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Can Organizations Emancipate Us?
Only if we balance cooperation and competition within, and check the excesses of rogue leadership.
The recent essay, Managing 21st Century Organizations, is the first in a two-part exploration of the naturalistic research paradigm that should lead to a reappraisal of human motivations in the context of organizational cooperation. This is the follow-on to that piece.
I started that essay, saying,
Last October, I read a breakthrough article, basically a unified evolutionary theory of deep work culture: A naturalistic theory of economic organization by J.W. Stoelhorst and Peter J. Richerson. Since then I have read it several times.
The authors open with this:
We develop a theory of economic organization grounded in the naturalistic paradigm currently emerging at the intersection of biology and the behavioral and social sciences. The crux of this approach is the recognition that an understanding of the evolutionary origins of human organizational capabilities can inform theories of contemporary economic organization. Modern firms sustain large scale cooperation by applying cultural ‘work-arounds’ to tribal instincts that evolved from simultaneous within-group and between-group competition on a much smaller scale. We translate this insight into ten principles of economic organization.
The previous essay extracted the gist of the researchers’ arguments, which I summarize (inadequately), in this way, drawn from the authors’ text and using their 10 principles.
1 | Humans are social animals with cooperative dispositions derived from a long history of living in tribal scale groups in which culturally transmitted norms and institutions favored cooperation.
2 | There are advantages to large scale cooperation, although these advantages are easily undermined by within group competition.
3 | Humans display a universal mix of cooperative dispositions that both enables and constrains our ability to sustain large-scale cooperation. The majority of individuals are cooperative animals, who are inclined to maximize joint returns when interacting with others. The fundamental problem of human organization, then, is to evolve organizational arrangements that allow us to sustain large-scale cooperation in the face of this behavioral heterogeneity.
4 | There are universal mechanisms by which cooperation can emerge and be sustained, such as social learning and hierarchies of dominance and prestige.
5 | Organizations sustain cooperation on the basis of local and contested norms. The evolution of the docile and deferential dispositions discussed above helps explain why humans tend to be norm regarding.
6 | Modern forms of organization use cultural ‘work-arounds’ to sustain large- scale cooperation. Organizational arrangements that can reap the benefits of large-scale cooperation in ways that preserve or recreate the sense of operating in a small-scale society will lead to more effective organizations.
7 | Successful organizations channel within-group competition in ways that enhance their success in between group competition.
8 | Specific cooperative solutions are historically and culturally contingent. It is difficult to develop the norms and institutions that engender the trust that is necessary to sustain large scale cooperation on the basis of social instincts that originally evolved to sustain cooperation on a much smaller scale.
9 | Human organizations are susceptible to exploitation by their leaders. In large scale organizations, a combination of freely conferred deference and docility can easily lead to organizational cultures where individuals are taxed for the benefit of their leaders, rather than the benefit of the group as a whole.
10 | Within-group cooperation goes hand in hand with a tendency toward between-group hostility. Our morality evolved at least in part as the result of a long history of between-group selection. Our cooperative behaviors are much attenuated, or even reversed, when interacting with those who we perceive as out-group individuals.
More Than Understanding, What Can We Apply From The Naturalistic Paradigm?
It’s great to gain a deeper understanding of human motivations and organizational psychology, but can we winnow out elements of the theory that can be put into practice?
There’s More To Organizations Than Cooperation
Here’s an even larger version of principle 3, that explores the mix of cooperative archetypes:
3 | Humans display a universal mix of cooperative dispositions that both enables and constrains our ability to sustain large-scale cooperation. This relies on ‘strong reciprocators’ who are ‘willing to sacrifice resources to reward those who cooperate (strong positive reciprocity) and to punish those who are uncooperative (strong negative reciprocity)’ and ‘even when punishing comes at a personal cost’. Three archtypes of cooperation: ‘individualists’ who operate for personal gain without regard for others, ‘cooperators’ who maximize joint payoffs, and ‘competitors’ who maximize the difference between themselves and others even when that leads to lower payoff for themselves:
The crucial insight for a naturalistic theory of economic organization is that the majority of individuals are cooperative animals, who are inclined to maximize joint returns when interacting with others. At the same time, there is also a substantial minority of individuals who are inclined to only pursue their own self-interest in absolute terms, as traditional economic theory would have it. And there is a small, but non-negligible, percentage of people who are willing to destroy general welfare to increase their own relative payoffs. The fundamental problem of human organization, then, is to evolve organizational arrangements that allow us to sustain large-scale cooperation in the face of this behavioral heterogeneity.
The first observation is that if people naturally fall into three categories of cooperative dispositions it would be helpful to know what an individual’s disposition is, at the very least, and perhaps to understand the proportions of each within a given company. The researchers cite a study undertaken at the country level:
For instance, in one representative study of the Dutch adult population, of the 92% of 1728 respondents that could be consistently classified, 65% were cooperators, 20% were individualists, and 7% were competitors (Van Lange, 1999). The percentage of competitors, in turn, is in the same range as the percentage of subjects in economic experiments that display so-called spiteful punishment, which combines free riding with punishing cooperators, thus increasing the payoff difference between one’s own pay-offs and those of others (Fehr et al., 2008).
