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Process, Sensemaking, and Organizing$

Tor Hernes and Sally Maitlis

Print publication date: 2010

Print ISBN-13: 9780199594566

Published to Oxford Scholarship Online: January 2011

DOI: 10.1093/acprof:oso/9780199594566.001.0001

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Organizational Learning through Problem Absorption: A Processual View

Organizational Learning through Problem Absorption: A Processual View

(p.185) 10 Organizational Learning through Problem Absorption: A Processual View
Process, Sensemaking, and Organizing

Sergey E. Osadchiy

Irma Bogenrieder

Pursey P. M. A. R. Heugens (Contributor Webpage)

Oxford University Press

Abstract and Keywords

In organizations, existing codified rules are often used as the basis for solving new problems even when this means stretching those rules. Such “absorption” of new problems by rules reduces the need to explore and develop new solutions and to encode those solutions into new rules. In the present chapter we examine the phenomenon of “problem absorption” more closely from the process perspective and conceptualize it as a micro‐level form of “semantic learning.” Contrary to previous literature, we argue that problem absorption does not necessarily reinforce existing rules and prevent the search for alternatives. We thus contribute to the literature on organizational learning and rule dynamics by showing how under certain conditions the cumulative effects of semantic learning via repeated absorption of novel problems by formal rules can give rise to higher‐level learning that has the potential to transform the organization's rule system.

Keywords:   organizational learning, problems, written rules, reflexivity, formal organization, processual view

Organizational learning is often conceptualized as a process by which organizations develop rules, procedures, and routines for solving recurring organizational problems (Cyert and March, 1992; Levitt and March, 1988; Nelson and Winter, 1982; Schulz, 1998; Weick, 1991). Over time, a repertory of “tried‐and‐tested” solutions is built up in organizational memory (Walsh and Ungson, 1991), and, insofar as these can be used to deal with or “absorb” new problems, the perceived need to search for alternative solutions is reduced (Levitt and March, 1988). In the literature on the dynamics of organizational rule systems in particular (March et al., 2000), this notion of “problem absorption” has been used to explain why the availability of codified and prescribed solutions to problems in the form of (p.186) written rules tends to reduce the impetus for further learning and codification efforts (Schulz, 1998).

In the present chapter we examine the phenomenon of “problem absorption” more closely from the process perspective (e.g., Tsoukas and Chia, 2002), arguing that it need not always imply the absence of organizational learning. On the contrary, we suggest that insofar as it involves the ongoing construction and reconstruction of the very meaning of those rules in practice and calls for reflexivity on the part of the actors concerned (e.g., Antonacopoulou and Tsoukas, 2002; Archer, 2003), problem absorption may actually constitute a form of organizational learning in its own right. Furthermore, while the extant literature on problem absorption suggests that “[s]tretching old rules to deal with new problems reinforces the old rules” (Schulz, 1998: 853), we propose that such stretching can actually undermine those rules under certain conditions and thereby trigger higher‐level organizational learning (Fiol and Lyles, 1985).

The intended contribution of this chapter is twofold. First, although the idea that rules absorb problems has already been introduced and briefly discussed in the literature on rules (Schulz, 1998; March et al., 2000), the concept of problem absorption remains underdeveloped. Our analysis helps to address this gap by reconceptualizing problem absorption as a reflexive process and integrating the concept more strongly with other literature that deals with related phenomena (Corley and Gioia, 2003; Tsoukas and Chia, 2002). Understanding problem absorption by rules is important for organization theory not only because such absorption constitutes a mechanism that limits bureaucratic growth (Schulz, 1998), but also because, as we argue in this chapter, problem absorption can be a source of both lower‐ and higher‐level organizational learning. Thus, our second contribution is to challenge views that associate problem absorption with only lower‐level learning (March et al., 2000) or codification traps (Schulz, 1998), by showing how the process of repeated and cumulative problem absorption can induce higher‐level learning and thus release the organization from the codification trap. Our arguments suggest opportunities for advancing research on organizational learning through closer attention to learning in bureaucratic contexts.

Building on previous literature, we conceptualize problem absorption as involving reflexive extension of a rule's labeled categories to cases that are markedly different from the prototypical members of those categories (Tsoukas and Chia, 2002), which allows practitioners to maintain the pattern of practice and a sense of order in the face of ambiguity and situational variation. We further argue that problem absorption is a form of “semantic (p.187) learning” or learning on the basis of meanings that emerges in a subtle and largely unintentional way from organizational members' practical coping (Corley and Gioia, 2003). When rules are extended to new cases repeatedly, semantic learning can become cumulative due to retention of precedents and new understandings in organizational memory (Walsh and Ungson, 1991). We suggest that it can have certain destabilizing effects on the relevant rule or rules and the broader understandings that underpin those rules and support their use in practice (Schatzki, 2006). Rule makers' recognition of these effects through reflection can lead to higher‐level organizational learning, unlearning (Tsang and Zahra, 2008), and codification.

10.1 Theoretical background

10.1.1 Problem absorption and rule dynamics

The notion of problem absorption, as developed in the literature on rule dynamics (Schulz, 1998; March et al., 2000), has its roots in the “Carnegie School” research program, with its emphasis on the relationship between “human problem‐solving processes” under bounded rationality and “the basic features of organization structure” (March and Simon, 1993: 190). According to this perspective, problem definitions, for example, do not constitute complete or fully accurate representations of all aspects of a problem, but rather simplified models that tend to be already constructed in light of potentially available solutions (March and Simon, 1993; Starbuck, 1983). Furthermore, many solutions, having once been developed through the process of search, become learned responses that can subsequently be routinely applied to similar situations, reducing the search process to the task of matching problems to solutions, and vice versa (Cohen et al., 1972; March and Simon, 1993; Levitt and March, 1988). Thus, an organization gradually accumulates a repertory of decision rules, procedures, and routines for dealing with recurring problems (Cyert and March, 1992; Nelson and Winter, 1982).

