is the relation between social system and psychic system. Luhmann speaks of interpenetration if an autopoietic system presupposes the complex achievements of the autopoiesis of another system and can treat them as parts of the own system. Meaning: meaning is formally defined as the difference between actuality and potentiality. A momentarily actual thought or communication refers to other possible thoughts or communications. The meaning of a particular communication or thought is its surplus of references to other thoughts and communications. Social systems and psychic systems both process meaning; the first in the form of communication, the second in the form of thoughts. Luhmann distinguishes three dimensions of meaning. The fact dimension of meaning distinguishes references into “this” and “something else”. Something is “this” and not “something else”. A knife is a knife and not a spoon, or fork. The temporal dimension of meaning divides references into “before” and “after”, as well as into the two horizons of past and future. The social dimension of meaning refers to the differentiation of references according to the distinction of “ego” and “alter”. It is a distinction between different social

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perspectives. In every meaningful event the three dimensions can only take place in combination. Observation: drawing on Spencer Brown, Luhmann uses the term “observation” in a very abstract and broad sense, which goes beyond its usual meaning as optical perception. An observation is any type of operation that makes a distinction in order to indicate either side of the distinction. A communication, for example, is an observation as it communicates a particular meaning out of all possible meanings; i.e. it selects a particular meaning from other possible meanings. Operative closure: operative closure means that a system can only operate in the context of its own operations and that it depends in this process on the structures that are being produced precisely by these operations [self-organization]. No operations from outside can become operations of the system, nor can the system operate in its environment. A thought, for example, cannot become an operation in a social system, nor can a communication become an operation in a psychic system. Operative closure does not mean that the system’s operations are not affected by external influences. On the contrary, operatively closed systems usually depend on external influences; the operative closure is a precondition for a system’s interactional openness. All autopoietic systems [autopoiesis] are operatively closed. Organization: organization is a particular type of social system that reproduces itself on the basis of decisions. Organizational culture: organizational culture is a particular type of undecidable decision premise. It refers to the way in which an organization deals with its own processes of decision making. For example, if the organization always produces the same kind of decision (e.g. recruiting merely male candidates) this might condense into an undecidable decision premise for future decisions – in the sense of “we have always done it this way”. Other-reference (synonymously: hetero-reference, environmental reference, external reference): the concept of other-reference describes the reference of operations to the environment of the system. Social systems, for example, communicate [communication] about phenomena of their environment. Paradox: a paradox occurs when the conditions of the possibility of an operation are at the same time the conditions of its impossibility. At the centre of Luhmann’s organization theory is the paradox of decision: if the decision communicates that there are real alternatives to the decision, the decision will not be accepted as “decided”. However, if the selected alternative is justified as the right selection, to which there are no real alternatives, the decision will not appear as a real “decision”. Formally, paradoxes are conceptualised as a re-entry of a distinction into itself, i.e. the outside of the distinction enters its inside. As a result, the inside is both inside and outside of the distinction; the distinction starts to oscillate: if one is inside, one is outside and thus is inside… Due to this oscillation paradoxes provide no clear point of connection for ensuing operations and thus tend to lead to paralysis. Person: persons are a construct of social systems. The person is a bundle of social expectations directed toward individual human beings. Personnel: personnel is a particular type of decision premise that concerns the recruitment and organization of personnel. Organizations, on the one hand, decide

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on the commencement and termination of membership and, on the other hand, on the transfer of members to different positions within the organization – both with and without promotion. Position: positions are nodes at which the three (decidable) decision premises (decision programme, communication channel, personnel) meet and are specified with regard to each other. Every position executes a particular programme, is filled by a particular person, and is located somewhere in the communication network. Psychic system (synonymously: mind, mental system): psychic systems are autopoietic systems [autopoiesis] that reproduce themselves on the basis of consciousness or thoughts. Their elements are thoughts that produce further thoughts. Re-entry: drawing on Spencer Brown, Luhmann speaks of a re-entry when a distinction is applied to itself. This would occur, for example, if one analysed whether the distinction just/unjust were itself just, or if a system reflected (inside the system) its system/environment distinction. Formally, the distinction re-enters the distinction and the outside of the distinction appears on its inside. As a consequence, the inside of the distinction becomes both inside and outside. Thus, the value of the distinction becomes ambiguous; it oscillates between inside and outside: if one is inside, one is outside and thus inside … [see paradox]. The re-entry is also described as a selfobservation [observation]. Self-organization: in contrast to the concept of autopoiesis the concept of selforganization does not refer to the (re)production of elements but to that of structures. Autopoietic systems are always self-organizing as they determine their own structures. Self-reference: self-reference designates every operation that refers in some way or other back to itself. Autopoietic systems [autopoiesis] are self-referential in the sense that all their operations refer to other operations of the same system. Social system: social systems are autopoietic systems that reproduce themselves on the basis of communications (communication). Their elements are communications that produce further communications. Luhmann distinguishes three types of social systems: society, organization and interaction. Societal differentiation: in the course of its evolution, society displayed different forms of differentiation. In archaic times society was differentiated into equal subsystems (segmentation), e.g. different tribes, clans, or families. This was replaced later on by differentiation according to the logic of centre and periphery, i.e. the differentiation between city and country. In late medieval times a hierarchical form of differentiation emerged, which was characterised by different social strata or classes (stratification). With the emergence of the modern society, around the 18th century, this was replaced by the current, functional differentiation, where we find several societal subsystems specialised in serving specific societal functions; e.g. law, science, economy, art, religion. Each of these primary forms of differentiation can be combined with the other forms of differentiation on a secondary level; e.g. in stratified society the different strata were often differentiated internally into equal subsystems (segmentation), or according to the difference centre/periphery. Similarly, the different functional subsystems might be differentiated internally either into equal subsystems, or into centre/periphery, or hierarchically.

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Society: Society is a particular type of social system, which includes all meaningful communication and is always formed when communication refers to other communication. All other types of social systems take place within society. Besides reproducing themselves, they always also reproduce society. Structural coupling: two systems are said to be structurally coupled if their respective structures are adjusted to each other in such a way as to allow for mutual influences. Social systems and psychic systems, for example, are structurally coupled through language. Structural coupling can explain why systems, despite their operative closure (i.e. in spite of the absence of any operative coupling), remain responsive towards other systems in their environment. Interpenetration is a particular form of structural coupling. Structure: structure refers to the selection of relations between the elements of a system. The structures of organizations are decision premises. Structures and operations are recursively related: structures enable and restrict the operations that then reproduce or change the structures for further operations. Uncertainty absorption: uncertainty absorption describes the processual aspect of organization. In the transition from one decision to the next the original uncertainty involved in the decision is absorbed. The ensuing decision takes the result of the earlier decision as given and does not have to consider the uncertainty involved in that decision. In other words, uncertainty absorption takes place when decisions are accepted as decision premises and taken as the basis for subsequent decisions.

