Book Review-Exit, Voice, and Loyalty: Responses to Decline in Firms, Organizations, and States

You only have two options when you’re experiencing a problem and you want to change it.  You can exit the situation, or you can use your voice to try to try to change it.  In 1970, Albert Hirschman wrote Exit, Voice, and Loyalty: Responses to Decline in Firms, Organizations, and States to explain how these two forces could help to drive forward commerce and politics – and the conditions under which these forces might not be enough.  The inclusion of loyalty was because it’s a mediating factor that influences when exit is used compared to when voice is used.  What makes Hirschman’s work interesting is that it applies not just to commerce and politics.  It applies to life.  It applies to every relationship that we have with organizations and others.

There’s a fundamental premise behind the book, which is that things are – at all times – somewhat imperfect and need some process to combat the process of entropy and degeneration.  This is, in nearly every aspect of our human existence, truth.  We recognize that, without market forces, organizations will reduce quality – a concept Hirschman is focused on – or will raise prices to the point that they can.  This is the heart of the monopoly protections that the government puts in place when competition is removed.  It’s also why anti-trust laws exist to prohibit collusion that might suppress the forces of exit and voice that Hirschman explores.

The Options

There’s a third option that doesn’t make it to the marquee of the book.  The option is to do nothing.  However, it isn’t an option that steers the relationship in a positive direction, it simply blindly hopes that the situation will get better – and it’s the option that loyalty, in its most extreme form, results in.

The economic premise of exit is that if you withdraw your commerce from the organization, its monitoring systems will detect the loss of revenue and awaken leadership to changing the organization in a way that corrects the reasons for the exit.

Voice, on the other hand, seeks to provide feedback directly to the organization in a way that doesn’t involve economic harm.  The basic premise is that the leadership of the organization is actively interested in the feedback of the customers, members, or citizens such that their feedback forms a first signal before exit becomes the required option.

The Mitigating Factors

At the individual level, we each have biases toward choosing to exit or apply our voice to a situation.  In the United States, our history has been largely influenced by the key decisions to exit.  It’s no wonder why, at a broader level, Americans seem more willing to exit an organizational relationship than to apply their voice.  However, there are two key mitigating factors for choosing voice over exit.

The first is the issue of loyalty.  The more loyal we are to a brand, the more likely we are to provide feedback directly via voice rather than leave.  Look at this 2×2 grid, which places loyalty and the degree to which the organization is listening on axes:

Loyalty for an organization with high listening results in change and therefore high retention.  However, for the organization with high loyalty and poor listening systems designed to pick up the voice of the customer, the result is repeated frustration by those who are loyal to the organization.  In the low loyalty category, low listening results in rapid exit as customers need little proof that their best option is to exit.  With low loyalty and high listening, organizations are confused why there seems to be nothing to hear.  Many customers exit without even attempting to assert their voice.

However, this graph ignores the other mitigating factor that constrains exit.  The greater the cost there is for switching, the greater the resistance of the exit option and thus the greater willingness to test voice as a vehicle for change.  High costs of changing were an intentional strategy of wireless carriers in the past.  Once a person was with you, they would be retained for a very long time, because the cost of switching was so high.  Gradually these barriers to exit were brought down by governmental and market factors.  Phone number portability transferred the ownership of a number from the carrier to the subscriber allowing them to take the number with them to another provider.  Market moves like those of T-Mobile pushed against the long-term contracts.

When There is No Escape

In some cases, the cost of exit is so high that it practically becomes impossible.  In the case of political systems, it’s possible to leave the city, county, state, or nation but at progressively higher and higher costs.  These costs are impractical to most people.  Highly constrained on the availability of exit, the result is voice – sometimes voices in active protest.  With exit constrained, more energy can be invested in voice before people exhaust their patience.

Once patience with voice has been lost, the consumer will fall into a trapped, hopeless place where they no longer see any escape from their circumstances.  This is problematic in two directions.  First, being resigned that nothing can change, they no longer provide any direct input into the system for the organization to learn.  The second direction is that pressure continues to build until a nontraditional solution for exit or organization change is attempted, often with disastrous consequences.

When There is No Voice

An opposite condition can occur when exit is too easy.  It’s effectively costless to transition, and the exit happens without any signal to the organization.  The result is that the voice option – the voice of the customer – becomes mute; no one bothers to offer up a voice, since doing so serves no purpose.  Thus, loyalty mediates this problem in environments where exit is too easy.  It encourages the use of voice where normally there would be none.  We can see this in the airline loyalty programs.  The programs are designed to keep flyers on an airline instead of exiting.  Even in an environment where the time and costs should dictate the transactions, we find that loyal flyers go out of their way to continue to fly on their preferred airline.  More importantly, they expect that they have a voice that will be heard.

