Limitations in Incentive Structures

The value of decisions is determined by their returns and significance:

In small organizations, although decision-making is somewhat isolated, the limited number of individuals means that an individual’s decision output still has a noticeable impact on the organization as a whole. In such cases, the limitations of cybernetic organizations are less pronounced due to the smaller scale, allowing specific incentive mechanisms to have a positive mobilizing effect at the individual decision-making level. Individuals can still feel that better decision outputs positively impact the organization, leading them to believe that high-quality decisions can improve their rights conversion efficiency. However, in large organizations, two factors suppress individual decision-making motivation: 1) The large scale of the organization means a vast amount of information, making it impossible for individuals to independently analyze the direct causal relationship between their decisions and organizational development; 2) A larger number of individuals implies more decision-makers, naturally reducing the proportion of influence a single individual has on the organization. As a result, individuals may feel a sense of powerlessness when evaluating the value of their decisions, perceiving that even significant efforts have minimal impact on the organization. This ultimately leads individuals to prioritize decisions based on their immediate personal interests rather than the organization’s overall objectives.

When individuals lose the ability to influence the organization through their decisions, they tend to abandon decision-making approaches that prioritize the organization’s overall interests, as such decisions become nearly irrelevant to improving their own rights conversion efficiency. Meanwhile, organizational development and rights conversion efficiency primarily depend on a small number of top-level decision-makers, who typically drive grassroots decision-making by setting a series of KPIs. These KPIs are cascaded downward, with the hope of mobilizing all organizational individuals. As stated in the chapter “Organizational Settings of Intelligenism,” executors generate information during execution, which is transmitted upward through various levels of information pipelines. The content and manner of information transmission often determine the interests (rights conversion efficiency) of different decision-makers and executors, leading them to transmit information in ways that maximize their own benefits. In large organizations with vast amounts of information, the layered processing and filtering of information result in top-level decision-makers receiving heavily distorted information, rendering them unable to make decisions that positively impact the organization. When top-level decision-makers fail to make effective decisions, organizational development faces significant issues. Based on the perspective from the section “Cybernetic Organizations and Heroism” in “Organizational Settings of Intelligenism,” individuals in cybernetic organizations often rely on the correctness of elite individuals’ decisions to maintain confidence in the organization’s continued development. When organizational development encounters clear problems, individuals gradually lose trust in top-level decision-makers (the elite individuals in their minds). As the situation worsens, they ultimately lose most of their confidence in the organization. In a context where individuals hold negative expectations of the organization, they further reinforce decision-making preferences that prioritize short-term individual benefits. As most individuals’ behaviors deviate due to weakened confidence, the effectiveness of elite individuals’ management further declines, leading to a worse organizational state and further eroding individual confidence. When the organization’s state enters a sustained downward spiral, large organizations lose competitiveness and gradually decline.

However, during this process of worsening organizational conditions, managers can still seek breakthroughs in specific areas and slow the organization’s decline by improving management capabilities. Top-level decision-makers (elite individuals) can strive to enhance their judgment of industry and economic trends, making as many correct decisions as possible to maintain or rebuild confidence in themselves and their organization. However, a mechanical hard drive remains a mechanical hard drive; even if its performance improves, its underlying structure prevents it from competing with solid-state drives in certain aspects. This is not because there are fewer or less capable researchers developing mechanical hard drives, but because it represents a leap in technological paradigms or even the beginning of a shift in organizational forms. (From Clayton Christensen’s The Innovator’s Dilemma.)

Deliberately Simplified Information

In the real world, any scenario can be observed, perceived, interacted with (through executors’ actions), and generate information. This information can be infinitely detailed and inevitably contains both useful and useless data. In the actual management of traditional organizations, considering that increased information volume raises management difficulty, information collection by executors in a bottom-up manner cannot be overly detailed. During the information collection process, executors evaluate decision-makers’ cognitive preferences (to please decision-makers) and their own interests (to maximize personal benefits), filtering and adjusting the information to be transmitted accordingly. As a result, decision-makers often see more of what they want to see or what executors want them to see. Ultimately, the cognitive limitations, biases, and internal interest dynamics of decision-makers, as well as the organization’s own interests, determine the content and conclusions of information transmission and analysis.

However, real-world information should be objective, and the set of information derived from real-world scenarios is also objective. Traditional organizations often struggle to process this information objectively. Additionally, the risk of information processing at each node cannot be diversified through a parallel circuit-like approach; instead, it is transmitted node by node in a serial manner, leading to significant information distortion. It is foreseeable that many large cybernetic organizations’ top-level decision-makers often navigate the organizational ship using a map that seems to belong to no place on Earth.