Towards a Theory of Large-Scale Organisation

A theory of large-scale organization may be developed in the form of 5 principles: 1. subsidiary function, 2. vindication, 3. identification, 4. motivation, and 5. the middle axiom. Subsidiary function teaches that the center will gain in authority and effectiveness if the freedom and responsibility of the lower formations are preserved carefully. The large organization will be composed of many semiautonomous units (quasi-firms) that have a large amount of freedom to provide the greatest chance for creativity and entrepreneurship. One of the most important duties of the central authority toward the lower formations is to vindicate them. Each quasi-firm must have a separate balance sheet, with profits appearing as loans to the center, and losses recorded as loans from the center. Motivation presents a central problem for a large organization. When the National Coal Board decided to concentrate output, it used the middle axiom principle -- issuing instructions and yet preserving the freedom and responsibility of the lower formations.