Why The CEO Chooses Not To Listen: Information, Reliability And Decision Making In Corporations, by Walter Lee and Paul Pangaro

This work was commissioned by Dr Michael C Geoghegan, Research Fellow, Du Pont Fibers (now Nylon) Research Division, Wilmington, Delaware, in the course of a consulting relationship with PANGARO Incorporated on various issues relating cybernetics to the needs of the modern corporation.

The conclusion of the work is that, if:

  • a manager considers his or her responsibility to be greater than that of individuals who report to that manager, and
  • the complexity of the business environment is increasing

then , it is rational and logical for the manager to

  • ignore the input of those “below” in the hierarchy, and
  • make guesses as to the best course of action.

Dr Geoghegan's general request was to work forward from formal notions of information theory, in order to consider the implications of communication structures in decision making in corporations.

In a thorough review and software simulation of related work by Alex Bavelas (whose work was reported in the Proceedings of the Macy Meetings), we confirmed Bavelas' experimental results (as reported in other documentation).

These showed that although hierarchical communication structures are invariably more efficient (i.e., faster) at solving problems in cases of no ambiguity, that once ambiguity or noise is introduced, peer-based communication is invariably more effective and more socially compatible with the individuals involved.

In addition it was possible to discern why this is so, and to actually compute the cost of transactions (i.e., communications) in corporate decision making.The addition of recent research in reliability theory and some further considerations led to the conclusions of the work reported here, as synopsized in the title.

The conclusions were not predicted in advance, and the explanation that emerged was as surprising as it was strict. The logic and development of the work is by Walter Lee and Paul Pangaro, and this paper was written by Walter Lee.

It was left in the form of a working document until such time as a specific use within Du Pont might provide the guidance for how to refine and/or apply it.