The rule dynamics research builds on these ideas, arguing that “[t]oday's rules are often the solution to yesterday's problems” (March et al., 2000: 48). The recognition or “social construction” of problems is sporadic and depends strongly on the allocation of organizational attention to different organizational task domains when performance in those domains falls below aspiration levels (March et al., 2000: 63; see also Cyert and March, 1992; Zhou, 1993). Once a solution to a problem situation has been (p.188) encoded in a written rule, it is assumed that the rule can also help organizational members to deal with future problems “in a routine way,” making such problems “less available for further rule production” (March et al., 2000: 65). This is what is meant by problem absorption.

Schulz (1998) identified two problem absorption mechanisms. The first of these, which he called preemption, has to do with the reluctance of rule makers to develop new rule‐based solutions to a problem when a rule‐based solution to the same problem already exists, because doing so could lead to inconsistencies between rules. The second mechanism involves a so‐called codification trap stemming from the tendency of rule users to “stretch established rules to cope with new problems,” which “reinforces the old rules and keeps experience with alternatives inadequate to make them rewarding to use” (Schulz, 1998: 853; see also Levitt and March, 1988). Schulz found indirect empirical support for problem absorption in the tendency for the rate of birth of new rules to decline as the total number of rules in a given domain grew larger. He also found that the rule birth rate increased when other rules were suspended, suggesting that such suspensions allowed problems that had previously been “absorbed” to be “released” and “recycled” into new rules (Schulz, 1998: 855).

In another study, Beck and Kieser (2003) attempted to extend the problem absorption argument to rule revisions, but could not find support for the hypothesis that rates of revision would decline with rule volume. March et al. (2000: 76) have suggested that rules are revised primarily in order to enhance their capacity to absorb new problems, describing this “refinement” process “as a case of learning by rules.” Rule revision is also seen as a process through which experiences accumulated through rule use become formally incorporated into the rule (March et al., 2000: 76; see also Beck and Kieser, 2003; Schulz, 2003).

What are the main implications of these arguments and findings for the relationship between problem absorption by rules and organizational learning? Insofar as problem absorption involves exploitation of experiences already encoded in extant rules, it may prevent exploration of alternative solutions (March, 1991; Schulz, 1998). Note that such exploitation need not imply the absence of learning, since rule users can learn “how to operate within rules, extending the meaning of rules to new situations, molding them to encompass new problems” (March et al., 2000: 53). However, this kind of experiential learning within rules is seen as contributing to the stability of those rules (cf. Zhou, 1993), and thus to the codification trap mechanism mentioned above (Levitt and March, 1988; Schulz, 1998). Even when some of these learned experiences are formally incorporated into the (p.189) rules via the revision process, such revisions may well only serve to further enhance the rule's stability through refinement (Beck and Kieser, 2003; March et al., 2000).

Despite considerable theoretical and empirical progress towards understanding both the problem absorption phenomenon itself, as well as its importance and consequences for organizations, we contend that important gaps in the theoretical treatment of the phenomenon still remain, and that filling those gaps from a process perspective will yield insights that may challenge some of the above conclusions regarding the relationship between problem absorption and organizational learning and change. In particular, extant treatments of problem absorption do not sufficiently address the micro‐processes through which absorption occurs, the broader normative and cognitive foundations that underpin the organizational rule system, and the role played by reflexivity of organizational members. In the next section we further elaborate on these issues and explain how adopting a process perspective can both sensitize us to them, as well as provide a way to theorize about them.

10.1.2 A processual view of problem absorption

The meta‐theoretical approach that we favor treats organizational rules as components of unfolding organizational practices (Schatzki, 2005, 2006). Moreover, it views the performative dimension (Feldman and Pentland, 2003) of such practices as inescapably open‐ended and processual, and as having ontological primacy over the structure/organization/patterning of practice, which is a secondary accomplishment (Schatzki, 2005; Tsoukas and Chia, 2002). In line with this assumption, the meanings of artifacts like written rules are not “given” once and for all but are negotiated in and through practical activity, ever remaining open‐ended and in a state of becoming (Tsoukas and Chia, 2002). As Tsoukas (1996) has forcefully argued, drawing on the work of Wittgenstein (1953) and other philosophers and social theorists, the knowledge that informs and directs the flow of practice can never be reduced to such rules, since “correct” use of any rule in a specific case always presupposes an unarticulated background of understandings, expectations, and embodied abilities.

How can this perspective contribute to our understanding of problem absorption? First, it provides a way of going beyond the truism that rules are extended or “stretched” to cope with new cases (Schulz, 1998) and of theorizing about this process. The very notion of “stretching” presupposes not only a view of rule use as involving attempts to subsume particular (p.190) cases under general categories that correspond to the rule's domain (Schulz, 1998), but also a distinction between prototypical and non‐prototypical cases, the former being more representative of a given category than the latter (Tsoukas and Chia, 2002). The “absorption” of a problem by a rule will thus often require “an imaginative projection of a category beyond prototypical cases to marginal ones,” which in turn has “the potential of extending the radius of application of the concept, thus transforming it” (Tsoukas and Chia, 2002: 574). This conceptualization opens up new questions about problem absorption, such as the issue of the stability of prototypes, and the long‐term effects of such conceptual micro‐transformations.

Second, by emphasizing that rules are incomplete and so can never determine their own use (Reynaud, 2005; Tsoukas, 1996), the process perspective encourages us to look beyond the properties of the written rules themselves in analyzing problem absorption and its effects. For example, work on organizational routines and practices suggests that not only rules, but also general background assumptions and understandings about, for example, the nature of the task performed, the social roles of organizational members, organizational goals and priorities, and other relatively “enduring” aspects of organizational context, make an important contribution to the patterning of activities in organizations (e.g., Feldman and Rafaeli, 2002; Schatzki, 2006). This does not imply that all such understandings, if brought into focal awareness and reflected upon (Tsoukas, 1996), will be met with agreement by all participants in the routine or practice, but merely that there is sufficient implicit agreement to sustain mutual expectations and the patterning of activity.1 Some of these understandings will also correspond to the cognitive and normative foundations underpinning certain sets of rules within the rule system; foundations that develop over time through theorizing and valorizing activities (Heugens and Osadchiy, 2007; Lawrence and Suddaby, 2006).

