Causal Inference as an Organizational Problem and Organizational Culture as a Solution

Olav Sorenson, Frederick Frank '54 and Mary C. Tanner Professor of Management, Yale School of Management

Research on organizations generally presumes that managers have the ability to direct the organization towards some goals. But that presumption depends crucially on the ability of the manager to understand how particular actions or directives might influence organizational outcomes, a problem of causal inference. We develop a formal model of this inference problem and use it to demonstrate that managers can only solve it under highly-specific conditions. Organizational culture and routines, however, can extend the ability of the manager to understand the expected results of directives or policies by mitigating problems that arise when the individual beliefs of other members of the organization influence the processes producing organizational outcomes and when managers do not have insight into those personal beliefs.