Individual intelligence can lead to collective stupidity

Posted by  Mark Schenk —August 7, 2008
Filed in Strategy

I am reviewing Fred Kofman’s book ‘Conscious Business’ subtitled ‘How to build value through values. He uses a soccer game to illustrate ‘a puzzling paradox’ whereby coherent and rational individual behavior often produces incoherent and irrational systemic behavior. Systems theory teaches that to optimize the system, you must optimize its sub-systems. Kofman’s soccer analogy kicks this into touch…I have paraphrased it below:

In soccer, the objective of each team is to win by scoring more goals than the opponent. Teams are organized into sub-teams, offense and defense. The objective of the offense is to score goals; the objective of defense is to prevent the opposition from scoring. If the coach decides to use management by objectives and performance-based incentives the resultant compensation system sees the offense receiving payment in direct proportion to the goals they score and the defense in inverse proportion to the goals they allow.

If the incentive system works, the team will end up defeating itself. The offense would rather lose 4 goals to five than win 1 to 0. The defense would rather lose 1 to 0 than win 5 to 4. There is no incentive for the offense to help defend their goal and vice versa. While each sub-team tries to optimize its sub-objective, it sub-optimizes the team’s objective. Substitute ‘operations’ for ‘defense’ and ‘sales’ for ‘offense’; ‘revenues’ for ‘scoring’ and ‘costs’ for ‘preventing goals’ and you can see how this would work in organisations, and how easy it is to lose sight of the objective of winning the game as a team.

Kofman’s book is an excellent read, using anecdotes and examples throughout to illustrate his ideas. It is a ‘must-read’ for all managers and leaders.

1. Kofman, F., ‘Conscious Business: How to Build Value through Values’, Sounds True, Colorado, 2006, p77-78

Mark Schenk About  Mark Schenk

Mark works globally with senior leadership teams to improve their ability to communicate clearly and memorably. He has been a Director of Anecdote since 2004 and helped the company grow into one of the world’s leading business storytelling consultancies. Connect with Mark on:

Comments

  1. Loryn Jenkins says:

    Mark, what “systems theory” are you referring to? The three major process-improvement methodologies—Theory of Constraints, LEAN and Six Sigma—are *all* premised on improving the overall system, not optimising subsystems.
    The Goal (Goldratt & Cox, 1986) describes this in an easy-to-read fashion. For a more technical presentation, see The Haystack Syndrome, (Goldratt, 1990: especially p67).

  2. Hmm…
    I seem to remember that an organisation I used to work for was at one stage apparently remunerating teams based on these objectives:
    Sales – Achieving maximum sales and revenue.
    Product – Delivering lowest cost product.
    What overall achievement would this produce?

  3. Ali Anani says:

    This article is inspiring for all. As for me the article provides extra juice as I have co-authored several articles on the The Pond as a Metaphor for Management Complexity that were published in the Projects Shrink blog. People use the same metaphor and apply it in different directions. I shall buy the book to compare notes.

  4. Mark Schenk says:

    Hi Loren, I agree with you that the objective of all forms of systems theory is to improve the overall system. My experience is that they are put into practice by focussing on sub-systems and risking the outcome illustrated in Kofman’s soccer analogy. I enjoyed reading Goldratt’s work ‘The Goal’ and its follow-on ‘What is this thing called Theory of Constraints and how should it be implemented’ – it goes a long way to preventing the reader from following the sub-system optimisation path as it is very concrete and uses story to communicate its meaning very clearly.

  5. Rob Varley says:

    Your “paradox” is like game theory examples of the prisoners dilemma. Developing “team player” values could exacerbate the problem of dysfunctional incentives in organizations, or in your case players in team games. Have a look at “PRIVATE TRUTHS, PUBLIC LIES: THE SOCIAL CONSEQUENCES OF PREFERENCE FALSIFICATION” BY TIMUR KURAN , which suggests a rational basis for herd behaviour. In a nutshell the costs of saying what you think outweigh the benefits. Especially when there is a majority view. But even if everyone thinks something is dumb, most keep quiet as they don’t want to be branded radical, liberal, eccentric, not a team player etc. But when some event takes place that forces everyone to acknowledge the truth (e.g. the financial meltdown), conventional wisdom unravels rapidly as it was not based on the beliefs of individuals, but what pollsters thought they were thinking. The exampe Keith De La Rue gives it is a typical example of contradictory objectives which when presented in a PPT will stimulate vigorous head nodding if the boss approves.

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