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Annotated Bibliography of Selected Works by Niklas Luhmann Kai Helge Becker

The enormous œuvre of Niklas Luhmann during his life as a scholar, from 1958 to 1998, comprises some hundred different publications, including many dozens of monographs. Giving a full, or indeed an accurate, account of his works is not an easy task, as Luhmann was not particularly meticulous about keeping a complete list of his publications. The most comprehensive catalogue of Luhmann’s writings by far, is Niklas Luhmann’s Complete Works 1958–2005, scheduled to be published simultaneously in the USA and Germany in 2006 under the editorship of Klaus Dammann (University of Bielefeld) and a team of several editors whose aim is to catalogue Luhmann’s publications in different languages. This CD-ROM will contain a list of Luhmann’s works in altogether about twenty languages and counts ninety-three publications in English. Among the latter, there are seventeen books, fifty-five essays, including lectures and contributions to books, as well as several reviews and interviews. Thanks to Klaus Dammann’s kind support, the bibliography of the present volume already benefits from his editorial work. The present annotated bibliography is intended to facilitate further reading by providing an overview of Luhmann’s œuvre, as well as some basic orientation to those interested in his work. The texts listed here are a selection of Luhmann’s English publications and have been chosen according to the criteria of accessibility (regarding both the content of the text and the source where the text has been published) and representativeness for Luhmann’s later works after his “autopoietic turn”. The selection has been guided also by a certain bias towards what may be considered especially relevant to the scholar of organization studies. In nine cases, so far untranslated German texts have been included, due to their outstanding significance among Luhmann’s works. In sum, the forty-eight publications chosen here cover approximately half of Luhmann’s books and essays written in English. Due to the internal structure of Luhmann’s theory, his writings strongly overlap in content. Therefore, in conjunction with Luhmann’s papers in this volume, this necessarily subjective selection of English (and additional 411

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German) publications will serve, despite its limited scope, as a helpful guide to the vast landscape of Luhmann’s writings. In view of the exuberance of ideas that can be found even in the smallest among Luhmann’s writings, the annotations presented below are as concise as possible. Primarily, they focus on information that may be especially relevant for a first insight into the main topics and the basic structure of his oeuvre. Occasionally, they also present some background information on the publications. The selected books and papers have been grouped according to subject areas, instead of the usual order according to the year of publication. This way of organizing the material may further support the aim of providing an overview of Luhmann’s writings and their interrelations, and will hopefully facilitate identifying those publications that are most valuable to the reader. Many of the selected texts have been published more than once. In these cases, the most accessible source has been chosen, and both the year of the first publication and the language in which the text originally appeared have been added in brackets.

Epistemology (theory of observation) The concept of observation as a (paradoxical) operation of distinction and indication lies at the heart of Luhmann’s late works. In particular, it lays the foundations for his “difference-oriented” way of theory-building in general, his notion of how systems observe and can be observed, and, as a consequence of this, his constructivist concept of epistemology. [1] “Identity – What or How?”, in N. Luhmann (2002), Theories of Distinction: Redescribing the Descriptions of Modernity (Stanford, CA: Stanford University Press), 113–127 (first pub. in German 1990). In this text, Luhmann distances himself from the classical concept of ontology, which is understood as a mode of theorizing that is based on the distinction of “being/non-being”. Against this background, he explains his concept of observation and how this shifts the focus from the question of what a certain identity is, to the question of how identities are constructed.

[2] “The Cognitive Program of Constructivism and the Reality That Remains Unknown,” in N. Luhmann (2002), Theories of Distinction: Redescribing the Descriptions of Modernity (Stanford, CA: Stanford University Press), 128–154 (first pub. in German 1990). Here Luhmann takes up the discourse of “radical constructivism”. Aiming at clarifying the debate, he elaborates on his concept of constructivism and describes in what way it is an empirically based approach presupposing a pre-given “real” world that must be considered cognitively unapproachable.

[3] “System as Difference”, Organization, 13/1, [forthcoming 2006] (in German: tape recording 1992; printed edn. 2002). 412

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This text is based on a transcription of a lecture on his social-theoretical perspective, which Luhmann delivered to students at the university of Bielefeld in the winter term 1991/1992. It is a fairly accessible explanation of the “difference-oriented” approach underlying his way of theorising, and of how it translates into his concept of the system/environment distinction.

[4] “The Paradox of Form”, in D. Baecker (1999) (ed.), Problems of Form (Stanford, CA: Stanford University Press), 15–26 (first pub. in German 1993). Proceeding from Spencer Brown’s concept of form as a distinction and indication, Luhmann describes here his concept of the paradox that lies at the heart of every observation, and shows how it can and must be de-paradoxized for an observation to take place.

[5] “The Paradox of Observing Systems”, in N. Luhmann (2002), Theories of Distinction: Redescribing the Descriptions of Modernity (Stanford, CA: Stanford University Press), 79–93 (first pub. in English 1995). In this text, Luhmann addresses the paradox of observation with regard to the question of what it means to observe meaningful systems that are themselves observing. Moreover, he sketches how such a perspective can be applied to observe the system of modern society.

[6] “Deconstruction as Second-Order Observing”, in N. Luhmann (2002), Theories of Distinction: Redescribing the Descriptions of Modernity (Stanford, CA: Stanford University Press), 94–112 (first pub. in English 1993). In this text Luhmann starts with the example of the debate on gays in the U.S. military, in order to contrast his concept of observation with the discourse on deconstructivism, as based on Derrida’s works. He shows how the idea of deconstruction can be reconstructed and further developed by the concept of second-order observation.

[7] “Why Systems Theory?”, Cybernetics and Human Knowing, 3/2 (1995), 3–10 (first pub. in German 1994). In this short text, Luhmann sketches his concept of autopoietic systems and its epistemological consequences in the context of other theoretical approaches. He argues that systems theory is an adequate way of observing society for it can account for the experience of contingency that characterises modernity.

Social theory (general theory of social systems) The publications listed here all refer to Luhmann’s general concepts of various social phenomena, i.e. to what other theorists would describe with concepts such as “social action”, “practices”, “discourse” or “acting self”. In Luhmann’s systems-theoretical framework, these issues are addressed in the framework of a general theory of social systems that is based on his notion of communication and includes the questions of how social systems are related to the mind and how they evolve over time. 413

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[8] “Meaning as Sociology’s Basic Concept”, in N. Luhmann (1990), Essays on Self-Reference (New York: Columbia University Press), 21–79 (first pub. in German 1971). This essay originates in the prominent Habermas/Luhmann debate on systemsbased research in the early 1970s. A lot of concepts that will later turn out to play a major role in his general theory of social systems are already addressed here in the context of a theory of meaning.

