Technostructure is the group of technicians, analysts within an organisation (enterprise, administrative body) with considerable influence and control on its economy. The term was coined by the economist

John Kenneth Galbraith John Kenneth Galbraith (October 15, 1908 – April 29, 2006), also known as Ken Galbraith, was a Canadian-American economist, diplomat, public official, and intellectual. His books on economic topics were bestsellers from the 1950s through t ...

in ''

The New Industrial State ''The New Industrial State'' is a 1967 book by John Kenneth Galbraith. Three revised editions appeared in 1972, 1978 and 1985. Discussion In it, Galbraith asserts that within the industrial sectors of modern capitalist societies, the traditiona ...

'' (1967). It usually refers to

managerial Management (or managing) is the administration of an organization, whether it is a business, a nonprofit organization, or a government body. It is the art and science of managing resources of the business. Management includes the activities ...

capitalism Capitalism is an economic system based on the private ownership of the means of production and their operation for profit. Central characteristics of capitalism include capital accumulation, competitive markets, price system, private ...

where the managers and other company leading administrators, scientists, or lawyers retain more power and influence than the shareholders in the decisional and directional process.John Kenneth Galbraith, ''The New Industrial State'', p. 71 HMCO 1967

Historical context

The power struggle between the technostructure and the shareholders was first evoked by

Thorstein Veblen Thorstein Bunde Veblen (July 30, 1857 – August 3, 1929) was a Norwegian-American economist and sociologist who, during his lifetime, emerged as a well-known critic of capitalism. In his best-known book, ''The Theory of the Leisure Class'' ...

in "The Theory of the Leisure Class" (1899), questioning who, among the managers and the shareholders, should control the enterprise. At the time and until the end of the 1980s, the shareholders, unable to effectively regroup and organise themselves, could not exert enough pressure to effectively counter the managerial decision-making process. After the Second World War, the rapid augmentation of shareholders further diluted their collective power. This was perceived, by Galbraith, as a divorce between the property of the capital and the direction of the enterprise.

Goals of the technostructure

Since the technostructure is composed of a

hierarchical A hierarchy (from Greek: , from , 'president of sacred rites') is an arrangement of items (objects, names, values, categories, etc.) that are represented as being "above", "below", or "at the same level as" one another. Hierarchy is an important ...

system of influential employees inside the enterprise, its primary goal is not to maximize their profits but rather survival, continuous growth and maximal size. While it must maintain acceptable relations with their shareholders, hegemonic growth is more beneficial to the technostructure. According to

Henry Mintzberg Henry Mintzberg (born September 2, 1939) is a Canadian academic and author on business and management. He is currently the Cleghorn Professor of Management Studies at the Desautels Faculty of Management of McGill University in Montreal, Quebec, ...

, a technostructure's influence is based on systems of expertise, but a technostructure gains power to the extent to which it can develop systems of bureaucratic control.

, "Power In and Around Organizations",

Prentice Hall Prentice Hall was an American major educational publisher owned by Savvas Learning Company. Prentice Hall publishes print and digital content for the 6–12 and higher-education market, and distributes its technical titles through the Safari ...

, 1983, p. 134-13

/ref> Strong organisational ideology decreases the need for bureaucratic control and technostructure. Thus, a technostructure usually resists the development and/or maintenance of organisational ideology. As the structures of control and adaptation that the technostructure designs are more necessary when something changes, technostructure is in favour of constant change. That happens even if they are not useful for the organisation itself. On the other hand, Mintzberg thinks that such changes tend to be cautious, as technostructure tries to standardise the work of all other parts of the organisation, and major changes make that harder. Among organisation's goals technostructure prefers the ones that are operational, measurable, as they make it easiest to demonstrate the usefulness of bureaucratic control. Among those goals, technostructure prefers the ones related to efficiency, economical goals.

Decline of the technostructure

The lack of control of the technostructure resulted in managerial abuse notably on its salaries during the economic crisis of the 1970s. It prompted support for new economic ideologies like the School of Chicago under

Milton Friedman Milton Friedman (; July 31, 1912 – November 16, 2006) was an American economist and statistician who received the 1976 Nobel Memorial Prize in Economic Sciences for his research on consumption analysis, monetary history and theory and the ...

. Furthermore, the Employee Retirement Income Security Act of 1974 forced a much greater transparency from businesses and possible opposition to their decisions. In the 1980s, the rising and influential

neoliberal Neoliberalism (also neo-liberalism) is a term used to signify the late 20th century political reappearance of 19th-century ideas associated with free-market capitalism after it fell into decline following the Second World War. A prominent f ...

ideology decried the ''divorce'' between the capital and the decisions. Based on the belief of a new emerging economy, neoliberal economic theories were introduced at the end of the 1980s forcing managerial capitalism to yield to the shareholders.

Results

The prime objective of the neoliberal economic theories is the maximization of the profits in order to maximize stock value. This, quite evidently, greatly differed from the objectives of the technostructure which caused massive restructuring in the 1990s. In order to maximize profits, enterprises now had to take draconian measures to cut expenses and ensure profits for the shareholders. This greatly encouraged the exportation of manual or simple tasks to foreign countries where labour is much less expensive and caused massive layoffs in developed countries. Likewise, it reduced salaries and caused a decline in income of the working class. Paradoxically, the salaries of the managers increased and the constant demand for profits played an important role in the accounting scandals in 2002.

Footnotes

References