Authority vs equality

In its obituary of him, the Times says that Peter Roebuck grew disenchanted with England because he thought it lacked the right combination of egalitarianism and authority. This is a really useful way for thinking about the structure of organizations - be they sports teams, companies or whatever - because there are costs and benefits associated with both*.

The benefits of authority are:

A1. It allows for speedy, decisive decisions. Imagine how much time would be wasted if every decision in your firm required a meeting at which every whinger and windbag could vent endlessly. (You might not have to imagine.)

A2. Unilateral authority allows for conflicts of interest to be resolved quickly. It can actually prevent such conflicts, insofar as potential disputants anticipate the boss’s ruling.

A3. It economizes on information -gathering. Where there’s a single decision-maker, only one person need bother preparing for it. If everyone had to take decisions, huge amounts of time would be devoted to preparing papers for meetings.

A4. It allows for clear feedback, which in turn maximizes opportunities for learning.  If a single boss is responsible for a decision, then if it goes wrong he learns something. If, however, a group is responsible, the error leads to buck-passing and arse-covering and so no-one learns. A similar thing is true for underlings. Feedback from a boss is clearer than that from a group; a man cannot serve two masters.

A5. Decision-making skills are like any other - they are not equally distributed. Some folk are better at managing than others, so the division of labour requires that they specialize.

Against this, there are benefits of egalitarianism:

E1. It can curb rent-seeking by opportunistic bosses.

E2. Where authoritarian monitoring is imperfect, it can improve discipline as workers police themselves. Some people have hated working for John Lewis because it’s harder to skive when everyone thinks they’re your boss.

E3. It can raise productivity as people work harder when they feel they have a stake (pdf) in the outcome or a say in the decision. As Tocqueville wrote, democracy “spreads throughout the body social a restless activity, superabundant force, and energy never found elsewhere.”

E4. It can improve decision-making by making better use of the dispersed, fragmentary knowledge of individuals. Also, in authoritarian regimes - be it Fred Goodwin‘s RBS or Hitler‘s running of Germany‘s war effort - leaders are often told what they want to hear rather than what they need to, with sometimes catastrophic effects. Equality prevents this.

The right balance between these will vary from organization to organization. For example, football teams are run on authoritarian lines because A1 and A2 are important whilst E2 is insignificant and E3 - because there are other sources of motivation - is less relevant. A similar thing is true for the army.

I stress the word “balance” here because there needn’t be - and rarely are - pure authority and pure egalitarian structures. In authoritarian structures bosses might pay more or less attention to workers or trades unions, thus having varying degrees of equality. And in egalitarian structures (say jury rooms), some individuals will carry more weight than others.

So, how can we tell what is the right balance? Often, it’ll be hard. For one thing, simple metrics such as the number of levels in the hierarchy from CEO to shopfloor won’t necessarily help; a few rigid levels might carry more costs of authority than more levels accompanied by an egalitarian ethos.

And for another thing, the balance will depend on individuals. If a boss is a genius, the organization can get away with what would otherwise be an inefficient balance of authority and equality; think of Steve Jobs’ bullying at Apple.

As you know, I share Roebuck’s hunch, that the balance we have is badly skewed, as we exaggerate the importance of A1-A5 and under-estimate that of E1-E4.

* I’m drawing here on Henry Hansmann’s  The Ownership of Enterprise and Oliver Williamson’s Markets and Hierarchies.

Comments

[tomslee]

Similar arguments apply to centralization/decentralization and standardization/experimentation. You may be interested in a theoretical approach to some of these things: the multi-armed bandit (http://en.wikipedia.org/wiki/Multi-armed_bandit). It phrases the problem nicely, although from what I've seen it is basically a general approach that demonstrates that no general approach will be particularly useful in striking the balance you seek.

[Luis Enrique]

possibly interesting application to current Eurozone mess. Many (justifiably) complain about the undemocratic nature of the solutions (and I agree that citizens ought to be given more power to choose their own fates in situations like this) however the set of solutions available to egalitarian decision making might be very limited.

In simple game theoretic terms, and outcome in which the ECB prints our way out of this mess and countries like Greece and Italy sort out their fiscal positions, might be the best solution. But this outcome may not be achievable by egalitarian means - voters in every country would wish to defect (for example: the Italians won't vote pain on themselves if the ECB is going to support their spending, knowing that the Germans won't support ECB printing). Whereas a hierarchical power system might be able to impose that outcome.

See Nick Rowe's v good short post along those lines

http://worthwhile.typepad.com/worthwhile_canadian_initi/2011/11/could-the-ecb-become-the-central-fiscal-authority.html

[Luis Enrique]

Tom,

not seen that before, thanks. Are you aware of any applications to economics?

[tomslee]

Luis - no, but that doesn't mean there aren't any.

[David Ward]

The irony is (if he were in any way a left wing egalitarian) he chose to move to Australia. In my experience (being married to one, and visiting on a regular basis) the average Australian is decidedly more right wing than the average Briton.

Your piece made me wonder whether the qualities you mention (which do exist to some extent) might make me happier living there. I think the one aspect I couldn't stand is the skewed and infantile standard of public debate. In my wife's home city it is impossible to access printed media not owned by Rupert Murdoch for instance.

[freelance writers]

having equal authority is the best! just implement it!