Aleksander Solzhenitsyn was a young decorated captain in the Red Army stationed on the Prussian front in WWII. One day he was abruptly asked to report to his commanding officer.
"Please hand me your weapon." "Sure, why?" "Did you write in a letter to so-and-so that 'the whiskered one' wasn't conducting a proper war strategy?" "Well, yes, I suppose so, why? What is this about?"
Other men stepped forward - the secret police - "You are a spy spreading anti-communist propaganda!!" "But I would never be a spy - I believe in communism!!" "You criticize Stalin - you are spy!!"
They ripped off his medals and his captain's bars and marched him away, to eventually be thrown into what he called "Stalin's sewage system," now known as the Gulags or forced labor camps.
His book The Gulag Archipelago is a moving testimonial memorializing the millions who suffered and died in those camps which he miraculously survived due to his training as a mathematician. (He was taken off of manual outdoor labor in 50-below-zero conditions to work on calculations.)
Upon his liberation, he became an outspoken critic of Stalin and that "sewage system." He was allowed to speak out because it was convenient at the time for the current politburro. At some point he outlasted his usefulness and became more of a nuisance.
Since he'd attained international recognition by that point (including winning a Nobel peace prize which the USSR did not allow him to receive), I suppose they couldn't just make him disappear, so instead he was shipped to Germany, stripped of his Soviet citizenship and eventually exiled to Vermont.
There he lived a relatively quiet life until invited by Harvard University in 1978 to give their commencement speech.
I am guessing that everyone in the crowd that June day expected him to pour vitriol on the USSR and sing the praises of western society and his benevolent host, the U.S. They were quickly disappointed...
"Harvard's motto is 'Veritas.' Many of you have already found out and others will find out in the course of their lives that truth eludes us if we do not concentrate with total attention on its pursuit. And even while it eludes us, the illusion still lingers of knowing it and leads to many misunderstandings. Also, truth is seldom pleasant; it is almost invariably bitter. There is some bitterness in my speech today, too. But I want to stress that it comes not from an adversary but from a friend."
He had decided to use the opportunity to give the West some "performance feedback," as an outsider who is living in - but is not of - that society. A sort of counter-weight to Alexis De Tocqueville's optimism. If you're a product of Western civilization, it is instructive to read in its entirety - not to simply agree with, but to provoke thought and reflection about the society in which you live. However, it is his section on Legality that I would like to dwell on a moment because it struck me so powerfully:
"I have spent my life under a communist regime and I will tell you that a society without any objective legal scale is a terrible one indeed. But a society with no other scale but the legal one is not quite worthy of man either. [...] Whenever the tissue of life is woven of legalistic relations, there is an atmosphere of moral mediocrity, paralyzing man's noblest impulses."
What makes Market-Based Management different from other management approaches is that it is based on Hayek's concept of Spontaneous Order (and Polanyi's Republic of Science). One condition for a spontaneous order - where all the members of an organization are voluntarily cooperating to maximize long term value - is a strong set of beneficial Rules of Just Conduct - a set of general principles that applies to everyone as well as beneficial norms of behavior that are based on shared values.
The opposite of a principle-based approach is a rules-based approach. This rule-based approach is, I think, what Solzhenitsyn is addressing in his comments. I see this approach a lot - and often unconsciously paired with negative assumptions about the nature of employees: that people cannot be trusted, are stupid or must be controlled.
It's the 100 item check-list that an administrative assistant is told to complete everyday; the RR&E-as-contract that is "negotiated" to define "meeting" expectations (usually just a more sophisticated form of a check list); the memo to the mill leader from "corporate" that says "do this or you're out of compliance"; the 10 signatures needed to approve a $500 incentive...
Rules beget more detailed rules and plea's for exceptions, resulting in favoritism, arguing over which rules apply, and increasing bureaucracy -- people focus on the rules and forget about the results - and worse, use the plethora of detailed (and sometimes conflicting) rules to pick and choose which to follow and which to ignore in order justify whatever it is they want to do, regardless of the benefit to the whole.
The rules-based approach promotes Solzhenitsyn's legalism, dampens the human spirit and prevents experimentation, discovery, innovation, and limits the use of individual knowledge and expertise - all things necessary to have a thriving organization where members have the opportunity to reach their full potential.
The MBM approach broadly asks us to concentrate on enforcing the general rules while allowing individuals to figure out the particulars. Focusing on the particulars causes the general to break down - as Charles Koch has oft repeated: "you can't tell someone to be entrepreneurial but then tell them what to do, when and how."
This is not to say that there is no place for detailed rules or step-by-step instructions. That would be absurd. But in this as in all areas of life, wisdom and good judgment must be applied. The MBM Guiding Principles spell out the most fundamental general principles that define the boundaries of our actions. When there's a conflict with the first three especially, they win, full stop. Start there.
