Institutional Subsystem

The third prong of the structural functionalist social system model promoted by Talcott Parsons in the 1940s. Parsons recognized the three major levels of organizational structure. At the bottom is the technical subsystem. Above the technical subsystem is the managerial subsystem. At the top is the institutional subsystem, whose function is to relate the organization to the larger society. The institutional subsystem consists of intangibles, such as standards, norms, rumors, myths, knowledge, and ceremonies.

In an organization, the institutional subsystem, which may have a fiduciary function, may be a board of directors, who, although superordinate to the managerial subsystem, also have responsibilities to the organization. It may give legitimacy and support to an organization, as well as define the limits of what those in the managerial subsystem may do, while simultaneously defining the organization's function in the larger community. In a business organization, the board may decide the issue of dividend policies, profits, or whether to invest in an economic program. In education or health organizations, the board will likely be tasked with where to build a school or hospital. For more information, see Parsons (1959).