Theme for Consideration: Simple Rules Versus Social Negotation -- Online Discussion, November 2002

[Moderator's note: This thread suggested another theme for the Crete face-to-face discussions, but didn't raise much interest.]

Topic: Consider: Simple rules vs. social negotiation (1 of 1)
Conf: SIG: Sys Appl in Business & Industry
From: David Ing
Date: Sunday, November 10, 2002 12:08 PM

As the first idea for discussion, I would like to propose that we consider the system design choices of "simple rules" versus "social negotiation". In business design (and social systems design, in general), these are choices we make every day.

"Simple rules" are a good idea, because the world is complex. It's easier to know which side of a line you're on, if the line is clearly marked. Thus, businesses operate within the laws of the country in which they are incorporated. Employees (at least at larger firms) sign contracts whereby they promise not to act in conflict with their employers (e.g. moonlighting). Salespeople work on commission or incentive plans that express their potential (and realized) earnings in mathematical terms: e.g. if the person closes 60% of the year in the first six months, there may be a 10% extra bonus. For commodity items (e.g a common loaf of bread), it's more straightforward to standardize on a named price rather than to figure out the cost and what the market will bear for each individual transaction.

One example of an article that would support this view is: Kathleen Eisenhardt and Donald Sull, "Strategy as Simple Rules", Harvard Business Review, January 2001. Another example, about written rules in formal organizations is: James G. March, Martin Schulz and Xueguang Zhou, "The Dynamics of Rules", Stanford University Press, 2000.

On the other hand, it could also be argued that "social negotiation" is a better idea, because the world is too complex for simple rules. One could argue that if everything could be expressed as a simple rule, it could be programmed into a computer for straightforward execution. If the world was really simple, there would be no need for lawyers! Even without invoking legal deliberations, however, it's not uncommon for businesses to have appeals processes or methods by which disputes can be resolved. Concepts such as "justice", "equity" or "fairness" are difficult to discuss in the generalization of rules, and may be better handled situationally, on an case-by-case basis.

An example that reflects this is described in Etienne Wenger, "Communities of Practice", Cambridge University Press, 1999. In "Welcome to Claims Processing!", insurance claims processors implicitly recognize whom should receive payment, and cases that are frauds. They fill out the paperwork so that the correct end is achieved. Another intriguing idea is expressed by Barry R. Weigast and William J. Marshall, "The Industrial Organization of Congress; or Why Legislatures, Like Firms, Are Not Organized as Markets", Journal of Political Economy, vol 96, number 1, February 1988. Vote-trading can be viewed not as a bad thing, but a good thing. If California cares about issue A but has little interest in issue B, but New Jersey cares about issue B and has little interest in issue A, aren't all interests better-served by vote-trading?

Framing decisions between simple rules and social negotiation can be straightforward. In organizational decision making, is it better to appoint a single decision-maker who can rapidly reach a conclusion, or to assemble a task force that will represent larger interest groups in a more thorough deliberation? In designing an information system, is it better to standardize a workflow to serve a customer most rapidly, or to allow a freer method of communication whereby values and interests get expressed and then better matched? In combining two companies, is it better to express the joining as a "acquisition" where the conventions from one party "win", or as a "merger" where the "best" from each party is brought together?

Within this frame, do you think you have some ideas that are worth discussing online, and/or worth structuring into a paper? Click on the "reply" button to express yourself. Opinions, clarifications, and expressions of outrage are welcomed.


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