One of the reasons why these understandings cannot be neglected in the analysis of problem absorption is that they are likely to encompass lessons from past rule use experience, including stories about different prototypical and non‐prototypical cases that have already been encountered and any precedents that may have been established (Levitt and March, 1988). As emphasized by Schatzki (2006), the concept of organizational memory2 is necessary for explaining how general understandings about practice are preserved in organizations (Walsh and Ungson, 1991). While written rules may be regarded as the formal memory of the organization (Heugens and Osadchiy, 2007; Levitt and March, 1988: 327; Schatzki, 2006), it is also important to recognize that “organizations have memories in the form of (p.191) precedents” (Cyert and March, 1992: 38). An analysis of problem absorption must take both these interdependent memory repositories into account.

Third, the analysis of problem absorption requires clarity in the assumptions regarding the scope for and role of human reflexivity in rule use (Tsoukas and Chia, 2002). While Schulz (1998: 853) suggests that problem absorption by bureaucrats might be “habitual” or the result of training (Merton, 1940), our view is that the constraints of bureaucracy can be mediated by reflexivity on the part of actors (Archer, 2003). Indeed, the view of rules as forming relatively enduring institutional structures with their own emergent causal powers, which constrain and enable the practice of agents (Archer, 1995), can be juxtaposed with the view of rules as “tools” that are “readily available” to practitioners who use them and that gradually come to be “internalized” or “dwelled‐in” by those practitioners (Chia and Holt, 2006). While the language of “internalization” may appear to conflate people and rules (cf. Archer, 1995 on Giddens), this criticism need not apply. The analytic distinction between rules and rule users can still be maintained, since there is always a possibility of a “distancing of the individual from the phenomenon apprehended,” a reflexive standing back, which characterizes the “occurrent” mode of engagement with the world (Chia and Holt, 2006: 641).

10.2 Problems, rules, reflexivity

The term “organizational problem” can have a variety of meanings, which poses a challenge for abstract theory. Typically, a problem is defined as “an undesirable gap between an expected and an observed state” (Tucker et al., 2002: 124; see also Cowan, 1990: 366). It is generally recognized that problems are social constructs that can be said to “exist” only insofar as they are “recognized as existing” (March et al., 2000: 63). Problem constructions are “imposed [on the ongoing flow of events], but not in total disregard of one's context and constraints” (Weick, 1995: 89). In light of the process perspective, where activity is seen as central to the phenomenon of organization (Schatzki, 2006; Tsoukas and Chia, 2002), it makes sense to conceptualize organizational problems as inextricably linked to activity. Indeed, as pointed out by William Starbuck (1983), organizational problems are often framed as “needs for action.”

However, most of the activity that occurs continuously in organizations does not involve the imposition of problems or explicit search processes (p.192) (Starbuck, 1983). Rather, it takes place within what Chia and Holt (2006), following Heidegger, called the “dwelling” mode of engagement with the world, where circumstances and objects present themselves as “available” for activity. It is only when there is “a shift from the experience of immersion in projects to a sense that the flow of action has become unintelligible in some way” (Weick et al., 2005: 409) that “problematization” of activity is likely to take place (Emirbayer and Mische 1998: 998). Some elements within the unfolding situation are apprehended as unexpected, novel, or ambiguous, which prevents the continuation of activity in the “dwelling” mode. Instead, subsequent action with regards to the situation must take place within the “building” or “occurrent” mode of engagement, which allows for more disengaged reflexivity (Chia and Holt, 2006), at least until the momentarily disrupted sense of order is restored.

Given this understanding of organizational problems, we may say that a situation that has been problematized is “absorbed” when organizational members find a way of responding to that situation in a manner that both they and others within the organization might recognize as being in accordance with existing formal rules. Moreover, after the response, the situation is no longer regarded as problematic, and therefore does not become a pretext for proposals of new formal rules (Schulz, 1998). We believe that this interpretation of “problem absorption” is consistent with the arguments in the literature on rule dynamics (March et al., 2000; Schulz, 1998).3

A further and perhaps crucial point is that an attempt to respond to a situation in accordance with existing rules can generate problems of its own, which might be called rule‐related problems. Specifically, the situation's novel or ambiguous features can make people wonder, which rule (if any) should be applied. Alternatively, or perhaps additionally, it may not be clear how a particular rule should be applied. As will hopefully become clear as we consider specific examples, these rule‐related problems frequently have to do with categorization (Tsoukas and Chia, 2002). Indeed, difficulties of categorization are often the reason why situations are problematized in the first place (Emirbayer and Mische, 1998). How organizational members cope with such rule‐related problems can make the difference between problem absorption and non‐absorption. If no rule seems applicable or if some rules cannot be applied in the usual way, it becomes more likely that the response to the situation will be more “ad hoc” (Winter, 2003), improvisatory (Moorman and Miner, 1998) or “non‐canonical” (Brown and Duguid, 1991). In some cases, this may entail an officially authorized exception to some rule or even an (unauthorized) rule violation (Lehman and Ramanujam, 2009). These non‐absorption responses (p.193) can alert organizational rule making agencies to the “problem” and motivate them to create new rules or adjust existing ones so as to enable the organization to handle similar problems in a more routine way in the future (Schulz, 1998).

10.2.1 Two examples of problem absorption

To clarify the types of situations that we have in mind, we shall make use of two examples of problem absorption. For the first example, we draw on the experiences of one of this chapter's co‐authors in her role as a treasurer of a university department (see also Bogenrieder and Magala, 2007). The part of the treasurer's role relevant to our analysis consisted in evaluating and approving research‐related expenditures that were to be financed from the department's budget. The applicant would fill out a form, providing details on the types of expenditure planned (e.g., conference visit, research collaboration, etc.) together with estimates of the expenses, which was then forwarded to the treasurer, who had to sign the application for approval. The treasurer was formally responsible for verifying that the expenditures were relevant to the department's research needs. In doing so, she naturally also had to take into account the department's financial situation. The treasurer's decisions were formally reviewed by the university's financial department, which made sure that these decisions were lawful and that the total expenditures remained within the budgetary limits.

