IVNS Raju started the "How do Nations learn?" thread by asking why "We now
are seeing the diplorable state of affairs of our political system wherein
forces like corruption.... are safely sheltered". I responded early onb by
saying that learning deficits are a function of a lack of incentives and a
lack of independence. I have reflected further on this topic and offer the
following analysis of the fundamental flaws that limit the performance of
and threaten the survival of both political and business organizations.
There are fundamental flaws in organized organizations such as the
political parties and business organizations that ruled the representative
democracy and capitalist systems. These flaws prevent these organized
organizations from operating optimally. I use the term "organized
organizations" to refer to the static collectivist groupings such as
political parties and business organizations that dominated the orderly
organized world. These groupings are static in so far as for example
membership is fairly fixed, with people working on fixed term contracts.
The fundamental flaws are:
Flaw: Incentives, lack of
Political implication: Politicians go wrong
Business implication: Employee and employer motivations deviate,
necessitating management supervision
Flaw: Bounded rationality, increasing
Political implication: Policies go wrong
Business implication: Interventions such as supervision and
compensation are imprecise
Flaw: Dependence, existence of
Political implication: Political parties go wrong
Business implication: The sum of companies is less than their parts
because much work activity is busyness
and not business
Flaw: Force, existence of
Political implication: Politics continues
Business implication: Employees are compelled to carry out tasks,
necessitating management supervision
Within collectivist groupings such as business and political
organizations, there is a lack of adequate incentives. The fact that
politicians are not rewarded with a wage based on market factors
commensurate with the impact of the value they add or detract, drives the
incidence of, for example, sleaze and corruption where politicians use
their political power and position to earn indirectly the rewards they do
not earn directly but feel they deserve.
For instance, politicians representing and promoting national and
international trade interests are performing a valuable service on behalf
of the lobbies, yet any rewards are at best indirect or unofficial
backhanders. Far better for those officials to openly offer their services
on the free market and earn a return commensurate to the benefits received
by their clients. Politicizing the process simply leads to certain
representatives of industries centered in certain geographical areas where
certain industries are dominant being captured by the voting power of
those lobbies, for political, and not moral or economic reasons. Faulty
incentives lead to flawed outcomes. The outmoded system rewards size- in
one person, one vote systems, the largest groups get disproportionate
support from politicians, irrespective of the quality and truth in the
opinions they back. This is why the outmoded farm and agriculture lobby
continues to get resources and attention far greater than it warrants in
economic terms.
Similarly, employees within static companies lack the incentive conferred
by direct reward for effort or initiative expended in meeting, for
example, customer service standards. These faulty incentives mean that
standards only come up to an excellent standard when there is an intrinsic
reward for the work done, such, as pride and satisfaction felt at making a
customer happy with the exceptional service rendered.
Bounded rationality is the problem of limited understanding and control of
an increasing dynamic, global, competitive, complex unorganized world.
This makes interventions of any type increasingly hazardous. If we do not
know what people want or what people do, how can we help or reward them?
Unclear circumstances lead to imprecise interventions that have negative
unintended consequences. Within a political context, this means that
policies help people who do not need helping whilst failing to help those
who do. Within a business context, bounded rationality means that other
people within the organization cannot fully and fairly assess the value
and effort from other peoples contributions. This means that people get
paid simply for being present in the office when expected, or do not get
rewarded for exceptional service.
Dependence exists, meaning that other people within the organized
organizations and collectivist groupings are dependent upon others in that
group for their prosperity. To perform fully and excellent, dependent
individuals have to rely upon colleagues supporting them and persuade them
of the value of our ideas. Dependence on others is hazardous in situations
where there is a lack of incentives and bounded rationality. Such
groupings splinter and divide because different members think and believe
different things about the decisions going on within that group. Effort is
either expended on busy negotiations and compromise to keep the group
together- or the static group disintegrates. Either way, the static
collectivist grouping does not provide an optimal platform for either
internal employee collaboration or external customer service and
responsiveness.
The existence of coercion and force within organized organizations and
collectivist groupings means that the vicious cycle of increasingly
dissatisfactory performance from traditional organizations cannot readily
be changed or circumvented. People are forced to do things: they have no
choice but to carry out the tasks given to them by their managers and they
have no choice but to support and perpetuate political regimes however
opposed they are to them. No matter how dissatisfied an individual or even
a vast group of individuals are, they are required without choice by the
laws of their home land to continue paying taxes, thereby perpetuating the
continuance of and paying for the mistakes caused by the imperfect static
political organizations.
In the business realm, the existence of force necessitates that employees
undertake tasks to which they are not suited or interested. This means
that employee potential is not maximized and it means that external
customer results are suboptimal. It also necessitates the existence of
managers and managerial procedures, because, if everyone in the company
was doing everything they wanted to, there would be no need for other
people higher in rank to supervise and ensure the completion of the tasks.
Of course, everyone doing what they want can only arise when the
collective groupings are voluntary and dynamic, such as collapsible
corporations.
These inter-connected problems with collectivist structures explain the
inherent dissatisfaction with the way people increasingly feel, behave and
are treated by collectivist organizations of both a political and an
economic nature. Faulty incentives, bounded rationality, dependence and
force are the underlying elements that make organized organizations the
sub-optimal environment for the full realization of everything positive
about work such as learning, earning and succeeding. Rational individuals
in pursuit of realizing their full potential will have the incentive to
opt out of organized organizations. Management supervision is only
necessary in environments where people are not self-motivated to carry out
the tasks they have been set.
regards sincerely
Simon Buckingham, http://www.unorg.com/weekly.htm
unorganization: business not busyness!
--Simon Buckingham <go57@dial.pipex.com>
Learning-org -- Hosted by Rick Karash <rkarash@karash.com> Public Dialog on Learning Organizations -- <http://www.learning-org.com>