Managers Controlling Organisations Successfully: A Perspective of Resource Dependency Theory

Organisations having fundamental resources and skills have competitive advantage, however, their inadequacy in supplying and sustaining the required resources often results in establishing relationships with other organisations to meet their needs (Barney, 1991). Moreover, they need to monitor threats and opportunities continuously created by the market dynamics. Hence, they tend to increase the coordination level and control process to manage their resources. To maintain such control, they tend to decrease uncertainties and purposefully maintain strategic partnerships, with formal and semi-formal links which may increase their financial and operational performance. They are resource dependent and hence shall seek ways to reduce such uncertainties in the environment (Zehir et al., 2019). This is the major crux of the Resource Dependency Theory. It emphasises that organisations need to manage their dependence on their inputs as the resources are scarce and one who can manage it successfully can have organisational effectiveness and gain competitive advantage in the long run. This essay evaluates the importance of Resource Dependency Theory (RDT) as an organisational theory and how it helps in interacting with other organisations. It examines that if a manager uses the theory in the organisation, he can easily control the competitive landscape and gain competitive advantage over other firms. 

External pressures limit the choices of organisations. As organisations are a member of the external environment and are interconnected with each other, to survive in the market place they shall be responsive to the external demand. This model is based on the basic premise that resources are scarce, organisations have social relations and networks with a pattern of inter-organisational dependence and constraints and hence organisations shall manage in such a way that their overall effectiveness is not hindered (Hillman et al., 2009). 

According to Pfeffer and Salancik (1978), the ability to acquire and maintain resources is the key to organisational survival. These resources can be physical, monetary, information or social legitimacy. But to acquire and maintain such resources is rather difficult as environmental conditions are scarce and uncertain (Froelich, 1999). The theory assumes that organisations are not autonomous entities, there exists environment constraints as they need them for resources. Social context matters and organisations try to enhance their autonomy and pursue interests. The concept of power is central here as control over vital resources become necessary and organisations actions both internally and externally are based on that (Davis and Cobb, 2009). Managers try to reduce others’ power over them and attempt to increase theirs over others. 

Hillman et al. (2009), further highlights that managers can act to reduce such uncertainties and dependence. The degree of dependence on these resources is determined by the concentration and importance of the resources provided. An organisation is considered highly dependent if it relies on relatively few sources and hence a logical step is necessary to manage this dependence (Wassenaar, 2014). Organisations that successfully manage these dependencies are not never completely successful as they create new patterns of dependence. This pattern produces intra-organisational as well as inter-organisational power which in turn have effect on organisational behaviour (Hillman et al., 2009). Collaborating with organisations having similar dependencies can be effective as it helps in reducing uncertainty and enables access to critical resources (Pfeffer and Salancik, 1978). Joint ventures, vertical/horizontal mergers and inter-organisational relationships can be seen as these collaborations. This is because it reduces competition by absorbing competitor, helps in diversifying operations thereby reducing dependency and manage interdependence with purchasers of output or sources of inputs by absorbing them (Pfeffer and Salancik, 1978). Additionally, board of directors, political actions and executive succession are other methods to reduce dependences. 

Thus, RDT is a scientific approach which helps in understanding organisational behaviour. It explains and manages the organisation’s dependence on resources owned by others mainly suppliers, competitors, shareholders, public authorities, unions and other stakeholders. The dependence on important and critical resources influences the actions and decision of the organisation. The continuous scanning of the environment helps in adopting strategic responses so that resources are better managed and acquired. For instance, organisations have resource dependences in their products and services. They outsource related strategies to get optimum quality so that they can focus and maintain core-competence capabilities of the firm (Yilmaz, 2014).