The application form specified different categories of expenditure together with some rules and standards for ensuring that the expenditures remained relevant and the budget was not exceeded. In describing the case, we are specifically concerned with the category labeled “conference presentations.” Recall that a case can be more or less prototypical relative to a category (Rosch and Lloyd, 1978, cited in Tsoukas and Chia, 2002). In this example, a prototypical application falling under the “conference presentations” category would involve a department member attending a conference with the aim of presenting a paper. The written rules stipulated that the category covered both conference fees and costs of travel and accommodation. However, as the treasurer was soon to discover, some conferences also required participants to be full members of the association linked to the conference, such as the AOM or EGOS. Attendance of such conferences thus entailed not only the usual conference registration fees, but also membership fees. This was the first problem or non‐prototypical case faced by the treasurer, since the rules on the application form said nothing about (p.194) membership fees.4 Thus, the treasurer had to decide whether or not to extend the “conference presentations” category and interpret it as also covering membership fees. After careful reflection and consultation, the treasurer chose to extend the original category.

This example is a case of problem absorption, since the treasurer brought a non‐prototypical request within the domain of existing rules (Schulz, 1998) and handled it by extending one of the categories. The problem was rule‐related, since the request revealed (what the treasurer recognized as) a problematic ambiguity of the rules. The treasurer's decision resulted in a foregone opportunity for rule revision, such as the establishment of a separate category and procedure for membership fees (both related and unrelated to conferences). Later on in this chapter, we shall describe how this decision had the unintended consequence of attracting further non‐prototypical cases for the treasurer cope with.

The second example is drawn from a historical study of the Rotterdam port (Van Driel and Bogenrieder, 2009). The focal rule is a by‐law for regulating the use of berths in the Rotterdam port, adopted in 1883. The by‐law stipulated that only “liner services” or “ships maintaining a scheduled service for many different customers” could be granted the right to a permanent berth (Van Driel and Bogenrieder, 2009: 654). The first truly problematic case in the history of the by‐law involved the firm Wm. H. Müller & Co., which had filed a request for a permanent berth in 1891. While the municipal executive was in principle willing to grant the request, other important actors opposed such a decision on the grounds that Müller had initially failed to name specific ships that would use the berth, which was one of the official requirements. The case thus illustrates the role of disagreement between actors in the social construction of organizational problems. When Müller eventually did provide the details of the ships, further questions were raised about whether those ships were in fact true “liner services.” In all likelihood, the actors viewed “the short sea traffic that dominated the Rotterdam liner shipping scene” as the prototype for the “liner service” category (Van Driel and Bogenrieder, 2009: 657). The prototypical “liners” were thus daily or weekly services, while the ships mentioned by Müller were primarily bi‐weekly services ( 2009: 657). However, since the by‐law did not explicitly specify the meaning of “liner service,” it was also possible to interpret it in Müller's favor. In the end, the city council agreed to grant the request, thereby extending the radius of the category beyond the prototype (Tsoukas and Chia, 2002).

(p.195) 10.2.2 The role of reflexivity

As these examples illustrate, problem absorption is about “special cases that have to be fitted to a given repertoire of actions” (Levinthal and Rerup, 2006: 507). Actors recognize a case as ambiguous or non‐prototypical when they are attentive to both the similarity and the difference (Weick and Sutcliffe, 2006: 516) between the prototypical cases that they have experienced in the past and the case they are faced with in the present. That is, the “systems of relevances” (Schutz, 1964, cited in Emirbayer and Mische, 1998: 979) acquired by actors through practical experience directs their attention to specific similarities and the differences that might be relevant in their work. For example, the similarity between membership fees and other conference‐related expenses suggests to the treasurer the possibility of applying existing rules, while the fact that such fees have until now not been financed from the budget makes her hesitate. When a case is non‐prototypical relative to a rule's domain, this can make actors uncertain as to whether the rule applies to the case. When a case is non‐prototypical relative to a category that serves as a criterion for what should be done according to the rule, such as the “liner service” category in the port example, this can make actors uncertain as to how the rule applies to the case (i.e. which action would be consistent with the rule).

The fact that the non‐prototypical case cannot be immediately subsumed leads actors to problematize the situation and to engage with the case more reflexively or mindfully (Levinthal and Rerup, 2006). An important component of this reflexive engagement will be what Emirbayer and Mische (1998: 971) called the “practical‐evaluative element” of agency, which “entails the capacity of actors to make practical and normative judgments among alternative possible trajectories of action”. Note that among these trajectories may be the action of not subsuming the case under any rule‐related category. Thus, problem absorption is not inevitable and reflection can enable the exercise of agency with regard to whether and how the problem is absorbed.

Of course, in organizations with many rules, the frequency with which rules will be cited as legitimating reasons for action is likely to be quite high (Ocasio, 1999: 393). Rules will consequently tend to be seen as being “more or less exhaustive” and “gapless” (Weber, 1978: 958, 656, cited in Nass, 1986). Given these background understandings, actors may face strong normative pressure towards problem absorption that can constrain their agency. Empirical research can shed more light on the agentic choice between absorption (p.196) and non‐absorption, which is no doubt an important topic, but one that is beyond the scope of this chapter.

Even when the problem is absorbed, reflexive agency can still matter in the process. In reflecting on the possibility of subsuming the case under different rule‐related categories, what is relevant is not only the similarities and differences between the case and the prototypical instances of the categories (Tsoukas and Chia, 2002), but also the overall variability of past instances still belonging to each of those categories (cf. Holland et al., 1986: 185–8). Both the sense of a category's overall variability and understandings about prototypical instances are developed through the use of the category in practice and can be brought to bear on the present situation through organizational remembering (Feldman and Feldman, 2006), in which actors' personal experiences, written organizational records (Walsh and Ungson, 1991), and storytelling (Boje, 1991) can all play a role. For example, there was ambiguity in the Müller case as to whether the ships in question could be categorized as “liners” or “irregular.” In the debates that followed, actors considered the prototypical examples of liner ships and noted the variability within the category between daily and weekly services.

