Platt Perspective on Business and Technology

Some thoughts concerning a general theory of business 22: considering first steps toward developing a general theory of business 14

This is my 22nd 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 1-21.)

I began addressing a set of four example scenarios 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 and follow as its routine business practice, in Part 20 of this series, which I repeat here for smoother continuity of narrative:

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.

And I have addressed the first of these more novel-case scenarios, at least for purposes of this narrative, since then with that line of discussion leading me to the above repeated hiring Scenario 2. My goal for this posting is to address that. And as done in my now completed discussion of Scenario 1, I do so in the context of alternating between the specifics of the scenario at hand, and more general theory of business considerations.

Focusing here on the more general line of discussion pursued in this series up to here, I analytically characterized trust as it enters into the types of decision making processes that arise in situations such as the above four scenarios in Part 21, splitting off three categorical varieties of it that differ from each other for the most part, according to how fully and directly a process or transaction participant can know, of what they would need to know, in order to make a best-for-them, or a best for their business decision.

My goal here is to delve into at least some of the more general issues that arise when discussing Scenario 2, and use that specific business circumstance as a means for further developing my more general business theory narrative, taking an explicitly game theory approach to that here. Think of my Part 21 discussion of trust and its information based foundations, as a foundational element to that, and for what is to come here.

First, let’s consider Scenario 2 itself. And I begin by noting that this arises when a business seeks to address a specific strategically significant challenge by finding and securing the hire of one or more specific individuals, who are at least relatively uniquely capable of addressing this new or emerging need. This type of scenario is most likely to arise in the context of addressing new or expanding gaps that have been found in the skills and capabilities sets that a business can apply towards fulfilling its core business goals, at least from its current staff and management. This means making its core capabilities more effective, that directly generate its incoming revenue streams and its profitability. But this can also arise if specific individuals can be found who for their special skills and experience, could make a necessary cost center, more competitively cost-effective too, freeing up resources for more profits-center use. Either way, a Scenario 2 situation as outlined above would arise when a business has to find and bring in specialized and difficult to find and secure new hires, with an overall goal of becoming or remaining as competitively effective as possible from that.

And in either case, this means finding and securing specific people:

• Where more generically available, routinely effective job candidates would not be able to offer the types of new value required in a hire here,
• And where wider candidate selective choice considerations, and the compensation benchmarking that such hiring patterns would provide, could not be used to help define or limit what the business would have to offer in overall compensation here.
• Together the above two points throw away the possibility of meaningful, standardized marketplace norms for hiring or for compensation offered for these Scenario 2 candidates, increasing the bargaining power of the most desired job candidates here, relative to that held by a hiring business.

And as soon as the managers directly involved in these hiring decisions begin to realize that their more routine personnel policies for managing compensation levels cannot apply here, due to uniqueness of circumstance and scale of need, this second scenario becomes inevitable in one form or other.

And with my earlier discussion of Scenario 1 as noted above, and this discussion of Scenario 2 noted, I turn back to the issues of trust and how it can take different forms, depending on the availability of necessary information. And I move forward to at least begin to reframe this in more explicitly game theory terms.

I have written in this blog on several occasions, about win-win and win-lose scenarios. And as part of that, I have noted that win-lose can come to predominate as an approach taken, as a consequence of at least one of several possible factors applying to the contexts in which these games play out, as perceived and understood by the participants involved. And I begin this phase of this narrative by at least briefly and selectively listing a few of those possible strategy triggers here, that I will then explicitly consider, and certainly for Scenarios 1 and 2.

Win-lose strategies are defensive in nature, and arise when, among other possibilities:

A. One or more participants in a business transactions system see the overall pool of rewards available from participating in it, as smaller than the overall pool of value that those participants would collectively have to pay in to it, in order to participate and with a chance of gaining some share of those rewards. This is the “pie to be divided is too small” scenario, where win-lose arises as participants seek to secure what they see as their fair share (or more) and even at the expense of others not even coming close to that.
B. One or more of those participants see that while they might be in effect paid back, if with a delay if they play cooperatively, it is uncertain, or even unlikely that the business transaction system game that they are in will be sustainable long enough for that to happen. This is the “cut your losses and play for as quick a return on investment as possible and regardless of impact upon others” scenario.
C. And with my discussion of trust in its varying forms, as outlined in Part 21, I add in business systems friction and the types of communications and information availability challenges that engenders it. The more incomplete and unreliable the timely availability of necessary information when choosing and pursuing a game strategy as a strategic option here, the more attractive and the more specifically risk reducing a win-lose strategy can appear to become. Limitations in information availability for quality and/or timeliness, and the friction that creates and drives that, degrades types and levels of trust that can be sustained, and that degrades any possible cooperation and any possible win-win alternative.

And to add one more detail to this brief narrative on why people would be drawn towards pursuing a win-lose, or zero-sum strategy, I stress that the strongest driver of all that would drive participants towards pursuing win-lose strategies (at briefly touched upon above, in a Rationale A context) is a sense of inequality and of not being offered a fair chance at receiving compensation in proportion to value and commitment invested. That point of observation, in fact underlies all that I have said here regarding win-lose and its root causes. With that noted, let’s reconsider first Scenario 1 as repeated above, and then Scenario 2 with this general business theory note in mind.

Employees at businesses do not in general see themselves as directly competing with the owners of those businesses or with their more senior executives, and certainly in big business and corporate contexts. This means Rationale A of the above list is unlikely to apply with much force for Scenario 1, unless employees as a whole come to see the leadership of the business that they work for as in effect, looting them of their fair due from how they loot the business as a whole, denying for example adequate cost of living wage increases to their employees while claiming the business cannot afford them, while significantly increasing their own paychecks or other direct personal benefits out of the resulting “savings.”

But employees who see their work as being important to their employing business, and who take pride in doing their work very well, do not necessarily see this same type of categorical separation as noted in the above paragraph, as existing between themselves and others who at least nominally work at the same general levels as them on the table of organization, simply because those employees, or at least some of them happen to know and use some currently “must have” new set of technical skills that they themselves do not need or use, such as knowledge of some new specialized computer language or tool set. The Phrase “as understood and accepted by …” as a contextual qualifier, becomes crucially important here (with this paragraph addressing Rationale A and Scenario 2, as both are offered above.)

I mentioned three rationales in my above list, as to why people working at a business or with an organization might come to pursue a more win-lose, zero-sum personal strategy there. Then I focused on the first of them: the limited pie that cannot suffice to fully meet all participants’ reasonable claims. It is possible for two or more of the types of sample rationales touched upon in that list, to co-occur, and I add that different participants and participant groups can in fact see and be driven by different ones, even if all involved basically follow the same general strategy at least most of the time (e.g. win-win, or in this case win-lose.) But that makes any analysis of the type I am offering here, more complex. And this type of complexity, of necessity means all involved face at least significant levels of Rationale C from my above list of them: friction stemming from faulty and incomplete information as to why others make the decisions that they do, that would be needed for making their own decisions more effectively.

I am going to complete this line of discussion in my next series installment, and will then turn to Scenarios 3 and 4 to complete this phase of this series and its overall discussion. Then I will step back from general theories of business as a special categorical case, and delve into a set of what have become essential foundation elements for that with further consideration of general theories per se. And looking ahead, I will then turn back to the more specific context of theories of business again, where I will begin using this newly added, more-general foundational material in its more specific 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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