The escalation teams for customer service issues at most major consumer organizations are named as “executive” care teams.  The implication is that you’re getting the special treatment that only the most important people receive.  Having engaged with many of these teams in the past, I can tell you that their efficacy for addressing problems is lousy.  They’re happy to issue a credit, but when you need a service problem resolved, they can almost never help.

The Impact of Time

Buried at the end of Hirschman’s treatise is that there are, in some cases, hybrid versions of each.  For instance, the boycott, where there’s a temporary exit.  The service is intentionally avoided for a period of time even if long-term avoidance is impractical.  More critically, he addresses the fact that loyalty has its limits.  Loyalty doesn’t fundamentally change the cost/quality to retention ratio.  Instead, it introduces a temporal dimension that is often ignored.  We’ll tolerate poor service from our favorite restaurant occasionally.  We may do so and neither resort to exit nor voice.  We’ll just expect they’re having an off day.  The degree to which we’re willing to do this is largely driven by loyalty.

A single stop at a restaurant with poor service will likely cause us to avoid it – exercising exit and not bothering with voice due to the low cost of changing.  It’s the loyalty that keeps us coming back – or using voice when no exit cost exists.  However, each time we encounter poor service, our loyalty will be a bit less – eventually, it’s not enough to hold back our desire for exit.

Desire of Autonomy

In some conditions, it may be desirable for an organization or its leadership to assert a level of autonomy.  That is to say, they may want to dispense with all the messy feedback and painful review of the metrics that are moved by the exit of customers.  They may thereby insulate themselves from the voice of the customer and remove the important leading metrics from their dashboards so that they can set out on their own course of change for the organization.  While this can result in success, it’s quite dangerous and ill-advised in all but exceptional circumstances.

Take the story of Netflix and its desire to separate its DVD shipping business from the online delivery of movies.  The attempt was a disaster – which was quickly remedied, to its credit.  However, it is a good example of an internal decision that wasn’t subjected to the review of loyal customers before it was announced publicly and received a negative reaction.

The MVP Program

I remain honored to be a part of the Microsoft MVP program.  It has taught me a lot about the sausage-making of building software products.  It’s also taught me that sometimes the voice that we’re graciously granted doesn’t change products.  Instead, it shapes how Microsoft announces their products to the broader market.  We often notify the product teams of the kinds of resistance they can expect in the market, and that allows them to shape how they message the changes.  While this isn’t the change that I hope to accomplish via my voice, I know that it serves an important role for the organization.  They need high-fidelity feedback channels that will tell them when they’re off the rails.  Sometimes, they can pick the train back up and put it on the rails again.  Other times, they paint the wreck in pretty colors and hope the market doesn’t notice.

Politics

It’s important to revisit the concept of politics and the degree to which the option of exit is limited in politics.  It’s hard to leave.  Even in boundary places, where exit appears to be available without undue costs, there are hidden costs which must still be paid.  Hirschman explains that consumers are free to send their children to private schools, but in doing so, they deprive the public schools of the most powerful voices in change.  Even those who send their children to public schools must still contend with the rest of the community who has received sub-standard education – so, at some level, they cannot escape (exit) the challenges of poor schools.

Politics is a special place where the cost of exit is so high that voice is nearly the only solution.

Sunk Cost and Skipping Rocks

One of the dynamics that Hirschman explores is the interplay between loyalty and exit.  This is a place where our sunk cost fallacy may drive the same direction as loyalty.  In Thinking, Fast and Slow, Daniel Kahneman explains that we tend to keep investing once we’ve made an initial investment – even when further investment isn’t the right answer.  We see this with employees.  They tend to either have a short tenure with an organization or a long tenure.  Once an employee has passed to a point of having worked at an organization for a few years, they’re invested and are much more likely to carefully use their voice to try to initiate change.  (See The Art of Insubordination for ways to do this.)  Employees without tenure with the organization have no sunk cost fallacy and therefore may decide that exit is their best option when confronted with an issue.

The lesson for HR managers is that their attempts to build loyalty should be equally distributed to include new employees.  Tenure-based bonuses may be a good reward, but they do little to encourage loyalty of the newest employees – and therefore is an area that may be challenging from a turnover perspective.

Relationships

While the entire context of the book lives in the realm of our society, including our organizations, affiliations, and politics, there’s one important aspect of Hirschman’s work that bears exploration.  He mentions only briefly about these options in families, yet it’s another important part of our lives, and one where the forces and options apply with perhaps greater impact.