The last point we wish to highlight here is that reflection need not be completely retrospective, but will in most instances also cover the possible actions to be taken if a given rule is applied to the case and the anticipated consequences of these actions. This is the core of Emirbayer and Mische's (1998) practical‐evaluative element. As Levinthal and Rerup (2006: 507) observed, “an important skill in the context of bureaucratic organizations is the art of manipulating the label or category with which a given request or initiative is encoded to elicit a desired outcome.” Thus, reflexive evaluation of courses of action and anticipated outcomes in light of personal projects, understandings about organizational goals, and the teleological ordering of the relevant practice (Schatzki, 2006), clearly matters in problem absorption.

10.2.3 Stabilizing consequences

In the short run, problem absorption may be seen as contributing to the stability of both the individual rule and the rule system as a whole. First, extending the rule to new problems will tend to increase both its pragmatic and cognitive legitimacy (Suchman, 1995); it not only serves to reaffirm the rule's usefulness to the organization, but also contributes to its becoming increasingly taken for granted as part of organizational life, so that its abandonment seems almost unthinkable (Zucker, 1977). Second, problem (p.197) absorption is an experiential learning process, whereby rule users become more skillful in interpreting and applying the rule, which in turn makes them less likely to challenge it (Zhou, 1993: 1138).

Third, problem absorption via rule extension to non‐prototypical cases leaves far less scope for exploration of novel responses that could potentially be encoded into new rules (Schulz, 1998). Fourth, it is important to remember that the organizational rule system “is not some abstract chart but one of the crucial instruments by which groups perpetuate their power and control in organizations: groups struggle to constitute structures in order that they may become constituting” (Ranson et al. 1980: 8). Thus, as long as problems are absorbed and individual rules within the system remain unchallenged, the “rule regime” as a whole becomes more entrenched (March et al. 2000).

While acknowledging that problem absorption can have the stabilizing effects just described, what we would like to do in the remainder of this chapter is to focus on the more dynamic consequences of problem absorption. As we argue below, problem absorption can be seen as involving a special kind of organizational learning (March et al., 2000). Furthermore, repeated problem absorption by the same rule can lead to amplification of the small changes that problem absorption generates (Plowman et al., 2007), thereby giving rise to more radical forms of change.

10.3 Dynamic consequences and organizational learning

10.3.1 Semantic learning

Corley and Gioia (2003: 625) used the term “semantic learning” to refer to the “changes to the intersubjective meanings underlying the labels and actions constituting the core of a collective's understanding of themselves,” and emphasized that such learning need not involve any changes to the actual labels. Although their discussion focused on the labels and meanings that form the basis for organizational identity, we suggest that an analogous learning process can take place at the micro‐level when existing rules are extended to deal with non‐prototypical cases, enabling the organization to maintain relative stability in its (rule‐based) response in the face of variety in stimuli (Weick, 1991). While problem absorption does not generally lead to changes in the actual text of the written rule, including the labels used to specify its domain and the actions it prescribes, it can still modify the categories for those labels (Tsoukas and Chia, 2002). In the words of Corley (p.198) and Gioia (2003: 622), “the meanings associated with these labels change to accommodate current needs.” Because the intention of rule users in problem absorption is usually to deal with the new case, rather than to transform the rule's meaning, semantic learning is likely to be an unintended consequence of problem absorption. Thus we can also agree with Corley and Gioia's (2003: 625) assertion that semantic learning can take place “without explicit awareness of learning, without the recognition of learning, or even without the intention to learn by the members of the collective.”5

One aspect of semantic learning that Corley and Gioia (2003) did not sufficiently emphasize is the cumulative nature of modifications of meaning. Similarly, discussions of problem absorption by rules do not address the implications of repeated absorption (March et al., 2000; Schulz, 1998). Only Tsoukas and Chia (2002: 576), while discussing empirical material from Feldman (2000), briefly mentioned that extensions of “current policies” to accommodate non‐prototypical cases “provided opportunities for further changes.” We believe that the temporal dimension of problem absorption and the tendency for later changes in the meaning/use of formal rules to build on earlier ones deserve greater attention. We also wish to highlight the role played by organizational remembering (Feldman and Feldman, 2006) in making it possible for semantic learning to become cumulative and have lasting effects.

As an illustration of our arguments, we return to our earlier example of the treasurer's work at a university department. Recall that the treasurer had found it necessary to interpret the “conference presentations” category as also covering conference‐related membership fees, thus allowing such fees to be paid out of the department's budget under the existing rules. This decision set a precedent (Levitt and March, 1988) for subsequent uses of the application with regards to conferences requiring membership fees. Over time, visits to conferences requiring membership fees became more common, in effect making such cases part of the prototypical core of the category (Tsoukas and Chia, 2002). This in its turn paved the way for further category extensions.

The next non‐prototypical request faced by the treasurer involved a membership fee that was not related to any conference, but had to be paid in order to enable the applicant to join a special association of researchers. In the absence of prior history of problem absorption, it would be very difficult to justify classifying such an expense under “conference presentations.” However, given the fact that the category had already been extended to some membership fees, as well as the lack of any (p.199)

Organizational Learning through Problem Absorption: A Processual View

Fig. 10.1 Category enlargement and category shift

alternative category that could cover the case, the treasurer faced strong normative and political pressure from department members to extend the category once again, which she did. What happened was a category shift, where a case (or set of cases) that used to be treated as non‐prototypical came to serve as the new prototype, to which future cases could be compared. Such a shift need not involve the complete unlearning (Tsang and Zahra, 2008) of the initial prototype, such that it no longer plays any role in the use of the rule in question, but it at least opens up the possibility of rule application to cases which would not have been included based purely on comparisons with the initial prototype.