Turned around and restated in more strong terms, perhaps as many as 7% of any large population are ‘competitors’, who play the game in order to better their own rewards even when it reduces the absolute payoff for themselves. From a limited perspective, these are anti-social actors, but perhaps not all is as it seems.
In the spirit of evolutionary dynamics, and based on the assumption that behaviors persist in the population since they confer advantages that are needed in some regard. What could be the benefit of these sorts of games and gamers?
Competition With Out-Group Organizations
We have to thread the needle of principle 3 with the need for organizations to compete with others, as in principle 7. As the researchers put it:
Organizations must also be able to sustain cooperation in ways that allow them to secure sufficient scarce resources from their environment in the competition with other organizations. Therefore, the nature, success, and size of organizations depend on their ability to channel intra-organizational competition in ways that are beneficial in interorganizational competition. Or in other words, successful organizations need to simultaneously solve the problems of the efficient creation and fair distribution of wealth. The relevance of this principle for a theory of economic organization is that it points to the need to always consider organizations as both social and economic systems. While Barnard (1938) already highlighted the importance of acknowledging the dual nature of organizations, ==economic theories have traditionally downplayed the importance of the social nature of human organization. In contrast, a naturalistic theory insists on seeing human organizations simultaneously as social entities that sustain cooperation among their members and as economic entities that compete with other organizations for scarce resources.
Put in terms of the question — why do companies admit and reward behaviors of the sort associated with ‘competitors’ — the answer is this: companies need to aggressively compete with other companies who will put their own interests ahead of other companies at gaining critical resources — like the best candidates for jobs, material resources, or geographical advantage — even when it decreases the absolute size of the marketplace for all competing.
Therefore, companies need to harness the psychological predilections of ‘competitors’ in the marketplace struggle, and as a result, may have to allow some degree of non-cooperative behavior in intra-company organization competition, as well.
The Biggest Moral Problem Arises From Cooperation
Stoelhorst and Richerson identify two foundational moral problems arising from the naturalistic paradigm, and the first I believe is the worst: the development of large-scale social organizations increases the coercive power of those in charge. (The second is hostility to individuals from other groups, which I agree is a major issue, but I defer to another day).
In the author’s words,
The anthropological evidence suggests that the small-scale societies in which our pro-social behavioral dispositions evolved did not tolerate the type of power relationships that could easily lead to exploitation. Tribal societies were egalitarian and involved little coercion and much autonomy. It therefore seems that our human ancestors evolved a way to suppress the central role that power typically plays in primate social organization. However, a central role for power relationships re-emerged as the scale of human organization increased in the wake of the transition to a sedentary agricultural economy some 10,000 years ago.
One of the problems of our tribal instincts may be that they reinforce the problem of intra-group exploitation of individuals by their leaders when the scale of social organization increases. In large scale organizations, a combination of freely conferred deference and docility can easily lead to organizational cultures where individuals are taxed for the benefit of their leaders, rather than the benefit of the group as a whole.
As we’ve developed organizations with a large proportion of ‘cooperators’ (and some individualists and competitors to leaven the mix), the possibility exists that leaders will act as ‘competitors’ internally, playing the game to benefit themselves to the detriment of the group. Or, in the case of modern corporations, they compete to benefit the C-Suite and investors, while harming the rank-and-file. In the past three decades or so, this has increasingly become the norm, supported by less-than-attentive governments and the financialization of nearly all industries.
As the researchers put it:
Large-scale organizations typically have offices with a large measure of coercive power over subordinate individuals. For example, firms have executive officers charged by shareholders to maximize their returns. In recent years, there have been sufficient examples to remind us that executives can also abuse the power that this organizational arrangement gives them to enrich themselves at the expense of other stakeholders, and even in defiance of the law.
Perhaps the counter to this ill is to return to the tribal cure and to figure out how to amplify the autonomy of individuals and smaller-than-full-organizational groups, and also to structure the roles of senior executives to diminish their ability to exploit the organization and its members. As one example, strong unions and union representation on corporate boards may be a counterweight to the inherent instability of large corporations to metastasize into greed machines, by elevating a countervailing and tribal community of non-executives into the halls of power.
Cooperation and competition are not always antithetical, and as individuals, we shift back and forth between cooperative and competitive actions in our day-to-day work lives. Coopetition — a mix between the zero-sum absolutes of naked competition, and possible reward systems that encourage cooperation despite possible winner-take-all dynamics — has to form a major element of how businesses operate if they are to persist.
Cooperators must be protected from the depredation of sociopathic competitors; individualists must be cajoled into cooperating for the greater good; and ‘competitors’ need to be trained in ethical systems that allow them to channel their energies for the good of the whole. This is in a true sense the major job for leaders: to create an environment where this balancing between the three sorts of players can lead to success for each, and for the organization as a whole.
In a work culture that acknowledges the need for coopetition — due to the psychological makeup of human communities — leadership must integrate the different sorts of striving into a commons that grows and cares for its constituents, both as individuals and as members in a larger community.
Since the greatest dangers come from leaders and ‘competitors’ going rogue, the ethical system has to be designed to counter those impulses.