[9] “What is Communication?”, in N. Luhmann (2002), Theories of Distinction: Redescribing the Descriptions of Modernity (Stanford, CA: Stanford University Press), 155–168 (first pub. in German 1987). This rather short publication is one of Luhmann’s most salient texts on his concept of communication. It is structured along several theses on the “nature” of communication which are then briefly explained.

[10] “How Can the Mind Participate in Communication?”, in N. Luhmann (2002), Theories of Distinction: Redescribing the Descriptions of Modernity (Stanford, CA: Stanford University Press), 169–186 (first pub. in German 1988). In this text, Luhmann describes the relationship of psychic and social systems during the process of communication. It may serve as a quite accessible presentation of Luhmann’s often criticised idea that only communication, not humans, can communicate.

[11] “The Concept of Society”, Thesis Eleven, 31 (1992), 67–80. This paper first gives a brief overview of Luhmann’s reasons for some of his basic social-theoretical concepts. Moreover, the consequences of his approach on the analysis of language, the issue of rationality, and the relation between individual and society are demonstrated.

[12] “The Self-Description of Society: Crisis Fashion and Sociological Theory”, International Journal of Comparative Sociology, 25 (1984), 59–72. Here Luhmann sketches three of the basic elements of his social theory: the concepts of evolution, system differentiation, and self-referentiality. The discussion is embedded in Luhmann’s criticism that society, including sociology, tends to be too quick to judge critically certain social phenomena instead of analysing more thoroughly the situation at hand.

[13] “The Individuality of the Individual: Historical Meanings and Contemporary Problems”, in N. Luhmann (1990), Essays on SelfReference (New York: Columbia University Press), 107–122 (first pub. in English 1986). Luhmann’s distinction between psychic and social systems begs the question of how he reconstructs the concepts of individuality and the subject. This paper argues that the concept of the subject is historically rooted in the transition from pre-modern to modern society. With the “subject” being relativized in this way, the concept of autopoietic systems turns out to be its legitimate successor regarding the question of individuality.

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[14] “The Evolutionary Differentiation between Society and Interaction”, in J.C. Alexander et al. (1987) (eds.), The Micro-Macro Link (Berkeley: University of California Press), 112–131. This publication provides Luhmann’s perspective on the well-known micro/macro problem in social theory. Instead of seeing it as a primarily theoretical issue, Luhmann makes the point that this dichotomy is mainly empirical in nature, as it is based on the historical process of differentiation between society and interaction.

[15] “The Paradox of System Differentiation and the Evolution of Society”, in J.C. Alexander and P. Colomy (1990) (eds.), Differentiation Theory and Social Change: Comparative and Historical Perspectives (New York: Columbia University Press), 409–440. Luhmann describes here how he conceives of social differentiation. After sketching the historical background of the concept, Luhmann presents the four kinds of system differentiation that he distinguishes. In the remainder, he applies his concept to analyse the evolutionary process of the transition to modern society.

[16] “The Improbability of Communication”, in N. Luhmann (1990), Essays on Self-Reference (New York: Columbia University Press), 86–98 (first pub. in German 1981). This publication is one of Luhmann’s earlier papers introducing his concept of “media of communication” as a means by which society deals with the unlikeliness of successful communication. This theory is fully elaborated in [32].

[17] Social Systems (Stanford: Stanford University Press, 1995) (first pub. in German 1984). This book is Luhmann’s groundbreaking opus magnum on social theory. Starting from a general theory of autopoietic systems, Luhmann elaborates on his theory of social and psychic systems and reconstructs many social-theoretical fundamentals, such as structure, time, conflict, and rationality, from his systems-theoretical perspective. The final chapter sketches the consequences that his approach had on his take on epistemology and theory of science (as presented in full in [21]) some years later. It is worth noting that the English edition contains an additional preface on the concepts of subject and action.

Theory of society (theory of modernity and functional differentiation) This section comprises publications on how Luhmann conceives of modern society. At the core of his theory lies the description of the different functional subsystems that characterise modern society and – as a result of this – the idea that modern society is multi-perspectival with no centre that could represent it as a whole.

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[18] Ecological Communication (Chicago: University of Chicago Press, 1989) (first pub. in German 1986). Here Luhmann describes how the different functional subsystems of society react to today’s ecological problems. Based on a talk given at the Rhein-Westphalian Academy of Science, this book probably is by far the most accessible introduction to the way in which Luhmann conceives of modern society as consisting of several functional subsystems.

[19] Law as a Social System (Oxford: Oxford University Press, 2004) (first pub. in German 1993). This is one of the two books (among altogether eight) on different functional subsystems that have already been translated into English. Apart from Luhmann’s comprehensive analysis of the system of law, it may be of interest to Englishspeaking readers also because it covers the basic concepts for analysing functional subsystems (i.e. code, programme, function etc.) in a fairly detailed way.

[20] Art as a Social System (Stanford: Stanford University Press, 2000) (first pub. in German 1995). This exploration of the subsystem of art is the second translated book among those on the functional subsystems. On a more general level, this book features a detailed account of the relationship between communication and perception, and of the role of second-order observation in the context of functional subsystems.

[21] Die Wissenschaft der Gesellschaft [“The Science of Society” or “Science as a Social System”] (Frankfurt am Main: Suhrkamp, 1990). Apart from its description of the academic system of society – which comprises both the sciences and the humanities – this book presents the most elaborated account of Luhmann’s epistemological position and of how he situates his own academic work. The book has not been translated yet; however, the following two papers may provide international readers with an insight into Luhmann’s concepts.

[22] “The Differentiation of Advances in Knowledge: The Genesis of Science”, in N. Stehr and V. Meja (1984) (eds.), Society and Knowledge: Contemporary Perspectives in the Sociology of Knowledge (London: Transaction), 103–148 (first pub. in German 1981). Though this essay was written some years before The Wissenschaft der Gesellschaft [21] and is therefore not based that extensively on Luhmann’s later concepts, it already presents in a rather detailed way many of his main ideas on the genesis and functioning of the academic system, which were further developed in subsequent publications.

[23] “The Modernity of Science”, in N. Luhmann (2002), Theories of Distinction: Redescribing the Descriptions of Modernity (Stanford, CA: Stanford University Press), 61–78 (first pub. in German 1990). This paper is the translation of the final chapter of [21]. In qualifying science as a social phenomenon that has evolved with modern society, Luhmann finally relativizes his entire theory as a communication that adopts the particular perspective of only one specific functional system and is inseparably bound to the particular conditions of modernity.

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[24] Die Wirtschaft der Gesellschaft [“The Economy of Society” or “Economy as a Social System”] (Frankfurt am Main: Suhrkamp, 1988). This publication covers the economic subsystem. The English-speaking reader will find some general remarks on this system in other publications, such as [18], [19] and [39], for example. [43] is a translation of the final chapter. Some of Luhmann’s very early ideas on the economic system can be found in N. Luhmann (1982), The Differentiation of Society (New York: Columbia University Press), 190–225 (first pub. in German 1970).