We distinguish the phenomenon of category shift from (mere) category enlargement, as illustrated in Fig. 10.1. Category enlargement occurs when past category extensions modify organizational members' sense of the overall variability of the category, while category shift additionally involves an adjustment of the prototype, as in the above example. Pure category enlargement occurred when the treasurer was forced to also extend the category to conference visits that did not involve any paper presentations for the applicant. Essentially, the cases of membership fees enabled both the treasurer and the department members to see the category as encompassing more variability (and the category boundaries as being more broad and flexible) compared with the initial understanding of the category that was based solely on prototypical cases. Therefore, a seemingly unrelated (p.200) extension to membership fees also paved the way for a further broadening of the category to cover conference visits for non‐presenters.

As the example illustrates, problem absorption is a form of experiential learning insofar as it involves inquiry about how to respond to a mismatch between expected and observed situations or outcomes, as well as the retention of “learning agents' discoveries, inventions, and evaluations … in organizational memory” (Argyris and Schön 1978: 19) in the form of new understandings and precedents for future rule applications. In the above example, the new understandings and precedents were relevant both for the treasurer (an actor formally charged with applying or enforcing the rule) and for the applicants (the actors directly affected by the rule). As participants in a common routine, both parties were able to learn about the others' “tasks and perceptions of the routine” (Feldman and Rafaeli, 2002: 314). The treasurer learned more about the kinds of expenses that applicants wanted reimbursed, while the applicants became more likely to submit further non‐prototypical requests under an old category once they learned that the treasurer was sometimes willing to extend the category beyond the prototypical instances.

However, without broader reflection on the whole cumulative experience with the rule, semantic learning of the kind that we have described is likely to be limited in its impact on the organization and especially its more formal aspects, such as the rule itself. At best, it constitutes a form of practical drift (Snook, 2002) that leads to an increasing divergence between the abstract understandings about the rule‐governed practice, which generally remains wedded to prototypical performances, and the actual pattern of practice itself, which has been transformed through problem absorption (Feldman and Pentland, 2003). In the next section we discuss how problem absorption can induce a higher‐order learning process with more far‐reaching effects for organizational rules.

10.3.2 Higher‐level learning

Organizational learning theories often distinguish between different types or levels of learning. Fiol and Lyles (1985), building on Argyris and Schön's (1978) classification of single versus double‐loop learning, postulate two levels of learning. Lower‐level learning stems from repeated action within a given set of rules leading to new behavioral outcomes, while higher‐level learning is a non‐repetitive enquiry leading to the development of new rules and understandings (Fiol and Lyles, 1985). Nicolini and Meznar (1995) make a related distinction between learning as a continuous and (p.201) often unconscious process of cognitive modification in the course of practice, which is especially close to the notion of semantic learning discussed above, and learning as a socially constructed product of organizational self‐observation and abstraction. Finally, in developing their process perspective on organizational change, Tsoukas and Chia (2002: 579–80) appear to differentiate between “microscopic” change, which is pervasive and “ongoing” in organizations, and institutionalized change, which depends at least in part on the management's “declarative powers” to turn change into a potential institutional fact (Searle, 1995).

The relationship between the two levels of learning, however, is not entirely clear. Although it is recognized that lower‐level learning “can provide the raw material” for higher‐level learning (Lant and Mezias, 1992: 64; Nicolini and Meznar, 1995), the two processes have sometimes been presented as relatively independent (Fiol and Lyles, 1985), or even antagonistic (Levitt and March, 1988; March, 1991). Some have suggested that a transition from lower‐ to higher‐level learning can be triggered when experience from lower‐level learning is “equivocal” (Lant and Mezias, 1992: 64), when organizational performance falls below the aspiration level (Cyert and March, 1992; Lant and Mezias, 1992), or when the organization faces a crisis (Fiol and Lyles, 1985). In analyzing the consequences of problem absorption by rules we can better understand the process through which lower‐level (semantic) learning can lead to higher‐level organizational learning and change in written rules. The consequences we have in mind have to do with the emergence of new understandings and patterns of practice that can undermine the pragmatic, cognitive and normative bases of a rule's legitimacy (Suchman, 1995). Cognitive burden and breadth

First, repeated problem absorption can impose a considerable cognitive burden on rule users and those whom they may consult and/or ask for authorization with regard to whether or not to extend the rule. This happens precisely because, as we argued above, problem absorption is often a reflexive (rather than mindless) process. Especially when people have to engage in such reflection frequently for the same rule (and thus encounter uncertainty in the expected results), the important purpose of the rule to provide a sense of order gradually becomes undermined by non‐prototypical cases. The rule's use imposes a cognitive burden instead of reducing it (Simon, 1997), thereby undermining the rule's usefulness or pragmatic legitimacy in the eyes of rule users. In the example introduced above, the (p.202) treasurer found after repeated extensions of the category that the rule was not helping her to reach a decision on a particular application, but rather that she had to consider each case in light of the whole history of past decisions.

Second, cumulative category enlargements and category shifts tend to make the rule quite broad or inclusive. Rule users may consequently find it increasingly difficult to draw the line and justify not extending the rule further given that it has already been extended so often in the past. Thus, the rule's usefulness in making distinctions can become undermined (Tsoukas and Vladimirou, 2001). Although each non‐prototypical extension might be plausible in the concrete situation, nevertheless the sum of all extensions can generate problems for rule application, which in turn provide opportunities for learning and change. For example, after the rule has been extended to non‐conference membership fees and to conference visits without paper presentations, the treasurer was asking herself: “Where does it stop?” She could no longer use the rule to justify turning down applications, even when their relevance to the department's research needs might be called into question. The reflexive attitude towards the rule induced by problem absorption makes it more likely that the rule's diminished usefulness (in making distinctions and reducing cognitive burden) will be recognized within the organization. Reflection on broader understandings

The same reflexive attitude can also contribute towards weakening the rule's cognitive legitimacy or taken‐for‐grantedness within the organization (Suchman, 1995). Because applications of a rule to non‐prototypical cases are difficult to justify on the basis of the rule's text alone, other considerations, including especially the purpose or rationale behind the rule, are likely to be cited in accounting for such applications. Thus, problem absorption can bring the historical circumstances surrounding the rule's adoption into the focal awareness of organizational members (Tsoukas, 1996). More precisely, certain understandings about the rule's history and rationale will be re‐constructed and elaborated through the process of organizational remembering (Feldman and Feldman, 2006). The very activity of reflecting on these matters can reduce the tendency to see the rule as a necessary or inevitable part of the organization (Suchman, 1995) or to value it for its own sake (Merton, 1940; Selznick, 1957). It can also make people more aware of potential alternatives to the rule.

