Corporations: Who is in charge?

Corporations are legally persons. But are they persons with a mind of their own? Yes or No? As with any complex systems, there is likely some truth in both answers.

Continuing to explore my many stories about complex systems. See this first post for an introduction

Corporations are legally persons. But are they persons with a mind of their own? Yes or No? As with any complex systems, there is likely some truth in both answers. Many major decisions are taken by such large complex systems. Who is in charge when those decisions are taken has been getting some attention lately.

Two recent books on the subject, The Handover by David Runciman and The Unaccountability Machine by Dan Davies, have been getting good reviews. Both books note that many decisions in our society are being taken by complex systems, in particular by corporations and bureaucracies. The classical view is that these decisions are taken by people, with the organization they are embedded in as a background. Both these books argue the organization itself plays a big role in shaping the decisions.

In The Handover, Runciman argues that corporations and states are a fairly recent social invention that has shaped much of the modern world. He visualizes these as robots built out of human parts. Not super smart, but super powered. Decisions are taken by humans, but acted out by the organization.

In The Unaccountability Machine Davies describes the thinking of Cybernetics pioneer Stafford Beer. In this model, decision making in organizations can be broken down into “black boxes” with inputs and outputs. Understanding how the inputs relate to the outputs can help you control the organization, even if you don’t understand the complex processes that lead to a decision. But this black box model allows the creation of an accountability sink. No one can be found to take responsibility for a decision. Just a black box. A feature, not a bug, if you are a manager that might be held accountable.

I’m happy to see two new books highlight the role complex organizations take in our decision making. But I think both books apply over simple models to the situation. In The Handover, the organization supplies some simple mechanical rules, and the humans provide the complexity. In The Unaccountability Machine, the decision making nodes are complex, but the connections between them fairly simple.

I believe large scale human organizations are themselves complex. As with any complex system, the interaction between components produce a new level to observe. The organizations have emergent properties and behaviors that are not obvious from looking at the components (humans). Yes, us humans do have a big role. But many of the features of complex systems still apply. Our conscious decision making shapes the organization, but the organization also shapes our decision making.

The common framing of us humans is as members of the organizations we belong to. Some truth to that. Another framing, particularly of long lived social organizations, is humans as hosts to a symbiotic organism. The organization is an independent entity which provides services to its hosts in return for energy and resources. In that framing, a lot of the frustrating behavior of organizations becomes more understandable, and to some degree more controllable.

Some complex systems become self organizing, capable of persisting over time and seeking out energy and resources to grow and thrive. A common example would be a bacteria. It has evolved to maintain a dynamic structure, and to sense and acquire sources of new energy. Applying such a model to social organization can seem like a stretch, but is an active if controversial topic of research in the complex system field.

Human social organizations have evolved over time. The most successful ones provide a benefit to their hosts, at the cost of requiring human time and attention. That evolution takes place in the particulars of how humans interact with each other. But, as with any complex system, the change in interactions provides new and remarkable behavior changes at the system level. New modes of organization change the behavior of the components (humans), so there is a feedback loop here. A loop that the ratchet of evolution has worked with to produce the complex organization we see today.

I’m often surprised that even social worker friends don’t believe social organizations exist. At least, in the high level complex system sense. Mind you, I can recall a time when I didn’t believe it either. I just saw social organizations as a voluntary collection of people. That likely is still a decent model of simple temporary social groups. Like a pickup football game, or a flock of birds. But it does not explain the behavior of persistent complex groups, like Manchester United Football Club, or an ants nest.

Framing such organizations as a self organizing entity hosted by its components explains a lot of otherwise annoying behavior. Have you ever worked for an organization where people complain about the gap between the mission statement and the actual behavior? Or how the organization seems to sprout bureaucracy and other inefficiencies?

Both behaviors make sense for a self organized system. The evolved mission statement for any such system is to persist, grow and replicate. Any system that failed at this was eliminated from the competition for human hosts and attention. In this framing, the official mission statement is a cover story to recruit hosts. Bureaucracy is a tried and true way of adding more hosts to the mix.

This framing is a bit of an exaggeration, but in my experience not that much. Most managers in large organizations recognize their status is as much tied to their budget size as their effectiveness. In my corporate days, I never went to an annual budget meeting where someone asked for a budget cut due to their incredible efficiency. Efficiency justified growth in our department, and cuts in the other guys.

I see organizations like corporations as having some agency of their own, at least at a bacterial level. What does that view say about my agency in the world? Surely this view is disempowering? No. As is the theme of this blog, it is forcing an over simple story on reality that is dis-empowering. Recognizing the dance between the levels of complex systems gives real power, not frustration.

We do have conscious power in the organizations we support. We can shape decisions by our own efforts and persuading others. But the system, if healthy does limit the reach of our actions. Getting an undesired result can be due to a personal failure, but may be due to the organization protecting itself.

An obvious case is setting up an organization to prevent something. The recruitment story is obvious, stop this evil thing. A mission sincerely held by the human hosts. But the incentive for the organization is to make sure it grows and continues. Completely stopping the evil thing would be a disaster. A familiar example is the war on drugs. The perceived threat has grown rather than shrunk despite the resources poured into prevention.

I do believe I have some personal responsibility for my choice of organizations I support. But I don’t expect them to operate purely on my good intentions, or on those of other supporters. The structure of the organization is important. Finding the structure that works for the task at hand is a long hard slog, but is doable.

As an example, take the aircraft industry. The Mayday series of TV documentaries reconstructs the investigations into aircraft crashes. Though a grim topic, I found the results encouraging. Despite the complex systems involved, crashes have become a rare event. A critical feature of that success I think is the attitude to blame. Crashes are framed as system failures, even when pilot or other human error is involved. Pilot errors are seen as an organization failure. A lack of training or of relevant information, or of over work or over stress. The question asked is, what could the organization do differently? This question has clearly had some positive results for the industry.

Even if you recognize the organization as an actor in the events, personal responsibility still counts. “It’s all the organization’s fault” is not the one true story that removes personal accountability. In my story, both the organization and its human hosts have a part to play. Neither party is totally responsible. Recognizing that complex dance is more effort than sticking to the simple story. But recognizing the complexity, in my experience, both reduces frustration and increases control. Hope that works for you.

See the first post for an introduction to this series. See the home page for previous posts on the topic. Of particular relevance is this one on Emergent Properties. For more about the author, see the About page.