Platt Perspective on Business and Technology

Some thoughts concerning a general theory of business 21: considering first steps toward developing a general theory of business 13

This is my 21st installment to a series on general theories of business, and on what general theory means as a matter of underlying principle and in this specific context (see Reexamining the Fundamentals directory, Section VI for Parts 1-20.)

I began Part 20 of this by offering a set of four case in point examples as to how someone might be hired into a business, outside of the more standard framework of processes and understandings that Human Resources would develop as its basic default candidate selection, vetting and onboarding system. Then, and with an initial discussion of the first of those four alternative scenarios in mind, I briefly touched upon a set of more general principles that would help to conceptually organize and explain how business systems function as networks of interacting individuals and as networks of more closely aligned groups of them, and in contexts of the type raised by those scenarios among others. (N.B. I will return in detail to the issues of groups and their decision making processes and their consequences, later in this series when considering emergent properties as arise in higher organizational levels where convergence and divergence of opinion, and social and authority based hierarchies enter this narrative, among other considerations. I only considered what might be viewed as simplest baseline scenarios in Part 20, as far as this is set of issues is concerned, assuming that any groups involved would start out as collections of individuals of like mind on all pertinent matters.)

I plan on reversing the order pursued there in this installment, and will begin with further discussion of more general principles. And then I will delve into the specifics again, as outlined at the end of Part 20 as an anticipatory closing note. And I will complete my discussion of that first scenario as my specific application of theory, half of this posting. But for smoother continuity of narrative, I begin this posting’s narrative by repeating those four scenarios as a group, as I will develop and present my more general organizing comments of this series installment, with all of them in mind:

1. More routine hire, hands-on non-managerial employees, and I add more routine and entry level and middle managers – versus – the most senior managers and executives when they are brought in, and certainly from the outside.
2. More routine positions, managerial or not – versus – special skills and experience new hires and employees, hands-on or managerial.
3. Job candidates and new hires and employees who reached out to the business, applying as discussed up to here in this narrative on their own initiative – versus – those who the business has reached out to, to at least attempt to bring them in-house as special hires and as special for all that would follow.
4. And to round out this list, I will add one more entry here, doing so by citing one specific and specifically freighted word: nepotism. Its more normative alternative should be obvious.

With that list noted as a source of specific case in point contexts that any overarching theory would have to accommodate and account for, I built my more general discussion portion of Part 20 around a conceptual model of how businesses are functionally organized:

• A business can, among other things, be viewed as a dynamic system of overlapping and interconnected stakeholder networks, some assembled on the spot for specific purposes just to dissolve as their sources of impetus for forming are resolved, and some enduring long term.
• And long-term ones, can even become effectively enshrined in the business model and in strategic and operational systems, where membership can become title and position based to allow for smoother member turnover as people come and go in a business’ workforce, and as people there change jobs within the organization. Much of this is in fact laid out at least for likelihood of arising in the table of organization itself, but even stable and seemingly permanent functional networks of this type can systematically cut across the table of organization too, and even intentionally so.
• Ultimately and according to this understanding, business systems and their functioning can be viewed as representing complex and evolving networks of interpersonal interactions, and interpersonal commitments. Think of the Scenario 1 hiring process and new employee onboarding process example that I have been focusing on here, as a case in point example of this much more widespread general set of phenomena.

My goal here is to at least begin to reconsider this model in more explicitly game theory terms, and with a focus there on how stable networks that are assembled from these interpersonal relationships, arise. And I begin that by noting that historical track records mean everything there. Stability in this is based on trust, and that is based on the at least presumably reliable foundation of prior and currently ongoing experience, and both with specific individuals and with the organizations that they work for.