To start, the book Divorce notes that after “irreconcilable differences” became an option to initiate divorce, there was a sharp rise in divorces.  In the context of Exit, Voice, and Loyalty, when the exit was made an option, people took it.  Alternatively, you could say that the cost was lowered; however, substantial stigma and therefore cost remained.  In short, the high cost of divorce maintained marriages that would have otherwise fallen apart.

However, there’s more.  If you evaluate Hirschman’s work in the context of estrangement, like those discussed in Fault Lines, one can see that either there’s a low value to the family relationships or a low loyalty to family – or both.  This leads us to Francis Fukuyama’s work in Trust and how different degrees of trust shape society.  Specifically, Fukuyama’s use of trust incorporates a degree of loyalty in it – and thereby changes the way that individuals react in families and in society.

What Hirschman views as competing options of exit and voice, Harriet Lerner views as The Dance of Connection.  In her book, she thinks about how to use voice effectively, and when it’s time to exit a relationship.  The principles drive all our relationships.  The challenge in the sense of relationships is that our exercise of voice sometimes causes the other person to exit – whether the voice was used appropriately or not.  Similarly, the market conditions for connections in our hyper-connected world are plentiful, and therefore the cost of exit seems small.  Smaller than it should when we recognize that at the heart of what it means to be human is to be connected, and those connections are intended to be substantially deeper than the world we live in today with Facebook friends.  Maybe it’s time to find out more about Exit, Voice, and Loyalty.

Book Review-Against Empathy: The Case for Rational Compassion

Who could be against empathy?  Isn’t it a good thing?  Don’t we need it to relate to one another?  How could someone, Paul Bloom, write a whole book about why empathy is bad?  The answer is a surprising journey into what we mean when we say “empathy” and the negative side of what is seen as a wholly good response.  In Against Empathy: The Case for Rational Compassion, Bloom decomposes what we mean when we say “empathy” and suggests that we should focus on only the “good” parts of empathy while finding ways to side-step the problems.

Cognitive and Affective

A good place to start is the fact that we use empathy to mean two relatively distinct things.  The best definition of empathy that I’ve seen is “I understand this about you.”  It’s a simple expression that equates empathy with understanding.  When I’m understanding, I can mean that I understand, cognitively, what your world is like.  I understand the environment, the factors, and the connections to other people.  To understand affect is to understand how the other person feels.  That’s really what most people mean when they say that they have empathy for someone else.  They’re presuming that they can feel what the other person is feeling.

The Grief Recovery Handbook makes a point of saying that no one else can know exactly how you feel.  How Emotions Are Made speaks about how emotions are constructed from the experiences we have in the moment, in the past, and our processing of those experiences.  So, while we generally mean that we know what someone else is feeling when we say “empathy,” it’s probably more accurate to say that we can approximate someone else’s feelings rather than “knowing” them.

The Affective Problem

Fundraisers who are looking to get you to part with your hard-earned money to support a need in a far-flung land know that you’re much more likely to support a single person – particularly a needy child – than you are to write a check to support a city, a nation, or a cause.  Organizations have long since learned that a name and a picture together are substantially more likely to pull you in to get you to donate than a picture without a name – or a name without a picture.  In these cases, affective empathy may be good, but what happens when it’s a zero-sum game?

Consider that you’re told that there’s a waiting list of patients for a doctor.  They’re carefully prioritized so that the neediest children are seen first.  You’re given the profile of one little girl who needs help, but her name is way down the list.  You’ve got the opportunity to move her up on the list.  Will you?  When focusing on how she feels, her world, and her plight, many do move her up in the line.  However, this is a place where empathy works against us.

If you trust the algorithm the doctor uses to prioritize cases, moving this case up pushes down other needier cases.  In short, you’ve done a net harm by prioritizing this one case.  Your empathy has sensitized you to the one case but has blinded you to the larger implications of your decision – and this is the key challenge with affective empathy.  It blinds us.

Cognitive Distortions

Bonds That Make Us Free, The Anatomy of Peace, and Leadership and Self-Deception all point to the challenges that an emotionally activated brain brings.  We learn that our emotions often take control – and won’t let rationality get a word in edge-wise.  In Kahneman’s language in Thinking, Fast and Slow, it’s System 1 overriding System 2.  In the language of Jonathan Haidt in The Happiness Hypothesis, it’s the emotional elephant taking the rational rider where the elephant wants to go.  The truth is that our emotions have more control than we’d like to admit, and engaging them necessarily allows us to be influenced by our biases – which isn’t a good thing.