I am impressed! You have linked an icon of the cold war between the east and the west with a more objective look at what freedom is and is not. The west, "us" can and do get trapped into believing that we have the "right" answers to these questions. However, the answer of more laws is equally as debilitating as the answer of no laws or absolute dictatorship.
Veritas is elusive. Truth when found may be painful.
Telling others or forcing others to toe the mark, with explicit step by step requirements is no more the hallmark of a free society than Stalin's USSR. But many of us live in this world every day; demand that these rigid boundaires be present every day; are uncomfortable without such limitations; are certain that these rules help define our freedom when in acutality they prescibe our prison.
To be free demands that we all constantly struggle to understand the tension between the right to choose and the necessary chaos that such choice often reults in. Our fear of chaos often overwhelms our understanding of what is gained, both in a busines sense and in a personal sense, from living in a general principle society!
Posted by: Eric Christensen | 06 April 2009 at 08:51 AM
“…spontaneous order - where all the members of an organization are voluntarily cooperating to maximize long term value…”
To me, the underlying idea here seems to be that people respond to incentives. In a centrally planned economy individuals are likely to have incentives to game the system and to influence the central planner. In well functioning market economies individuals have incentives to innovate and provide goods and services that are valuable to others. Inside an organization an overreliance on detailed rules can lead to a “tick the box” mentality that discourages initiative while if given appropriate freedom people will use their initiative and contribute more.
In all cases individuals are responding to the rules of the game as they see them.
We should recognize that spontaneous order does not operate in a vacuum. The rules of play may influence outcomes. Whether the expected outcomes are appealing or not depends on the nature of the underlying rules. For example in line with theory, lots of public goods experiments lead to the underproduction of the public good. In addition, behavioral economists have shown how individual decisions (and therefore aggregate outcomes) can depend on seemingly minor institutional arrangements. For example, Thaler and Sunstein discuss how what they call “choice architecture” can be designed to “nudge” individuals into making decisions that are individually and collectively beneficial.
These insights are relevant when we think of applying the notion of spontaneous order inside the organization. Just because order is spontaneous does not mean it is beneficial. The choice architecture that applies can have an important influence on outcomes so its design can matter.
Posted by: Tim | 06 April 2009 at 09:01 AM
One passage presents an opportunity to reflect on why the governed (or the led) so often conspire to create the rules-based prison.
"...unconsciously paired with negative assumptions about the nature of employees: that people cannot be trusted, are stupid or must be controlled."
Given the uncomplimentary, underlying assumptions of the approach, one wonders how such approaches succeed at all in gaining control of governing bodies or why employees would choose to remain in such a culture. A possible explanation lies in a different set of assumptions. These social systems often arise as the handiwork of architects who profess beliefs of the inherent goodness and the perfectibility of man. The idea that some men misbehave conjures up the explanation that poorly designed and unjust systems and institutions have led to these behaviors and outcomes. If only we will allow "them" to design the right systems and rules, then we can all achieve our highest level of potential. This approach is relatively unoffensive to the subjects and raises no particular concerns. Only a few may be turned off by the next step of the progression designed to equate inequality of results with injustice, and the first cousin - entitlement. What a benevolent social order: we are all fine, inequality of outcomes derives from injustice, let us fix the systems and rules to ensure justice, life will be equal, better and more fair for all.
Contrast this with the narrative of the other worldview. The human condition is self-interested. The free individual owns the responsibility to be productive and make good choices. Inequality of outcomes will never be vanquished, but just rules of conduct can make men in large part the masters of their own destiny.
Sowell, in A Conflict of Visions, thoroughly and eloquently describes the two worldviews so crudely discussed in this post, referring to them as the Unconstrained and Constrained worldviews. Those who subscribe to the Unconstrained view need never sell their approach with a negative stereotype of humans (a view they likely do not hold, although they do certainly exhibit elitist tendencies), and furthermore can perversely benefit from the keen ability of a human to detect a scent of self-interest in a nanny-state.
The alternative worldview struggles to overcome the disadvantages of believing man is self-interested (no compliment to many), that efforts to force equality of outcome will fail while simultaneously lowering the standard of living for all but the powerful who take by force, and that freedom is the reward of taking responsibility for one's self.
Strange indeed, that those who peddle the former are seen as the friend of the masses, while those who offer the best chance at a life of dignity and value to the greatest number of people are seen as the pirates of society.
It seems inescapable that proponents of the Constrained worldview desperately need to creatively reframe their proposition. The appeal of the near-term entitlement seems to all to often trump the desire to preserve freedom, especially since the participant seems unaware of the trade-off.
Posted by: Dennis | 16 July 2009 at 06:18 PM