Daniel Little: Organizational dysfunction

Daniel Little writes about Organizational dysfunction.

One intriguing hypothesis is that correction of dysfunctions requires observation, diagnosis, and incentive alignment. It is necessary that some influential actor or group should be able to observe the failure; it should be possible to trace the connection between the failure and the organizational features that lead to it; and there should be some way of aligning the incentives of the powerful actors within and around the organization so that their best interests are served by their taking the steps necessary to correct the dysfunction. If any of these steps is blocked, then a dysfunctional organization can persist indefinitely.

The failures of Soviet agriculture were observable and the links between organization and farm inefficiency were palpable; but the Soviet public had not real leverage with respect to the ministries and officials who ran the agricultural system. Therefore Soviet officials had no urgent incentive to reform agriculture. So the dysfunctions of collective farming were not corrected until the collapse of the USSR. A dysfunction in a corporation within a market economy that significantly impacts its revenues and profits will be noticed by shareholders, and pressure will be exerted to correct the dysfunction. The public has a strong interest in nuclear reactor safety; but its interests are weak and diffused when compared to the interests of the industry and its lobbyists; so Congressional opposition to reform of the agency remains strong. The same could be said with respect to the current crisis at the Consumer Financial Protection Bureau; the influence of the financial industry and its lobbyists can be concentrated in a way that the interests of the public cannot.

Emphasis Mine

For an organization to function correctly, it must be under democratic control. A wide democratic base ensures that an organization functions for the benefit of the wider society.

The width of a democratic base determines spread of benefits from that organization. An organization exists to benefit its owners. If a narrow clique control an organization, then a narrow group reaps the benefits, while the majority bear the costs. This is the case under Capitalism.

Socialism means that there is social control of important organizations. This would mean that the benefits from these organizations would flow to the wider community.