Open and Closed Models of Organization

Corruption Evaluation

The two organizations being discussed in this paper are SPACE, a government-funded space exploration program, and Electric Innovators, an electrical engineering firm that provides semi-conductors to SPACE as well as to other vendors. SPACE has a closed organizational model; it is a government-run organization that interacts with, but is not dependent upon, outside vendors in order to do business. Moreover, it has a single customer: the U.S. government. Electric Innovators has an open organizational model; it competes in the free market for customers and has to negotiate prices from suppliers as well as market price to customers. The fact that Electric Innovators is one of SPACE's providers is one of the few ways that the companies are linked.

"A closed system organization is the one that is self-sufficient and its operations are not influenced by external influences like competition, economy, suppliers, or external resources" (Gupta, 2009). SPACE is this type of closed system. Although it can be impacted by significant external economic changes, it does not have the same vulnerabilities as private enterprise. In addition, it even has sufficient access to resources and influence to prevent it from experiencing the worst supplier-related problem scenarios. Furthermore, because the nature of the business is so highly specialized, even if SPACE wanted to seek information from outside resources, they might not be able to find qualified people outside of their organization.

Electric Innovators is an open system. SPACE is one of its clients, but it provides electrical components to a variety of different customers, including other governments. It is a large business that has found success by continuing to harvest the best talent from other organizations in the electrical engineering field. Moreover, Electric Innovators has entered into a number of partnership agreements with other firms. "Open systems are tightly coupled with the external environment; their survival depends upon how quickly they anticipate external changes and how impeccably they adapt to them" (Gupta, 2009).

In terms of organization structure, there are some similarities between the two firms. For example, trade secrets, trademarks, and patent protection are essential functions in both firms, so that there is an emphasis on confidentiality clauses, non-compete agreements, and aggressive patent protection. Although Electric Innovators is an open organization, "to some degree every organization is closed, in that much of its information remains behind its walls. Though sometimes necessary, it can lead to what psychologist and Nobel prize winner Daniel Kahneman terms the "inside view," wherein decisions and forecasts are based entirely on specific circumstances and supported only by a company's own experiences" (Gross, 2013). In addition, both organizations have a hierarchical structure. There is a distinct chain-of-command in both organizations, the people at the top are the decision-makers, and knowledge about products and company function are often limited to the people at the top of the hierarchy.