The aim of this presentation is to propose a new conceptualisation that can be used to analyse and understand formal organisations. Rather than relying on traditional sociological theories which some have criticised as conceptually soft and abstract, thermodynamics provides hard and measurable theoretical foundations upon which explanations of organisational characteristics can be based allowing dynamic modelling of the relationships between those characteristics and organizational performance. Classical thermodynamics, which forms the main discussion, clearly has intrinsic limitations as it disregards system structure and organisation. Yet, this perspective is expected to culminate in a basic organisational model that has the potential to generate a more comprehensive understanding of how formal organisations work, at least in steady state. This paper also draws upon the research of two of the authors into management practices in a wide range of organisations which put forward the argument that many models of analysis in organisational behaviour are overwhelmingly qualitative in nature and many presented in diagrammatic forms that suggest degrees of precision, insight and rigour far in excess of actuality. The proposed steady state model provides a foundation for ongoing work by the authors into to the application of non-equilibrium thermodynamics for explaining evolutionary and revolutionary change in formal organisations.

1. Formal Organisations: How Classical
Thermodynamics Can Help Us to
Understand Them
By
Doy Sundarasaradula
Helen Hasan
Andrew M. Tobias
David S. Walker
OPUS Conference 2006

2. Presentation Outline
• The limitations of existing mechanical and
biological – based organisational model
• A rationale for conceptualising organisations as
thermodynamical systems
• The first law of thermodynamics, energy
conservation, and formal organisations
• The second law of thermodynamics and formal
organisations
• Discussion and conclusion

3. The Limitations of Existing
Mechanical and Biological – Based
Organisational Model
• Descriptive models aiming at describing
organisational characteristics and qualities
(e.g. mechanistic and organic models)
• Very little or no reference to the concept of
energy flows that enable organisations to
function and survive.

4. A Rationale for Conceptualising
Organisations as Thermodynamical
Systems
• Organisations as energy (or resources)
transforming systems
• The necessity to perform work and
thereby expending energy
• Operating in a cyclical and repetitive
fashion (e.g. assets turnover, routinization
of task, etc.) which is similar to the
operation of heat engine

5. The First Law of Thermodynamics,
Energy Conservation, and Formal
Organisations
• The first law emphasizes the
conservation of energy.
• Internal energy = heat
supplied to the system +
work done on the system
• The principle of energy
conservation is also applied
to formal organisations.
WQU ∆+∆=∆

6. Organisational Interpretation of The
First Law Variables
Internal energy
(Delta U)
Heat Supplied
(Delta Q)
Work Done by
the System
(-Delta W)
Is broadly equivalent
to fixed, current, and
other assets i.e. items
within and under the
control of the
organisation, and
which can be
transformed into
useful outputs.
Represents potentially
useful resources
outside the
organisation that can
be brought in to
achieve such
transformations.
Corresponds to goods
manufactured or
services generated
and rendered as a
result of the
transformation of
potentially useful
resources.

7. U∆Q∆ W∆
U∆ Q∆W∆
U∆Q∆ W∆
Figure 1. Different cases of the first law of thermodynamics and their interpretation in
organisational context (see texts for details).
(a)
(b)
(c)

8. U∆Q∆ W∆
Figure 2. The first law of thermodynamics and their implications for formal
organisations (arrows with bold lines represent physical flows and those with
dashed lines represent financial flows)
1
Γ
2
Γ
1
γ
2
γ

9. The First Law and Its Implications
for Formal Organisations
2121
γγ === ΓΓ
21
ΓΓ =
0
21
>− γγ
(1)
(2)
(3)
(4)U∆+=
21
γγ
Steady State
1st
Law
Run at Profit
Potential for Growth

10. The Second Law of
Thermodynamics
• “It is impossible for any system to undergo
a cyclic process whose sole result is the
absorption of heat from a single reservoir
at a single temperature and the
performance of an equivalent amount of
work.” (Kelvin-Planck Statement)
• “Heat cannot, by itself, pass from lower
temperature to higher temperature.”
(Clausius Statement)

11. Heat Engine, Carnot Theory, and
Formal Organisations
• Heat engine and Carnot theory
• Organisations as energy transforming
systems
• Refrigeration and a modified value chain
model

12. Energy Source
Energy Sink
Intermediate
System
Figure 3. Generalised energy flow system showing three essential features: an energy source,
an energy sink, and an intermediate system through which the energy flows.
(After Morowitz, 1979, Page 17.)

13. Heat reservoir at high
temperature Th
Heat reservoir at
low temperature Tc
Heat engine
Qh
Qc
W = Qh - Qc
Figure 4. Working principle of heat engine based on Carnot theory

14. High value, untapped
resources reservoir
Rh
Low value, less
useful resources
reservoir Rl
Conversion process
Fh
Fl
Figure 5. Working principle of a simple conversion system based on Carnot theory
Desirable outputs
O = Fh - Fl

15. Inbound logistics
Operations
Outbound logistics
Marketing, sales, and services
W1
W2
W3
W4
S,V0
V1
V2
V3
D,V4
Figure 6. Generic Value Chain
considered as a series of refrigerators.
Bold lines represent resources flows.
Dotted lines represent financial flows.
P1
P2
P3
P4

16. Equilibrium
State
Non-equilibrium
State
Entropic
Structure Formation
(or Neg-entropic)
Energy Flow
Figure 7. Energy flow, structure formation, and entropic processes

17. Conclusion and Future Work
• Thermodynamics is concrete, measurable,
and well-established theory.
• The inclusion of non-equilibrium and
irreversibility thermodynamics will expand
the utilities of physical sciences in the
realm of social sciences.
• People psyche and psychological factors
are not included at this stage.

18. Questions?
• Can organisational structure be measured
in ‘Joule’?
• Can ‘Watts’ be used as a measure of how
powerful or energetic an organisation is?