• Let’s begin with the familiar. You know a particular individual and how well they do or do not carry out their work tasks, and how promptly or not they do this. You know how reliable or not, any collateral and supporting information would be, that they would have to provide as part of a task completion on their part – and also from past experience with them and from their track record from working with your own direct colleagues. And in this, I could be writing about a direct member of the work team that you yourself work for who reports to the same supervisor as you, or I could be referring to a more distant colleague who works in a different part of the same business as you, but who works there at least situationally as a fellow stakeholder with you in some larger overall task or work process. Or I could be writing of a professional who works for a completely different organization, who you find yourself dealing with through, for example, supply chain transactions.
• In any of these cases you might directly, individually know these people who you would work with. Or you might only know them to start with at least, by reputation and from knowledge of who they work for and from what you know of the reliability of their hiring and retention and employee training systems. Yes, that applies to new members of your own same-supervisor work team, as much as it does to the context of working with more distant task participants and stakeholders. Then, and focusing for the moment on new hires to your work team, your basis for initial trust is based on your sense of the reliability and thoroughness of the vetting and screening that new prospective hires go through there, to make sure that the right people are hired, and both for their professional skills and experience and for their qualities as people who others can readily work with.
• Think of this set of bullet points as having described individually based trust that is grounded in your own direct experience, and institutionally based trust that is based on your trust in organized vetting systems in place.
• New hires, arriving from outside of the organization as a whole, bring with them more and I add more fundamental unknowns in this, barring direct prior knowledge of them from earlier experience or from knowing them from outside of the hiring workplace. Then the questions of reliability and trust and of genuineness in what they claim, for example in their resumes and covering letters, can come to depend on how reliable their references might be viewed. I add a third category to this list with that: surrogate-based trust, where individually based trust as grounded in face to face meetings and interviews, and knowledge of the businesses that a job candidate has worked for and their hiring and retention practices, would be supplemented by insight from third party references who might themselves be largely unknown. Think of this as an example of trust in the presence of information limited friction.
• To complicate matters and certainly for that and when hiring from the outside, businesses that a prospective new hire has worked for in the past are often reluctant to discuss or even admit that a now former employee of theirs might have left under a cloud if they did, and with problematical entries or worse in their personnel files there. Such disclosures can and often are seen as creating legal liability in the event that a job candidate who is not hired by a prospective new employer, might file suit of defamation of character from a former employer.

And this brings me directly to the issues of hiring from completely outside of a business, as opposed to promoting from within a business and from within the same local line of a table of organization at that, or hiring from a different functionally and perhaps geographically distinct part of a same, generally larger and more geographically dispersed company.

All three of these possibilities carry both positives and negatives. Outsiders can for example bring new ideas and insights and approaches, where insiders might start out with sets of career-based blinders in the form of same-as-everyone-else assumptions and presumptions. I mentioned in Part 20, how managers and executives in nonprofits tend to advance in their careers to higher level positions by moving between organizations, rather than by moving upward along a table of organization within some single employer. Partly that is because these organizations tend to keep their headcounts to a minimum so it is unlikely that an appropriate next step upward would even be available in-house where a career advancer is now. And that is the point that I raised there, in this context. But it is also true that nonprofits often explicitly seek out fresh blood and fresh, new ideas, and the greater breadth of experience of having worked, and successfully so at one or more other nonprofits already.

But this reaching outside also brings an increased measure of risk too – which among reasons is why essentially all hiring businesses have an at least informal probationary period for new hires, as a means of validating that they actually work out before more fully committing to having them there as full time in-house members of the team.

Let me bring that back to Scenario 1 to conclude this posting, and to the issues of bringing in senior executives in particular. I write this thinking of a nonprofit that I worked for, that brought in an experienced Chief Strategy Officer from the outside as a means of bringing in new ideas and approaches for making more fundamental overall changes in the organization as a whole: strategic and operational changes that a significant amount of organizational growth had now made necessary as they had significantly ramped up the number of local chapter offices that they had to support nationally, and as they had instituted larger regional offices to help national run their overall operations in this, as a new intermediate organizational and supervisory layer. But they brought this individual in-house this way for a second reason too; their Chief Executive Officer of long-standing was beginning to prepare to step down and retire. And they wanted to bring in new blood there too, but at least as importantly they wanted and needed to find someone who really knew their systems and their corporate culture too, and who they could rely upon to be a good fit for both and from day one at that job. They brought in their new Chief Strategy Officer and kept them at that position for something over a full year, to groom them, and yes to validate them too, as a good fit next CEO. He worked out and was advanced to be their replacement CEO and has worked there in that capacity for a number of years now since then. Think of this as representing a hybrid strategy as far as balancing risks and benefits is concerned.

I am going to turn to Scenario 2 in my next series installment: special skills and experience, new hires and employees who might work hands-on or in a more managerial capacity. And I will also continue my discussion of more general principles there – applying this posting’s more general discussion to an explicitly game theory context. Meanwhile, you can find this and related material about what I am attempting to do here at About this Blog and at Blogs and Marketing. And I include this series in my Reexamining the Fundamentals directory, as topics section VI there, where I offer related material regarding theory-based systems. And I also include this individual participant oriented subseries of this overall theory of business series in Page 3 of my Guide to Effective Job Search and Career Development, as a sequence of supplemental postings there.

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