In the case of the girl, it blinds us to the tragedy of commons.  The tragedy of commons is a well-known parable about how individually rational decisions can be destructive to the whole.  The idea is that a town allows the residents to have their livestock graze on the town commons for free.  It is therefore in every resident’s personal best interest to have as much livestock as possible grazing on the commons.  However, when this is done collectively, the commons will be over-consumed and eventually no plants will be available for anyone’s livestock.  Rational decisions made by individuals about a common resource will eventually destroy the whole.  The girl’s case is a different form where to improve her treatment we must reduce others’ treatment.

Trigger Warning

If we’re encouraging affective empathy, we’re necessarily encouraging people to become triggered by other’s emotions.  This is the very thing that The Coddling of the American Mind warns us about.  When we’re worried about triggering other people, we become tentative, and our students and friends stop trying to understand other perspectives, because to do so may make them uncomfortable.  Instead of challenging ourselves to see and understand the world better, we shrink back into a place of safety.

Walter Michel’s Marshmallow Test may seem like a far cry away from trigger warnings – but the distance is much smaller than people realize.  The marshmallow test was about allowing discomfort in the short term for long-term reward.  Those who are focused on the need for trigger warnings are worried about their here-and-now feelings at the expense of their ability to cope with discomfort in the future.  Albert Bandura explains that desensitization to stimuli is an important technique in reducing phobias – and maladaptive responses of any kind.  In Moral Disengagement, he explains how people don’t want to accept responsibility for their part in larger amoral actions but instead become desensitized – either for better or for worse.

Weighing Now and Then

Ultimately, empathy in its focus on the here and now, blinds us – or partially blinds us – to the future impacts.  We’ll take the marshmallow now, because we don’t know about tomorrow.  We’ll buy on credit today, because the future is something vague that may never happen.  Both Daniel Pink in When and Phillip Zimbardo in The Time Paradox have addressed how humans perceive time – and it’s not second-by-second.  Instead, we tend to unequally weight the past, present, and the future.

Empathy, by the nature of the present focus, causes us to insufficiently consider the costs in the future.  To be clear, it’s not that being in the present moment is bad – it isn’t.  However, when we can’t evaluate the future consequences to our present actions and experiences, we’re failing our future selves and the conditions they’ll find themselves in.

Capacity and Propensity

There’s a challenge.  Empathy has a positive side but also the potential to be used for evil.  It’s empathy that allows cult leaders to drive followers to kill themselves and their children.  Just as it can be used as a powerful force for good, it can be used by evildoers to manipulate and trap victims.  This raises the question about how someone can feel what someone else is feeling and inflict harm.  The answer seems to come in the form of the difference between capacity – the ability – and the propensity – the willingness to do so.  It can be that people who use their capacity for empathy for evil may turn off this capacity while they’re harming the other person.

This ability to turn off – or turn down – empathy may be something that parents need to be able to discipline their children.  In The Psychology of Not Holding Children Accountable, I walk through all the ways that parents can be sucked into not holding children accountable, most of which are an inability to separate their child’s immediate pain from their own discomfort.

Favoritism

No one wants favoritism – unless the other person is favoring them.  We want our friends and family to favor us more than they might the random person on the street.  So, it’s more accurate to say that we don’t want others favored over us.  Empathy creates a favoritism for those that we’re feeling empathy for.  Favoritism in the animal kingdom isn’t absent.

Chimpanzees are more likely to survive to adulthood if their mothers are more social and supportive of other mothers.  It’s the kind of old-time social network that Robert Putnam talks about in Our Kids.  It’s where everyone looked out for everyone else.  Except that it’s not really everyone.  It’s those people who are in a network of commitments with you.  In an old book, Understanding Computers and Cognition, Terry Winograd and Robert Flores describe organizations as a network of commitments – societies, families, and friend groups fit the same model.

Backup Enforcement Force

To maintain social order, we need more than just the kind of trust that Francis Fukuyama describes in his book, Trust: Human Nature and the Reconstitution of Social Order.  Trust does bind us together and enable us to be more collectively effective, but we need to accept that we need some sort of backup enforcement force to ensure that the rules of social order are maintained.  Rushworth Kidder separates moral and ethical problems based in part on societal conventions in his book, How Good People Make Tough Choices.

However, even the most generous thinkers about human nature recognize the need to have a mechanism for enforcing the social norms.  Jonathan Haidt in The Blank Slate and Robert Axelrod in The Evolution of Cooperation arrive at the same conclusion from two different approaches.  We need to be able to enforce the standards of behavior we hold – and that may mean hurting someone’s feelings or even hurting them.

However, it won’t hurt to consider whether you should be Against Empathy.