There are many reasons why organizations (government, businesses, etc) grow dysfunctional and stagnant. One major reason lies with the promotion and retention of less capable workers. There have been a number of studies that explored this dynamic (for example, The Peter Principle, which theorizes that people are promoted as long as they are competent, which means at some point they reach a position of incompetence). In general, though, the promotion and retention of incompetent workers would seem to run counter to the rational interests of the larger organization. So why does this behavior persist? Why are less competent workers able to retain their positions and, in some cases, obtain promotions?
One potential reason is that it is their very incompetence that is valued. Incompetence acts as a credible, costly signal that they can be trusted by superiors looking to accumulate a power base.
Sociologist Diego Gambetta is a pioneer in the study of signaling. In his 2007 book Codes of the Underworld: How Criminals Communicate, Gambetta uses the extreme case of cooperation amongst criminals to tease out more general dynamics of trust, signaling, and communication. The Mafia can be considered a “hard-case” for theories of signaling trust; given the extreme incentives for criminals to lie and the lack of credibility they wield given the very fact that they are criminals, how is it that criminals manage to coordinate their actions and trust each other at all? By understanding how trust works in this harsh environment we learn something about how to signal trustworthiness in broader, less restrictive environments.
Gambetta theorizes that one way that a criminal can signal their trustworthiness to another is through their own incompetence:
The mobsters’ henchman, so often caricaturised in fiction as an énergumène, epitomizes the extreme case of this class. If he were too clever he would be a menace to the boss. Idiocy implies a kind of trustworthiness. […] One way of convincing others that one’s best chance of making money lies in behaving as an ‘honourable thief’, is by showing that one lacks better alternatives. […] Incompetence is one way of telling people “You can count on me for even if I wanted to I would not be able to cheat.”
Through this mechanism, lower-level criminals can signal their trustworthiness to their bosses, since they are essentially dependent on their bosses for their economic gains given their lack of independent skill and intelligence. This pervasive logic means that criminal organizations are likely to employ mostly incompetent criminals and that leaders will likely surround themselves with less competent lieutenants over time.
It is not hard to see this same logic play out in businesses, schools, and government. If organizations are set up in such a way where the accumulation of loyalists is incentivized instead of performance, we should expect to see a greater number of incompetent employees relative to competent ones. Additionally, we should see more incompetent employees advance as their “sponsor” advances.
If so, this suggests there's no superiority to meritocratic, as opposed to nepotistic, organization. And indeed that meritocratic organization eventually seeks to replicate the virtues of nepotistic organization.
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@mcd: Actually, I think it makes the point that the more an organization is built on incentives that approximate nepotism (loyalty over performance), the less likely the organization is to be profitable, effective, innovative, etc. Meritocratic orgs are better–the trick is in how well you prevent nepotistic-like behavior from creeping in.
The way you prevent this from happening is to maintain a peer-to-peer organization, rather than a top-down heirarchical one. This is why large corporations and centralized governments are ultimately doomed.
@BP: Given that nepotism (or its functional equivalent) has a cost in efficiency, it might be that managers consider, rationally, the trade-off worthwhile. Especially if this was a general feature of all organizations- then nepotism would confer no comparative disadvantage.
A some what more pedestrian view is that the skills to to an entrance level job in a large organization or field are sometimes (often?) irrelevant to doing higher level jobs. The brilliant computer programmer may not have the skills to do large project management, talk to customers, or persuade higher management. But his success at programming gets him promoted, and the programmer with lackluster computer skills but good management potential stays put.. So you end up with the management potential programming, and tbe good programmer attending endless meetings.
It is pretty much the same in every profession, the needed skill set changes as one moves up or laterally in a field, and the move is often a reward for success with the old skill set not a demonstration of being able to use the new one.