[25] Die Religion der Gesellschaft [“The Religion of Society” or “Religion as a Social System”] (Frankfurt am Main: Suhrkamp, 2000). Luhmann’s book on the religious system has been published posthumously on the basis of an already rather elaborated manuscript. It may be worth noting that this book also contains a chapter on religious organizations. Until a translation is available, Luhmann’s early ideas on religion, as presented in N. Luhmann (1984), Religious Dogmatics and the Evolution of Society (New York: Mellen; first pub. in German 1977), may give a first insight into the topic, including Luhmann’s perspective on religious organizations.

[26] Die Politik der Gesellschaft [“The Politics of Society” or “Politics as a Social System”] (Frankfurt am Main: Suhrkamp, 2000). Published posthumously on a similar basis as [25], this book describes the political subsystem, including one chapter on the organizations of the political system. Luhmann’s very early ideas on this topic have been published in N. Luhmann (1982), The Differentiation of Society (New York: Columbia University Press), 138–189 (first pub. in German 1968 and 1974).

[27] Das Erziehungssystem der Gesellschaft [“The Educational System of Society” or “Education as a Social System”] (Frankfurt am Main: Suhrkamp, 2002). Also this book is a posthumous publication. The probably most important early publication on the educational system is N. Luhmann and K.E. Schorr (2002), Problems of Reflection in the System of Education (Oxford: Berghan; first pub. in German 1979, rev. edn. 1988), which also includes a chapter devoted to educational organizations.

[28] The Reality of the Mass Media (Cambridge: Polity Press, 2000) (first pub. in German 1996). Though Luhmann considers also the mass media a societal subsystem, he has not placed it in the series of the other seven books on subsystems. From his point of view, this system is not fully differentiated, due to the way in which it communicates with the other parts of society. This book has attracted much attention because of its thought-provoking thesis that the things we know about the world are a construct of the mass media.

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[29] Love as Passion (Cambridge: Polity Press, 1986) (first pub. in German 1982). An important part of Luhmann’s works are historical analyses of how structural changes in society entail semantical changes. This book presents a detailed analysis of how, as a consequence of the transition from a stratified to a functionally differentiated society, the modern concept of love evolved from the 17th century on. Further analyses of this kind have been published in the four-volume Gesellschaftsstruktur und Semantik [“The Structure of Society and Semantics”] (Frankfurt am Main: Suhrkamp, 1980–1995). [13] is an excerpt from a chapter of the third volume.

[30] Observations on Modernity (Stanford: Stanford University Press, 1998) (first pub. in German 1992). This collection of papers on modern society reacts, among other topics, to characterisations of today’s society as “postmodern”: Luhmann takes up the postmodern insight of the impossibility of métarécits (Lyotard) and explains the claim of a postmodern condition by the fact that modern society is functionally differentiated. In this way, the postmodern semantics turns out to make sense only in the context of a society that, structurally, is still modern.

[31] “Globalization or World Society: How to Conceive of Modern Society?”, International Review of Sociology, 7/1 (1997), 67–79. Here, Luhmann elaborates on his concept of modern society as a functionally differentiated world society that cannot be adequately described in terms of regional, ethnic or cultural differentiation. In relating this concept to the discourse on “globalisation”, this paper shows the critical potential of systems-theoretical analyses.

[32] Die Gesellschaft der Gesellschaft [“The Society of Society” or “Society as a Social System”], 2 vols. (Frankfurt am Main: Suhrkamp, 1997). These two volumes contain Luhmann’s summa sociologica concerning the theory of society as a whole, in contrast to the different functional subsystems it contains. They comprise an account of society as the encompassing social system, a fully elaborated theory of media of communications (cf. [16]), the final stage of his theories of evolution and system differentiation (cf. [15]), and several chapters on societal self-descriptions. There is also a brief chapter on how organizations relate to society.

Organization theory The publications in this section make up, or rather mark the core of Luhmann’s theoretical work on organizations, which spanned his entire academic life. In the early works listed here, Luhmann critically examines the heritage of the classical concept of rational organizations coordinating action on the basis of division of labour and by means of hierarchy. In the later works, Luhmann has fully developed his alternative perspective on organizations as a specific kind of social system whose characteristic elements are decisions. 418

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[33] “Ends, Domination, and System: Fundamental Concepts and Premises in the Work of Max Weber”, in N. Luhmann (1982), The Differentiation of Society (New York: Columbia University Press), 20–46 (first pub. in German 1964). Referring to results of empirical research until the 1960s, this paper criticises Weber’s notion of organizations as entities coordinating labour on the basis of authority and means-end relations. In addition, Luhmann sketches a possible alternative from his systems-theoretical point of view.

[34] Funktionen und Folgen formaler Organisation [“Functions and Consequences of Formal Organization”] (Berlin: Duncker & Humblot, 1964). Combining the distinctions of “system/environment” and “formal/informal”, Luhmann analyses the effects of formal organizational structures by focusing on the possible conflicts that arise when organizations have to develop formal structures that must both integrate their members and allow for adaption to environmental demands. Through this perspective, the book succeeds in integrating the findings of the empirical research at that time and raises many issues that were put on the agenda of organization studies only decades later.

[35] Zweckbegriff und Systemrationalität: Über die Funktion von Zwecken in sozialen Systemen [“The Concept of Ends and System Rationality: About the Function of Ends in Social Systems”] (Tübingen: Mohr/ Siebeck, 1968). This book presents a fundamental systems-theoretical critique of the classical concept of organizational means and ends (cf. [33]). In developing Simon’s criticism much further, Luhmann argues that organizations cannot be understood in terms of a final end or purpose, but instead that the concept of ends is only one among many functionally equivalent solutions to the problem of how organizations can deal with a complex environment. Many of the concepts in this text still are of importance in Luhmann’s late works on organizations.

[36] “Interaction, Organization, and Society”, in N. Luhmann (1982), The Differentiation of Society (New York: Columbia University Press), 69–89, 372–376 (first pub. in German 1975). This early paper introduces Luhmann’s central distinction of the three types of social systems: interaction systems, organizations and society. Having yet to develop his concept of autopoiesis, Luhmann sees organizations as systems that draw a boundary within society by means of the distinction “member/non-member”, with membership being subject to certain conditions imposed by the organization.

[37] “A General Theory of Organized Social Systems”, in G. Hofsteede and M.S. Kassem (1976) (eds.), European Contributions to Organization Theory (Assen: Van Gorcum), 96–113 (first pub. in German 1975). This paper aims at presenting more thorough reflections on organizations than those of the contingency approach in the mid 1970s. Organizations are conceived of as self-referential systems that experience their structures as contingent, therefore put themselves under strong pressure to select, and in this situation refer to

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decision premises. This notion of organization is later reconstructed by Luhmann on the basis of the concept of de-paradoxisation.

