The grip of fashion, group-mindedness, and conformist organizational cultures

One answer to the question of why organizations are often badly run becomes clear once you consider the possibility that managers are using rational — even reasonable — responses in response to what are fundamentally irrational corporate systems.

Economists have always assumed that economic behavior is basically rational, otherwise there would be no hope of studying it. This doesn’t mean that economic behavior is always the result of cost-benefit analysis — it seldom is — but rather than it’s not random. People do silly things all the time, but they are acting in ways that seem reasonable to them when they do them.

A gambler in a casino or on a trading desk who is losing badly may be tempted to redouble their bets. If they give in now, they have a hundred per cent chance of losing; if they go on, they have a tiny chance of winning. The more they stand to win, the more they will persevere. This isn’t strictly rational, but it’s not really random behavior either. So managers may drive their staff to meet impossible deadlines or to win an un-winnable contract, in spite of the high probability of failure, because of the small possibility of a huge (and lucrative) success.

Paradoxically, the level-headed individual who points out how unlikely this success is will be stigmatized as a “bad team player.” The grip of fashion and group-mindedness, encouraged by today’s conformist organizational culture, means that teams can and do take off into bizarre patterns of behavior which still seem reasonable because the behavior of each conforms to an internal norm, and everybody is doing the same thing. There’s even a fancy name for this, “information cascade”, or a less polite one, the “lemming syndrome.”

Too much competition?

Partly it’s competition — there’s too much of it. If this sounds like heresy, recall that, unlike the old days of a craft- and engineering-based economy, today’s major employers — housing, financial services, consulting, services, software mdd often have very low barriers to entry. The result is far more players than the market can support, and a type of competition which increasingly resembles some Social Darwinist apocalyptic nightmare.

If you doubt whether your company will even be in existence in five years, there’s little point in planning for the future. If you think your best salesmen might defect to one of your numerous competitors for more money, then why bother to treat them like human beings?

Such behavior by managers is not arbitrary, and could even be said to be rational — in the sense that they are responding to outside pressures as best they can, and pursuing what they see as their own best interests.

Critically, they are also acting in the same way that everyone else is. Too much competition also means that far too many these days people are doing managerial jobs for which they are not suited or trained, and generally that means they are doing them badly.

The growth of Finance Capitalism

Finally, there is what even its strongest defenders would agree to call Finance Capitalism. This is not the same as the private ownership of business — “private enterprise” as some like to call it grandly.

Private enterprise means owning your own business; Finance Capitalism means somebody else owning your business. In such a situation, managers and workforces are simply assets to be traded. Managers themselves, enjoying little job security and uncertain long-term prospects, are expected to subordinate everything and everyone to the relentless pursuit of short-term financial results on behalf of remote “others.”

In such a world, no structure can ever be secure, no commercial relationship enduring, no management position safe beyond the end of the week. The behavior which results from all these stimuli is, in its own way, quite rational. It is what’s called “rent-seeking” when applied to the behavior of elites in collapsing states, and involves using the position you have, to extract the maximum profit — “rent” — from the system in the shortest possible time, simply because the longer term is so uncertain. It’s also a system, needless to say, which makes people tired, unhappy and de-motivated, and actively encourages bad and negative behavior.

Now you may think today’s system is still wonderful, in spite of these limitations, and many people do. But whatever you think about it, it is the system which is at least partly responsible for the present malaise in organizations of all types.

In the end, whilst there are plenty of bad and incompetent managers — and whilst the pressure exerted by fashion and groupthink is always a problem — you can’t isolate people from the system in which they work, and which provides them with their norms and their assumptions.

We are all, to some extent, creatures of our working environment, whether we like it or not — and an awful lot depends what rules it follows, and who imposes them.

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Photo credit: Kevin Rosseel