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Organisations as brains

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We use a variety of metaphors when we think or talk about the human brain. For instance, we may view it as a computer processing lots of information, or a sophisticated memory bank, or a complex system of chemical reactions. More recently the brain has been compared to a hologram - if a hologram is broken, then any single piece can be illuminated to reconstruct the entire image.

Morgan's third metaphor compares organisations to human brains. He explores this metaphor by thinking about organisations in three interconnected ways:

  • as information processing brains
  • as complex learning systems
  • as holographic systems containing both centralised and decentralised characteristics

Morgan writes:

If one thinks about it, every aspect of organizational functioning depends on information processing of one form or another. Bureaucrats make decisions by processing information with regard to appropriate rules. Strategic managers make decisions by developing policies and plans that then provide a point of reference for the information processing and decision making of others.

In the 1940's and 1950's Herbert Simon explored the parallels between human decision making and organisational decision making. He challenged the assumptions of classical economic theory that individuals and firms make optimal decisions (to maximise profits or minimise costs, for instance). Rather, people use bounded rationality to make 'good enough' decisions based on limited information and rules of thumb. He coined the word satisfice, a combination of satisfy and suffice, to describe this way of making decisions. In his view, decision makers satisfice rather than optimise.

Simon argued that organisations can never be perfectly rational since individuals have limited information, explore a limited number of alternatives, and cannot attach accurate values to possible outcomes. To make the decision making process manageable, organisations make decisions that may be fragmented - different departments have different information and priorities - or based on routines that are established through experience.

More recently, developments in information technology offer a very different way of viewing an organisation as an information processing system. Modern technology can "dissolve the constraints of space and time, linking 'knowledge workers' and factory operators in remote locations across the globe into an integrated set of activities." Practices such as computerised stock control and 'just in time' (JIT) manufacturing processes have changed the very concept of what it means to be an organisation. Morgan writes:

JIT has transformed organizational relationships throughout the world, linking what used to be discrete organizations into integrated systems of intelligence and activity. We see the same process occurring in financial services and throughout the service sector.

He adds:

Organizations are rapidly evolving into global information systems that are becoming more and more like electronic brains.


Modern IT and communication systems enable the creation of virtual organisations. A virtual organisation has few physical assets, reflecting the fact that adding value is becoming more dependent on (mobile) knowledge and less dependent on (immobile) plant and machinery. A virtual organisation relies for the most part on a network of part-time electronically connected freelance workers. As an illustration, the Virgin Group briefly held 5% of the British cola market with just five employees. This was achieved by tightly focusing on the company's core competence: its marketing. Everything else, from the production of the drink to the distribution of it, was done by someone else.

Morgan goes on to discuss how to design organisations that can learn in a brain-like way, a challenge which becomes ever more important as the pace of change accelerates. He notes the distinction between single-loop learning and double-loop learning. A thermostat, for instance, is able to detect a change in temperature and initiate action to correct this - that is an example of single-loop learning. A thermostat, however, does not tell you whether the temperature it's set at is appropriate. Double-loop learning involves questioning whether the setting is appropriate or not. It might be described as learning how to learn.

Many organisations are good at single-loop learning. They can scan the environment, set objectives, and monitor performance against these objectives. A budgetary system, for instance, will monitor revenues, costs and profits, signalling to management where there are deviations from plans and targets that may require remedial action. However, some organisations, particularly bureaucracies, are unable to review and challenge operating norms. There may be strong divisions within the organisation which protect vested interests within the organisation, prevents the flow of information and knowledge, and leads to different units pursuing goals that are narrow and suboptimal.

Morgan suggests that a learning organisation has the capacity to do four things:

  • Scan and anticipate change in the wider environment
  • Question, challenge and change operating norms and assumptions
  • Allow an appropriate strategic direction and pattern of organisation to emerge
  • Engage in double-loop learning - not being trapped by traditional management control systems or defensive routines that protect individuals and departments

Morgan then considers an organisation as a holographic brain, in which the "qualities of the whole are enfolded in all the parts so that the system has an ability to self-organize and regenerate itself on a continuous basis." He offers the example of a Norwegian shipping company which lost half of its staff in a plane crash but was soon able to function much as before since the remaining staff shared much of the intelligence of the company and were able to pool their knowledge effectively.

The idea of a holographic brain is also seen in the notion of corporate DNA, another metaphor. This is a shared appreciation of the organisation's vision, values and norms that enables each employee to act in a way that represents the whole.

Watch this video clip on what it means to be a learning organisation.