[38] “Organization”, in T. Bakken and T. Hernes (2003) (eds.), Autopoietic Organization Theory: Drawing on Niklas Luhmann’s Social Systems Perspective (Copenhagen: Copenhagen Business School Press), 31–52 (first pub. in German 1988). This is the first text where Luhmann elaborates on his theory of organizations as autopoietic systems with decisions as their basic elements. From this perspective, he addresses the self-referential closure of organizations, the concept of decisions as events in time, the role of membership, organizational structures (including decision premises), the relation of organizations to their environment on the basis of the concepts of redundancy and variety, and, finally, rationality as a re-entry of the “system/environment” distinction into the system. Although rather short, this text, read in combination with Luhmann’s chapter on the paradox of decision making in the present volume (chapter 4), covers many of the basic concepts of Luhmann’s organization theory.

[39] “Membership and Motives in Social Systems”, Systems Research: The Official Journal of the International Federation for Systems Research, 13/3 (1996), 341–348. This short paper provides a brief overview of some concepts central to Luhmann’s late organization theory. After introducing his notion of the social system, Luhmann presents the concepts of person and motives, and addresses the function of organizational membership. In the final section, he sketches his notion of the economy as an autopoietic system.

[40] Organisation und Entscheidung [“Organization and Decision”] (Opladen: Westdeutscher Verlag, 2000). This book, published posthumously on the basis of an almost finished manuscript, contains Luhmann’s fully developed organization theory on the basis of the concepts of organization as an autopoietic system (cf. [38]), and of the paradox of decisions (cf. Luhmann’s chapter in the present volume). In this perspective, Luhmann addresses the different kinds of decision premises that he distinguishes, the topics of structural change, technology, and rationality, and the ways in which organizations relate to both themselves via self-descriptions and their societal environment.

Miscellaneous This final section comprises some publications that are not central to Luhmann’s theory, but may nevertheless be of interest to the scholar of organization studies. The books and essays listed here address the topics of trust, power and risk, the question of steering and control regarding social systems, Luhmann’s relation to phenomenology and the Frankfurt school of sociology, his concept of sociological theory, and, finally, his stance towards ethics. 420

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[41] Trust and Power (Chichester: Wiley, 1979) (first pub. in German 1973 and 1975). The two shorter books collected in this publication, address two concepts that do not play a major role within the general framework of Luhmann’s theory (though the concept of power is fairly central to Luhmann’s theory on politics as presented in [26]). However, they are a very accessible read and offer in nuce an insight into Luhmann’s style of theory construction. The part on power contains also a chapter on organizations.

[42] Risk: A Sociological Theory (Berlin: de Gruyter), 1993 (first pub. in German 1991). This book can be seen as Luhmann’s equivalent to the sociological diagnosis of a “risk society” as advocated by other authors. Especially Luhmann’s distinction between risk (referring to damage that may result from one’s own decisions) and danger (referring to damage stemming from external sources) has attracted quite some attention. Moreover, as [40] has not been published yet in English, this book may offer an interesting read regarding Luhmann’s perspective on technology. Also, this book includes a short chapter on organizations.

[43] “Limits of Steering”, Theory, Culture & Society, 14/1 (1997), 41–57 (first pub. German 1988). This paper is the translation of the final chapter of [24]. Though it has a certain focus on the economic system, the theory of steering (in the sense of a reduction of a difference) that Luhmann develops here is more general in scope and must therefore be considered of relevance to organization studies and a theory of management.

[44] “The Control of Intransparency”, Systems Research and Behavioral Science, 14 (1997), 359–371. Given this bibliography’s focus on the social sciences (which corresponds to the fact that Luhmann always saw himself as a sociologist), it should not be overlooked that Luhmann has innovatively contributed also to General Systems-Theory. This paper elaborates on the role of time and memory with relation to self-referential, operationally closed systems.

[45] “The Modern Sciences and Phenomenology”, in N. Luhmann (2002), Theories of Distinction: Redescribing the Descriptions of Modernity (Stanford, CA: Stanford University Press), 33–60 (first pub. in German 1996). This essay is the published version of a lecture that Luhmann delivered in Vienna in commemoration of Husserl’s Vienna lectures in 1935. It sheds light on the relevance of Husserl’s phenomenology to Luhmann’s thought, and the way in which Luhmann reconstructs Husserl’s ideas in the framework of his systems theory.

[46] “I See Something You Don’t See”, in N. Luhmann (2002), Theories of Distinction: Redescribing the Descriptions of Modernity (Stanford, CA: Stanford University Press), 187–193 (first pub. in German 1990). This paper is based on a talk Luhmann gave at a conference on the significance of the Frankfurt School. Here Luhmann (rather polemically) highlights his main

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arguments against the type of critical sociology that was developed by this school of thought in post-war Germany.

[47] “‘What Is the Case?’ and ‘What Lies behind It?’: The Two Sociologies and the Theory of Society”, Sociological Theory, 12/2 (1994), 126–139 (first pub. in German 1993). This paper is a translation of Luhmann’s final lecture at the University of Bielefeld in 1993. In relation to what he considers to be the two basic questions of sociology, Luhmann characterises his own concept of sociological theory as a way in which society describes itself within society.

[48] “Paradigm Lost: On the Ethical Reflection of Morality”, Thesis Eleven, 29 (1991), 82–94 (first pub. in German 1988). This is the published version of a talk Luhmann gave on the occasion of being awarded the Hegel-Preis in 1989. It presents Luhmann’s sceptical perspective on moral communication in view of the conditions characterising modern society, and assesses the conditions of the possibility of an adequate ethical theory.

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Contributors Dirk Baecker is Professor of Sociology at the University of Witten/Herdecke. Kai Helge Becker is a doctoral student at the Department of Operational Research, London School of Economics. Michael Bommes is Professor of Sociology at the Institute for Migration Research and Intercultural Studies, University of Osnabrück. Barbara Czarniawska is Professor of Management Studies, GRI-Research Institute at the School of Business, Economics and Law, Göteborg University. Thomas Drepper is Postdoctoral Researcher at the Nijmegen School of Management, Radboud University Nijmegen. Raimund Hasse is Professor of Sociology at Luzern University. Darnell Hilliard is a researcher at the Institute for World Society Studies, Bielefeld University. Morten Knudsen is Assistant Professor at the Department of Organization and Industrial Sociology, Copenhagen Business School. Jochen Koch is Assistant Professor of Management at the Institute of Management, Freie Universität Berlin. Niklas Luhmann (†) was Professor of Sociology at Bielefeld University. Tobias Scheytt is Assistant professor of Controlling at the Department of Organization and Learning, University of Innsbruck. David Seidl is Assistant Professor of Organization and Strategy at the Institute of Business Policy and Strategic Management, University of Munich. Fritz Simon holds a chair for Leadership and Organization in Family Businesses at the University of Witten/Herdecke. Veronika Tacke is Professor of Sociology at Bielefeld University. Jan-Peter Vos is Assistant Professor of Organization Studies at Eindhoven University of Technology.

