Cyert And March's Behavioural Theory

Cyert and March (1963) argue that the goals of an organization are a compromise between members of a coalition comprising the parties affecting an organization. Therefore, this theory is closely related to stakeholder theory. Cyert and March say that there are essentially five directional pulls to consider:

  • production related, and encapsulating stable employment, ease of control and scheduling;
  • inventory related - customers and salesmen push for high stocks and wide choice, management accountants complain about the cost of too much stock;
  • sales related - obtaining and satisfying orders;
  • market share, which yields power relative to competitors;
  • profit, which concerns shareholders, senior management and the providers of loan capital.

This theory stresses the perceived importance of the short term, as opposed to the long term, because issues are more tangible and because decisions have to be taken as situations change.

Developing these themes Herbert Simon (1964) makes an important distinction between objectives and constraints. He further contends that one of the main reasons for an organization's collapse is a failure to incorporate the important motivational concerns of key stakeholders.

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Establishing Organizational Direction: Mission And Objectives
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