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Euro-Asia Centre Research Series Euro-Asia Centre Research Series Authority: The Vertical Order of Society N° 76 July 2001 Gordon Redding Affiliate Professor of Asian Business INSEAD INSEAD EURO-ASIA CENTRE Abstract Authority is seen as one of the three components of culture which underlie the pattern of institutions in a particular society, the other two features being `identity' or the basis for cooperation and horizontal order, and `rationale' or the sets of ideas which convey purposes for behaviour. The role of authority is to provide the vertical order in the societal architecture, and the paper examines the way this occurs historically in the context of the evolution of business systems. The fundamental notion is one of the emergence of distinct and societally embedded business systems. Classifications of types of authority are considered, using a mainly Weberian set of categories, and so a continuum of traditional to legal/rational. Components of this typology are examined, and the role of religion in affecting it is described. Empirical data on worldwide variations along the key dimensions is presented and discussed, drawing mainly on Inglehart but also Hofstede. Three societal systems are then examined as cases to illustrate the emergence of alternative business systems deeply affected by different systems of authority. The first of these is Western bureaucracy, seen in terras of the influence of Roman law, then Christianity, then rationality. The second analysis is of the Japanese business system, and its origins in Japanese social history. The influence of decentralized feudalism in early Japan and its being carried forward during the Tokugawa period is brought into the account, and the diffuse nature of power in Japan today is described. In contrast, the final case, that of the Chinese system, as it developed outside China and now as it is emerging in China itself, is presented as an instance of the role of belief systems, in this case Confucian, on the retention of a centralized structure. In each case, some proposais are made about the impact of such forces on present day practices in the world of managing and organizing. Acknowledgement Grateful acknowledgement is made for the research support provided to this project by Boston University's Institute for the Study of Economic Culture, INSEAD's Research Committee, and the Euro-Asia Centre, INSEAD Authority: The Vertical Order of Society Discussing the idea of vertical order cornes from the need to understand how one society is different from another. Societies vary in three major ways: in how they think life should be lived, in other words the spirit which breathes through them (seen in a parallel paper via the question of rationality, in other words `reasons', considered previously); in how to organize the use of power and authority to establish a form of vertical order (this paper); and in how relationships and trust are organized to establish horizontal order (another parallel paper). They are not always clear about such things, but societies with strong cultures normally are, and any society has to be able to achieve a minimum of agreement and acceptance about such fundamental issues if it is to remain a society in which people can fit and understand their places. It is a convenient simplification to separate out for analysis a single variable like `authority', even though within it there is much complexity. Such forces should not be analysed out of context, as they are inextricably bound up with other features of society, in ways which will become apparent. This convenience is, however, adopted here for the sake of concentrating attention on one thing at a time. Having done that, it will be necessary to demonstrate that patterns of values in culture tend to be connected and to be knitted together, in ways which give a culture its more rounded and fuller meaning. Vertical order is about power and authority. It is about the kinds of people who tend to be above and below, why they are there, and how the flows of influence remain stable. In a formal sense it is a matter of who can require you to do things, to a degree that might concern you, such as your parents, your boss, the tax man, or a policeman, or your bank manager. In an informai sense, it is a matter of whom you take notice of, such as your grandfather, or your teacher, or a politician. It is also a matter of how these influences work, of why you obey, if you do. All societies need a sense of natural social order, and authority is the most important of the senses in which it is needed. As a necessity it will be created and justified and maintained. People need to know where they stand. Take the case of a young executive in a company employing a thousand people in the United States, and an equivalent in Bangkok, and their relationships with the bosses of their companies. For most such cases in the US the executive would be there because of certain 2 competences, which justify being employed in that position. These might be an ability to handle financial analysis, or marketing, or production management, or some such specialism, possibly backed by a degree in the subject and some years of practical experience. The boss of the company would, in the case of most companies, be in that job because of an ability to deliver results, and would expect to step aside if the results were not delivered. By the same token, the boss would have great influence if the results kept coming, and would be able to keep the authority needed to get others to do what was needed. People have to earn a living and executives would realistically accept that keeping their jobs required them also to get results, to submit to being measured against them, and to do what the boss thought was necessary. The system is seen by most of those involved in it as fair, and they have the choice of walking away if they don't like it. It is not expected that loyalty to the company would force a person to stay in it if a better opportunity became available outside. Except in cases where the authority is abused, it is seen as legitimate, as reasonable, and as necessary. Without it the economy would not work and people would be poor. There are other aspects of it, such as legal protection, formai contracts, neutral and objective ways of giving reward, and ways of incorporating the wishes and ideas of people who work in the system, but these are peripheral to the main characteristic which is that the power works effectively because it fits in with what people see as fair and efficient. Here the basis of authority is the system of objective, neutral, reasonable allocation of influence based on ability and specialization. Its workings are based on two features ; it is rational in the sense that the work compliance required is part of a larger structure of specialized jobs which all lock together and make sense if everyone plays his or her part , and the total activity to which they separately contribute is seen as the right thing to be doing. So, for example, the running of an organization which gives people a living is seen as both desirable and reasonable. Secondly there are agreements entered into which bind the person to an exchange of work for reward and which carry accepted threats of punishment, if the bargain is not kept by each side. The authority lies in the system itself. Its technical name in social theory is bureaucracy and in Western cultures it is pervasive. This form of authority is not universal. In the Bangkok company, assuming it is more or less typical of the indigenous companies of that city, the majority of which are owned and mn by people who are ethnically Chinese - although now Thai citizens - the young executive is likely to be in a position of trust and some authority because he or she is considered trustworthy by the boss. This may corne from some years of cultivating loyalty, or it may corne from relationships such as a family 3 connection or a friendship and obligation network of the kind which is often based on ancestral place of origin. The young executive's performance is likely to be good, as such organizations do not carry passengers, but it is unlikely to be measured openly. Nor will the rewards received be directly connected with the results achieved. The relationship with the boss will be one of respect and dependence, and there is far less likelihood of the young executive going looking for openings in other companies. So too is there less likelihood of suddenly being fired in a business downturn. The relationship with the boss is also likely to be more personal than in the US case, and the feelings of mutual obligation more marked. There is likely to be a naturally expressed deference upwards, which includes not challenging or disagreeing with the boss. The power of the boss to exert influence over executives like this is based largely on the boss's ability to display the kind of dignity and sense of responsibility which both Confucian and Buddhist culture see as ideal. The firm's performance is unlikely to be known in any clear detail, and only a broad sense of the firm's progress is available for judging the results of a CEO's actions. The likelihood of the boss resigning because of a downturn is virtually unthinkable. He, occasionally she, will own the company, and much of the authority carried will be because of that.
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