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Index A accounting 137, 221, 235, 251, 386–401 action – concept of 28, 34–5, 66, 70–72, 108, 181, 218, 231–237, 405 – collective 174, 181, 196, 256 – theory of 55, 69–70, 181 actor 55, 70, 121, 133–5 – collective 141, 177, 181–82, 223 – corporate 171, 174, 181–183, 190 adaptation 69–80, 186–7, 251–52, 368–71, 374, 378, 383–84 address, social 284, 288–291, 293, 300–303 addressability 291 agency, agent 76, 176–7, 218–9, 225–6, 230–45, 259, 386 asymmetry 47–48, 71, 79, 90, 372, 378–80 attribution 29, 34–5, 70–72, 85–6, 120, 126, 152–155, 163–4, 180, 182, 228, 235–6, 246, 289–90 autonomy 45, 59, 75, 115, 153, 155, 174, 179, 185–9, 198, 228–9, 243–4, 311–15, 339 autopoiesis 11–12, 21–35, 54–83, 95, 98, 105, 110–11, 123, 129, 134–5, 145–7, 153, 166, 174, 187, 195–8, 227–30, 235, 238, 255, 270, 310–13, 333–5, 405 B blind spot 49–50, 86, 132–135, 270, 357 body 197, 201, 218–219, 237–247

460

boundary 47–51, 88, 160, 175, 181–2, 259, 269–70, 308–11, 332 bureaucracy 181, 196, 200, 258, 390 C calculus of form 46–53, 86–7, 270, 307, 397 centre/periphery 36, 172–74, 184, 409 chaining 264–6, 277–80 change 9, 66, 94–7, 107, 130, 132, 142, 154–5, 249, 253, 259–261, 371 classical organization theory 10–11, 85, 97, 173–4, 189, 191, 389, 418 code 36–8, 147, 188, 192, 223, 256–7, 286, 405, 416 co-evolution 75, 230, 234, 236, 243, 312–20 cognitive routine 44, 216, 220, 405 commitment 89, 100–101, 181, 195, 208–9, 252 communication – acceptance 30, 68, 96–7, 115, 185, 188 – communicative address 180, 183, 235, 290–291, 294 – channel 42–5, 93–4, 147, 198, 242, 405 – information 28–30, 34–5, 52, 66–8, 71, 77–7, 221–22, 405 – media of 185, 204, 253, 291, 337, 415 – meta-communication 146, 147, 310 – understanding 28–30, 34–35, 66–71, 76–8, 405 – utterance 28–35, 52, 66–70, 76–7, 161, 290, 302, 405 complexity 67–8, 73, 112, 117, 123–4, 156,

161–67, 175–81, 184–90, 194–6, 203–9, 274, 355, 358–9, 368–75, 386, 389, 394–95, 398, 405 complexity reduction 68, 95, 161, 163, 166–7, 352 connectivity 27, 59, 61–62, 109–110, 117, 119–21, 123–4, 157, 358 consciousness 25–6, 32–3, 58, 64–6, 73, 76–8, 80–82, 195, 197–8, 200, 224–6, 232–3, 263, 266–7, 409 constructivism 9, 92, 211, 216–7, 221–22, 239, 310, 387, 393, 395, 412 – radical 23, 105, 377, 385, 412 consulting 97, 99, 133, 205, 228, 249, 251, 351–64, 376, 380, 399 contingency 39, 44, 89, 107–126, 146, 155, 201–202, 296, 395, 406, 413 contingency theory 250, 253, 382, 419 convergence 157, 249, 261 corporation, historical forms of 324, 339, 341, 346 coupling – strict 313–314, 317–323 – structural 24, 30–32, 37–38, 101, 105, 150, 173–174, 186–188, 197, 211, 239, 283, 394, 410 – loose 103, 120, 184, 201–203, 206, 208, 255, 259, 313–314, 317, 381 cultural turn 216, 220

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cybernetics 8, 62, 88, 99, 174, 184, 255, 357–359, 368, 389 D de-centring the subject 217, 223–231, 234, 237, 267–268 decentralization 107, 111, 118, 132–133, 178, 300 decision 39–46, 85–106, 108–11, 331–335, 406, 420 decision premise – communication channel 42–44, 93–94, 147 198, 255, 405 – decision programme 44, 98, 163, 179, 228, 406 – cognitive routine 44, 405 – organisational culture 44, 100, 199, 408 – personnel 42–44, 94, 113, 140, 147, 176, 179, 296, 299, 408 deconstruction 40, 110–111, 146, 264, 267, 273, 275, 278–281, 393, 396, 413 decoupling 132, 252–254 de-ontologisation 26–27, 268–272 de-paradoxization 46, 72, 79, 107–12, 115, 123–7, 129–34, 139–42, 163–65, 376–8, 406, 413 design 91–213, 388–389, 397 differend 265–266, 277 differentiation – theory of 172–175, 179, 181 – functional 36–37, 78, 172–190, 249–50, 255–257, 278, 283, 288, 296, 336–339, 407, 415 – internal 124–125, 172, 175, 184–85, 190 – primary 36, 172, 183–186, 190, 255–256, 284–289, 335–336, 339, 409

– secondary 36, 184, 284, 288, 296, 335–336, 339, 409 – societal 183, 185, 284–288, 335, 347, 409 – stratificatory 36, 172, 174, 180, 183–84, 190, 285, 409 – forms of 36, 172, 179, 183–184, 206, 280, 286, 335–36, 362, 409 diffusion 249, 256, 259–260 displacement 119–124 distinction 9, 46–53, 55, 67, 71–72, 76–7, 81, 85, 91–93, 99–104, 109, 134, 150–53, 194–9, 206, 221–23, 268–71, 274, 307–23, 332–4, 356–63, 370–1, 397–9, 405–9, 412 division of labour 58, 175, 191, 418 double closure 44–45, 114, 331–333 duality of structure 232, 245 E ecologization 200 economy 12, 36–8, 97, 155, 173, 178, 185–6, 188, 208, 255–9, 282, 315, 325–30, 335–47, 353–4, 398, 407, 417 effciency 111, 140, 205, 251, 258, 299, 389 eigenvalues 279–280 element 11, 21–31, 34–6, 39–40, 51, 61, 66–78, 81, 108, 155, 157, 160–63, 185, 222, 238, 270, 311, 313, 405–7, 409 enactment 77, 196, 204, 220, 222, 239, 241, 252, 356, 378–83, 400 epistemology 9, 79–82, 98, 105, 140, 267–9, 272–3, 276, 280, 386–391, 395, 397, 412 event 26–8, 30, 32, 55, 61, 66–7, 71, 73–4, 76,