(p.203) Rationalized cultural understandings about formal organizational rules generally focus on the rules' relationship to organizational goals, technical expertise, or professional norms (Meyer and Rowan, 1977). However, organizational preferences and goals are frequently “ill‐defined” and ambiguous (Cohen et al., 1972; Lindblom, 1959), while professional jurisdictions are often contested (Bechky, 2003; Reed, 1996). Thus, collective reflection on the rule's purpose can reopen old debates over what the relevant organizational goals and professional norms are, and how best to balance conflicting norms and goals. The normative underpinnings (Lawrence and Suddaby, 2006; Suchman, 1995) of the organizational rule (or even a whole set of organizational rules) may be called into question as a result. For example, the by‐law regulating the use of permanent berths in the Port of Rotterdam was originally adopted in 1883 in order to prevent “independent middlemen [from] make[ing] money out of the right on permanent berths” (Van Driel and Bogenrieder, 2009: 654). However, by the end of the debates in the late 1890s, which were stimulated and informed by controversial extensions of the category “liner service” within the by‐law, the relevant authorities came to the conclusion that the prosperity of the port was no longer “best served by an unmediated relation between the port and the end users of its berths,” which in turn made it possible for a major revision of the by‐law to be passed in 1900 (2009: 663). Transition to higher‐level learning

As this example shows, reflection on how the rule relates to broarder organizational goals can trigger higher‐level learning and formal rule change when actors with formal authority over organizational rulemaking become involved in this reflection. This is consistent with the view that higher‐level learning “occurs mostly in upper levels” of the organization (Fiol and Lyles, 1985: 810). If the organization has routines for monitoring and reviewing rule applications, then these can help to bring the non‐prototypical rule applications to the attention of rule makers and thus ensure their involvement in the reflection induced by repeated problem absorption. Factors like organizational voice/silence (Milliken and Morrison, 2003) and the politics of issue selling (Dutton et al., 2001) can also affect whether reflection will become a collective process in which rule makers participate as well.

The transition to higher‐level learning also implies the occurrence of a “cognitive breakdown” (Nicolini and Meznar, 1995: 739) or a “realization that certain experiences cannot be interpreted within the current belief (p.204) system” (Lant and Mezias, 1992: 42; Argyris and Schön, 1978). In the context of problem absorption, this means that organizational members realize that the pattern of repeated category extensions cannot continue anymore. The sense of increased cognitive burden and of inability to make distinctions due to excessive broadening of the category can help to trigger such realization, as discussed above. The undermining of the rule's taken‐for‐grantedness and normative underpinnings can in turn make organizational members more willing to consider revising the rule or even suspending it altogether. Although the precise outcome of higher‐level learning is difficult to predict ex ante, it is clear that the outcome will be affected by the organizational experience with category extensions. Given that higher‐level learning is a response to a cognitive breakdown induced by this experience, it is likely to involve “the effort not to incur the same breakdown again” (Nicolini and Meznar, 1995: 739).

Indeed, one result of higher‐level learning can be an attempt to reverse the process of category extensions that has taken place in the course of applying the rule. The rule might be revised so as to explicitly prohibit the kinds of extensions that have taken place by delineating more explicitly the boundaries of the relevant category.6 Thus, if the setting of precedents through category extensions is a form of (semantic) organizational learning, as we maintain, then rule revisions that explicitly reject those precedents are a form of organizational unlearning (Tsang and Zahra, 2008). However, this is not what happened in the Rotterdam Port example. There, the rule makers actually embraced rather than rejected the results of semantic learning, since the revised by‐law explicitly authorized the use of permanent berths by irregular ships, whereas prior to the revision such ships were only permitted to use permanent berths when the officials were willing to stretch their definition of liner service (Van Driel and Bogenrieder, 2009). Thus reflection on the process of semantic learning can reveal not only the inadequacy of the old rules in dealing with the problems that have been absorbed, but also the value of some lessons from the process of semantic learning for the organization.

The extent to which the consequences of semantic learning, such as the increased variety of users of permanent berths in the port example, are embraced or rejected in rule revisions is difficult to predict. Rejection may become less likely when broadening of rule categories over time generates organizational commitments that are difficult to reverse. Furthermore, as noted by March et al. (1991: 5), it can happen that the “preferences and values in terms of which organizations distinguish successes from failures are themselves transformed in the process of learning.” Thus, the process (p.205) of semantic learning can subtly modify the prevailing understandings of organizational goals and preferences, which can in turn pave the way for more radial forms of change, such as rule suspension (March et al., 2000).

10.4 Summary and discussion

The aim of this chapter was to further develop the concept of problem absorption and to explore the relationship between problem absorption and organizational learning. Building on the process view, we suggested that an important part of problem absorption is the extension of categories of existing rules to non‐prototypical cases, which can transform the meaning of those categories in practice without changing the actual text of the rules (Tsoukas and Chia, 2002). Thus, our perspective on rules parallels Feldman and Pentland's (2003) argument that the performative aspect of a routine can vary even while its ostensive aspect (i.e. the abstract understanding of the routine) and the associated written rules, documents, and other artifacts, seem to remain relatively stable. In fact, variation at the performative level can actually contribute to stability at the ostensive and artifact levels (Essén, 2008), just as problem absorption in practice can sometimes contribute to the stability of a rule. Given that written rules are similar to technological artifacts (Adler and Borys, 1996), Orlikowski's (2000) arguments that technology's capacity to structure work is not inherent, but is enacted through “people's repeated and situated interaction with particular technologies,” and that “technologies‐in‐practice” (2000: 407) can undergo subtle transformations that will not be apparent when technologies are examined apart from practice, also generalize to rules.