108, 157, 180, 203, 300–1, 406 evolution 33, 36, 58–9, 68, 73, 75, 77–9, 94, 129–30, 172, 179, 181–83, 185, 187, 230, 234, 236, 255, 259–60, 286, 312, 317, 328, 334, 341, 409, 414–5 evolutionary universals 181 evolution theory 94, 181, 255 exclusion/inclusion 39, 71, 178, 193–194, 202, 210, 284, 286, 288–289, 292–293 expectation 31–32, 43, 70, 72, 86, 93, 95, 116, 119–20, 122–3, 148, 179, 182, 167–88, 190–91, 202, 248–54, 256–7, 260, 338, 346–7, 375, 381–83, 408 external communicability 173, 182, 187 F financial market 319–320, 330, 342 firm 41, 251, 289, 291, 313, 315–322, 326–329, 353–354, 360 form 46–53, 86–7, 270, 307, 397 formal/informal 12, 97, 123, 150, 153, 163, 169, 179, 188–9, 250, 252–5, 294–5, 297–301, 419 function – functionalism 93, 222 – functional differentiation 36–37, 78, 172–190, 249–250, 255–257, 278, 283, 288, 296, 336–339, 407, 415 – functional equivalence 97, 120, 188, 190, 256, 358, 374–375, 378–380, 382–383, 419 – functional method 375, 378–379

461

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16.33

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– functional-structural theory 93, 173, 179 – functional subsystems 12, 36, 60, 155, 172, 177, 184–187, 190, 223, 256, 277, 325, 335, 338–339, 407, 409, 415–417 G goal-attainment 77, 175, 177 Gorgon sisters 127–143 group 97, 101, 113–114, 121, 123, 138, 191, 228, 258, 286, 335, 339, 354–355, 383, 391 H habitus 219, 225, 232, 234, 244 heterogeneity 180, 182, 198, 201, 205, 288, 292–93 hierarchy 10, 36, 43, 79, 85–86, 92, 96–97, 124, 133, 151, 162, 164, 177, 182, 196, 198–199, 204–205, 207, 282, 300, 340, 390, 409, 418 human being 9, 13, 31–34, 39, 130, 181, 182, 332, 407 hypocrisy 131 I ideal type 181, 218, 258, 390 identity 56, 66, 74, 92, 94, 140–41, 222, 256, 259, 268–9, 355, 372, 383, 397, 412 immune system 61, 64, 78–79, 208 indication 47–50, 58, 88, 109, 222, 239, 270, 279, 308–310, 317, 356, 358, 397, 399, 412 individualization 199–200 information 28–30, 34–5, 52, 59–62, 66–8, 74–7, 97, 106, 165–6,

462

225–36, 294–5, 372, 396, 405 institution 86, 131–132, 140–141, 178–182, 187–188, 191, 205, 209, 220, 248–261, 300, 364 interaction 35–9, 69, 78, 145–70, 175–6, 188, 194, 227, 232, 236, 243, 258–9, 405, 407, 415, 419 interdepedency breaks 184–187 interpenetration 31–32, 71, 156–157, 160–162, 167, 174, 229, 407 intersubjectivity 226–227, 237, 244, 268 isomorphism 249–250, 253, 257, 260 K knowledge – claim 276, 281 – deficiency of 192–3, 201 – development 142, 266 – narrative 265, 273 – schemes of 218–9, 224–5, 234, 241 – scientific 79, 92, 105, 265–6 L language 33–4, 66–7, 80, 86, 101, 128–30, 160, 195, 224, 267, 272, 361, 393, 410 latent/manifest 56, 73, 101, 159, 273, 277, 301, 354, 356, 358–9, 361 Law of requisite variety 162, 368–9, 371 legitimation 105, 128, 141, 188, 195, 219–20, 264–6, 273–4, 277–8, 292 life-form 236, 245, 247 life-world 172, 226, 236, 263, 275–6

M management 110, 124, 133, 162–3, 198, 202, 204, 307, 316–22, 365–385, 386–401 marked state/unmarked state 47–52, 397, 399 meaning 9, 28–30, 32, 35, 41, 50, 61–62, 64–5, 68, 76–7, 95, 129, 141–42, 151, 157, 180–88, 187, 204, 220–28, 237–40, 242–4, 279, 285–92, 301, 308, 332–3, 336–8, 356–7, 379, 397, 407, 414 medium/form 61, 102, 173, 186, 205–6, 327, 339, 356 member(ship) 43, 114, 150–51, 154–5, 168–9, 176–9, 190, 209–10, 236, 239, 283, 288, 293, 296–8, 301, 329, 409 memory 32, 73, 166–8, 203, 291, 421 meta-narrative 264, 266–7, 272, 280, 418 modernity, modernization 191, 251, 258, 262–3, 267, 276, 280, 295, 415 motive 70, 85, 100–1, 104–5, 122–3, 131, 178–9, 190, 209, 301, 354, 421 N network 198, 201, 204–5, 207–10, 282–305, 329 new institutionalism 248–61 O observation – concept of 46–53, 79–82, 270–1, 308–18, 408, 412 – of first order 48–50, 91, 95, 133–5, 141, 361, 364, 376–83, 399

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Sida 463

– of second order 49–50, 56, 88, 91, 95–6, 101, 133–4, 141, 271, 278–9, 357, 359, 361, 364, 376–82, 399–400, 412 – paradox of 45–50, 79–82, 85–105, 107–25, 127–42, 163–4, 367–8, 371, 378, 384, 406, 408, 412 – self-observation 49–50, 56–7, 71–2, 81–2, 246–7, 270–1, 333–4, 371–6, 387, 393–5, 397–8 ontological 90, 173–5, 177, 182, 189, 232–3, 272, 279, 370, 386–8, 391–2, 400, 412 open systems theory 22, 61, 76, 370 operation 22–3, 47, 50–52, 55, 57–61, 67–8, 71, 73, 75–7, 80–1, 85–92, 101–105, 116–7, 149–50, 156, 231–37, 270–1, 308, 325–33, 359, 374–5, 378, 396–8, 406 operative closure 22–3, 25, 31–32, 36–8, 40, 44–5, 51, 53, 58–65, 68–9, 72, 76–9, 95, 108, 145–146, 148–9, 156, 168–70, 187, 211, 229–30, 331–33, 385, 394, 408 organization(al) – concept of 39–46, 85–106, 108–11, 331–335 – culture 44, 100, 199, 215, 322, 408 – forms of 9, 211, 249–50, 254, 256–8, 261, 307–22, 331, 333–4 – performance 172, 175, 190, 389, 398 – society 172, 190, 255 – sociology 171, 248, 250, 252, 255, 257–61, 302