However, apart from Tsoukas and Chia's (2002) contribution, this literature fails to address the crucial role of categorization in the interaction between the performative and the ostensive or artifact levels. Category extensions are an important type of performative variation, which can to some extent modify people's shared understandings of the relevant categories (ostensive change), but without changing the associated labels and the normative link between categories of situations and categories of actions, as encoded in written rules (ostensive stability). We build on Tsoukas and Chia's (2002) arguments that extensions transform the radius of a category by affecting understandings about category variability, but further add that extensions can transform understandings about the core or prototype, leading to category shifts.

(p.206) We also develop Tsoukas and Chia's (2002: 580) brief remark about the “agglomerative” nature of microscopic change and the possibility of such change being “amplified” (2002: 579; see also Plowman et al., 2007) by examining the effects of repeated extensions, each building on the previous one. We identified organizational remembering, and specifically reliance on precedents in rule use, as the crucial enabling condition for cumulative extensions. While our analysis echoes Feldman's (2000: 620) finding that continuous change in routines is possible when previous performances generate “outcomes [that] enable new opportunities,” giving participants “the option of expanding” the routine, we specifically focus on category enlargements and shifts as the outcomes that provide opportunities for further change in the use of formal rules.

Finally, we explored the possibility of microscopic change (via problem absorption) leading to formal organizational change (in the form of rule revisions), which Tsoukas and Chia (2002: 580) mentioned as an “interesting topic…for further theoretical development”. We framed the issue as one of a transition form lower‐ to higher‐level learning (Fiol and Lyles, 1985). Like Feldman and Pentland (2003; see also Feldman, 2000), we argued that collective reflection on problem absorption and its outcomes (performative aspect) in relation to broader understandings that underpin the rule (ostensive aspect) matters in bringing about more fundamental changes. The crucial question that is not addressed in this literature, however, is why the performative variation cannot continue indefinitely without inducing any major changes to the ostensive aspect and the relevant artifacts. After all, research shows that flexible routines can persist in organizations (Howard‐Grenville, 2005), and they may persist precisely because of (rather than in spite of) performative variation (Essén, 2008). What then might be the limits to the persistence of flexibly applied rules?

We argued that because rule application to non‐prototypical cases requires reflection (Levinthal and Rerup, 2006; Tsoukas and Chia, 2002), it imposes cognitive burden on those who actually apply the rules or review rule applications. When rules have been extended repeatedly, the accumulated precedents add to the burden. This can make organizational members dissatisfied with the current version of the rule. Furthermore, repeated extensions can blur the boundaries between the categories and undermine the rule's role as a standard for drawing distinctions. Finally, reflection on the purpose of the rule can enable the organization to recognize that the purpose is no longer valid or that it would be best served by developing a different rule. It is these factors that, in our view, enable the transition to (p.207) higher‐level learning with regards to rules and can thus “release” the organization from the codification trap (Schulz, 1998).

An important issue for future research is how experience with problem absorption might affect the contents of the revised rules. While we agree with Feldman (2000: 624) that “rule changes may simply be the codification of changes that are already made,” and specifically of the changes to rule‐categories in problem absorption, we also suggest that the process of rule revision in response to problem absorption can entail more exploratory forms of learning (March, 1991), where the outcome cannot simply be inferred from prior organizational history or experience. Furthermore, the aim of codification might in some cases be to reverse some of the category extensions and to preclude their occurrence in the future.

10.5 Conclusion

The process perspective on organizations suggests that although change always has primacy, a sense of order can emerge temporarily when distinctions are made between different types of situations and systematically connected to distinctions between different types of actions (Tsoukas and Vladimirou, 2001). By serving as reminders of the imperative to continue making those distinctions and connections in practice, written rules contribute to the maintenance of the sense of order in organizations. In some situations, the distinctions and connections will be more difficult to make than in others. Such situations act as momentary disruptions of the sense of order and might be called “problems” by those who attend to them. Yet, organizational members can often find a way of acting in such situations that is consistent with the imperatives of the rules. Building on previous research, we called this phenomenon “problem absorption.” Problem absorption subtly transforms the way in which distinctions are made within an organization, and thus constitutes a form of “semantic” organizational learning. Furthermore, when it occurs repeatedly, its cumulative consequences can lead to far greater disruptions to the sense of order and trigger a transition to higher‐level organizational learning. We identified reflexivity as the crucial enabling condition in this process. We argued that through reflection on problem absorption both in situ, as well as retrospectively, organizations can develop new understandings about the relevant practice that can undermine existing rules and clear the way for the development of new distinctions and associations.


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An earlier draft of this chapter was presented at the First International Symposium on Process Organization Studies (PROS) in Cyprus, June 2009. We thank two anonymous reviewers and volume editor Ann Langley for their helpful comments and suggestions. All errors remain our own.

(1.) A participant can feel a pressure to conform due to her assumption that such implicit agreement exists among others. However, this assumption may well overestimate the actual extent of the agreement.

(2.) The processual orientation sensitizes us to the danger of reifying organizational memory or conceptualizing it in substantialist terms. Perhaps “organizational remembering” would be a better term in this context (cf. Feldman and Feldman, 2006).

(3.) Still, perhaps this interpretation does not completely exhaust what these authors had in mind. One might argue that by enabling the enactment of a rationalized and patterned context of activity (Weick, 1995), and facilitating the emergence of organizational routines (Reynaud, 2005), formal rules make it less likely that situations will be problematized in the first place. While we acknowledge that it may well be worth exploring “problem absorption” in this second sense, we leave it as a task for future research.

(4.) At the time when these rules were adopted, EGOS (European Group for Organization Studies) did not require membership fees and visits to the AOM (Academy of Management) Conference by the department members were comparatively rare.

(5.) This, of course, does not mean that rule extension itself must be a completely tacit or unreflexive process. On the contrary, as should be clear from the previous sections, it rarely is in our view.

(6.) Of course, no amount of specification can eliminate the need for judgment in applying the rule to new cases, since the specifications themselves can only be made in abstract terms with the possibility of non‐prototypical applications (Tsoukas, 1996; Wittgenstein, 1953). For example, changing the category “conference presentations” into “conference presentations excluding membership fees” will not help in cases where it is not clear whether the relevant expense is a membership fee or not.