oscillation 134–5, 194, 277, 408 other- (hetero-, external-, environmental-) reference 52, 60, 67, 94, 147, 329–30, 347, 408 P paradox 45–6, 50, 71, 79, 82, 85–105, 107–25, 127–42, 163–4, 207, 269, 271, 281, 367–8, 371, 378, 384, 406, 408, 412 paralogy 127, 129–30 paradigm of adaptation 368–71, 384 perception 32–3, 38, 47, 76–7, 101–105, 132, 147–8, 194–7, 200–203, 206–12, 239–42, 407 person 31–34, 43–4, 69, 121, 126, 148, 150–53, 170, 178, 180–182, 187, 228, 235, 358, 405, 408 personnel 42–4, 113, 147, 163, 176, 295–6, 298–9, 406, 408 phenomenology 222, 224–6, 336–8, 420 position 44, 92, 94–5, 158, 196, 207, 228, 285–6, 294, 296–8, 409 post-decisional regret 253 postmodernism 129, 262–81, 418 post-structuralism 216, 245 power 37, 73, 77, 181, 185, 229, 241, 253, 255, 264–6, 273, 277, 318, 337–41, 387, 391, 420 practice 94, 96, 101, 127, 141, 148, 160, 211, 215–47, 396 pragmatism 79, 91, 134, 211 profession 103, 114, 182, 184, 188, 190–1, 209–10, 249, 251, 253, 295, 386 programme

– decision programme 42–5, 52–3, 56, 93–5, 97–8, 113, 115, 147, 163, 175–6, 179, 181–82, 192, 256–7, 242, 296, 389, 406 – conditional 43, 175, 406 – goal 43, 406 R rational 10, 12, 59, 85–7, 93–101, 103, 121, 130–1, 141–2, 165, 173–8, 189, 200, 208, 210, 220, 229–33, 249, 251–53, 262, 381, 386–7, 390–1, 420 redundancy 62, 97, 184, 420 re-entry 49–52, 74, 76, 150–53, 271, 283, 316–7, 320–22, 333, 341, 371, 375, 399, 409 reflection 56, 59, 80–1, 134–5, 140–42, 194, 208, 232–3, 266, 269, 300, 357, 359, 375, 379 reflexivity 78, 175, 232–3, 288–93, 299–300, 371, 374–5, 377 resource 60, 116, 187, 204, 219, 237–242, 288, 291, 296, 298, 300, 328–30, 345, 369, 394 resource dependence theory 250, 382 role 86, 93, 132, 140, 150–54, 169–72, 178–80, 182–3, 187–8, 190, 285, 287, 289, 291, 301, 379, 382–3 routine 44, 116, 140, 182, 197, 202–211, 216, 220, 232, 234, 236–7, 252–3, 328, 378–82, 405 S science(s) – applied 351–53, 363–4 – modern 82, 264–7, 277 – social 129, 133, 142, 202, 220

463

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16.33

Sida 464

– system of 9, 12, 36–7, 105, 186, 208, 255–7, 259, 409, 416 – theory of 79, 264–7, 277 segmentation 36, 172, 174, 179, 183–4, 190, 285, 336, 338–9, 409 selection, selectivity 28–31, 34, 39–41, 55–6, 61, 66–71, 74, 76–8, 85, 93–4, 103, 105, 117, 147, 153, 157, 162–3, 169, 176–7, 183–6, 190, 203–5, 207–8, 210, 252–254, 259–60, 274–5, 289, 292, 296, 332–3, 344, 356, 360, 363, 399, 405 self-description 34, 56–7, 95, 151, 153, 173, 180, 233, 316, 376, 378, 383, 393, 414, 418, 420 self-organization 24, 56, 60, 75, 123, 389, 409 self-reference, self-referential – basal 269, 271, 374, 379, 409 – systems 11, 23, 37, 46, 52, 57, 62, 64–75, 80, 89, 107–8, 111–12, 124–5, 147, 177, 259, 269–71, 296, 333–4, 339–41, 365–79, 383–5, 394, 409, 414 – theories 10, 275, 278, 281 semantics 75, 222, 243, 418 social order 179, 220, 242, 263, 392 social practices 215–47 society – modern 9, 36, 75, 142, 172–4, 177–188, 190, 222, 249–50, 255–7, 259–61, 267–8, 277–8, 284–91, 293–4, 335–6, 340, 407, 415 – system of 12–13, 36, 52, 69, 79, 81, 149, 155, 182, 189, 335–6, 418

464

– theory of 132, 171–73, 179–80, 188–92, 194, 212, 223, 283–4, 302, 334, 415 – world society 36–7, 193, 325–6, 330–31, 335–8, 341, 346–7, 418 stratification 36, 172, 174, 180, 183–4, 190, 285, 409 structural coupling 24, 30–32, 37–38, 101, 105, 150, 173–174, 186–188, 197, 211, 239, 283, 394, 410 structural level 32, 44–5, 52, 56, 73, 96–7, 117, 163, 181, 338, 362 structuralism 66, 93, 215–6, 224–5 structure/agency 9, 230–37 subconscious structure 224, 266 subject 102, 104, 216, 223–31, 234–5, 237, 262–3, 267–8, 414 symbiotic mechanisms 197, 243–4, 246 symbolic generalized media 173, 179, 185, 188, 190 system – autopoietic 11, 22–31, 54–63, 64–82, 310–11, 405, 409, 413–15 – biological 21–26, 61, 64–5, 69, 74, 76–7, 80, 82, 174, 187, 308, 311–312 – system/environment distinction 9, 22–7, 51–53, 104, 147, 150, 175, 178, 189, 201, 268–9, 273, 316–7, 354, 360–61, 370–71, 375, 407, 413 – mental, psychic 25–7, 31–34, 64–5, 101, 156, 159–62, 221–22, 227–30, 235, 406–9, 414 – social 9, 11–13, 28–35, 54–63, 64–82, 226–30, 409, 413–5

– subsystem 12, 36, 80–81, 155, 175–178, 184–187, 198–199, 223, 256, 277, 300, 325, 335, 338–339, 389–390, 407, 415–417 T tautology 39, 76, 121, 369, 372, 376–8, 380, 384 trust 123, 134, 207, 282, 298, 301, 303, 320, 351–2, 421 truth 37, 79, 89, 106, 185–6, 222, 264, 275, 277 U uncertainty (absorption) 40–43, 56, 62, 89, 93, 96–100, 104–6, 108, 115–6, 118–20, 122–3, 125–6, 146–7, 158, 166–8, 173, 180, 190, 200, 203, 240, 252, 258, 292, 298, 410 V values 93, 106, 120, 177, 182, 209, 220, 320, 322, 333, 362 variety 99, 162–3, 184, 203, 368–9, 371, 420 W world horizon 337, 341–47 world polity 249–51, 253–4, 260 world society 36–7, 193, 325–6, 330–31, 335–8, 341, 346–7, 418