Eight to Late

Introduction

Many activities in organisations are driven by information. Chief among these is decision-making : when faced with a decision, those involved will seek information on the available choices and their (expected) consequences. Or so the theory goes.

In reality, information plays a role that does not quite square up with this view. For instance, decision makers may expend considerable time and effort in gathering information, only to ignore it when making their choices.  In this case information plays a symbolic role, signifying competence of the decision-maker (the volume of information being a measure of competence) rather than being a means of facilitating a decision. In this post I discuss such common but unspoken uses of information in organisations, drawing on a paper by James March and Martha Feldman entitled Information in Organizations as Symbol and Signal.

Information perversity

As I have discussed in an earlier post, the standard view of decision-making is that choices are based on an analysis of their consequences and (the decision-maker’s) preferences for those consequences.  These consequences and preferences generally refer to events in the future and are therefore uncertain. The main role of information is to reduce this uncertainty.  In such a rational paradigm, one would expect that  information gathering and utilization are consistent with the process of decision making.  Among other things this implies that:

1. The required information is gathered prior to the decision being made.
2. All relevant information is used in the decision-making process.
3. All available information is evaluated prior to requesting further information.
4. Information that is not relevant to a decision is not collected.

In reality, the above expectations are often violated. For example:

1. Information is gathered selectively after a decision has been made (only information that supports the decision is chosen).
2. Relevant information is ignored.
3. Requests for further information are made before all the information at hand is used.
4. Information that has no bearing on the decision is sought.

On the face of it, such behaviour is perverse – why on earth would someone take the trouble to gather information if they are not going to use it?  As we’ll see next, there are good reasons for such “information perversity”, some of which are obvious but others that are less so.

Reasons for information perversity

There are a couple of straightforward reasons why a significant portion of the information gathered by organisations is never used. These are:

1. Humans have bounded cognitive capacities, so there is a limit to the amount of information they can process. Anything beyond this leads to information overload.
2. Information gathered is often unusable in that it is irrelevant to the decision that is to be made.

Although these reasons are valid in many situations, March and Feldman assert that there are other less obvious but possibly more important reasons why information gathered is not used. I describe these in some detail below.

Misaligned incentives

One of the reasons for the mountains of unused information in organisations is that certain groups of people (who may not even be users of information) have incentives to gather information regardless of its utility. March and Feldman describe a couple of scenarios in which this can happen:

1. Mismatched interests: In most organisations the people who use information are not the same as those who gather and distribute it. Typically, information users tend to be from  business functions (finance, sales, marketing etc.) whereas gatherers/distributors are from IT. Users are after relevant information whereas IT is generally interested in volume rather than relevance. This can result in the collection of data that nobody is going to use.
2.   “After the fact” assessment of decisions:  Decision makers know that many (most?) of their decisions will later turn out to be suboptimal. In other words,   after-the-fact assessments of their decision may lead to the realisation that those decisions ought to have been made differently. In view of this, decision makers have good reason to try to anticipate as many different outcomes as they can, which leads to them gathering more information than can be used.

Information as measurement

Often organisations collect information to measure performance or monitor their environments. For example, sales information is collected to check progress against targets and employees are required to log their working times to ensure that they are putting in the hours they are supposed to. Information collected in such a surveillance mode is not relevant to any decision except when corrective action is required. Most of the information collected for this purpose is never used even though it could well contain interesting insights

Information as a means to support hidden agendas

People often use information to build arguments that support their favoured positions. In such cases it is inevitable that information will be misrepresented.  Such strategic misrepresentation (aka lying!) can cause more information to be gathered than necessary. As March and Feldman state in the paper:

Strategic misrepresentation also stimulates the oversupply of information. Competition among contending liars turns persuasion into a contest in (mostly unreliable) information. If most received information is confounded by unknown misrepresentations reflecting a complicated game played under conditions of conflicting interests, a decision maker would be curiously unwise to consider information as though it were innocent. The modest analyses of simplified versions of this problem suggest the difficulty of devising incentive schemes that yield unambiguously usable information…

As a consequence, decision makers end up not believing information, especially if it is used or generated by parties that (in the decision-makers’ view) may have hidden agendas.

The above points are true enough. However, March and Feldman suggest that there is a more subtle reason for information perversity in organisations.

The symbolic significance of information

In my earlier post on decision making in organisations I stated that:

…the official line about decision making being a rational process that is concerned with optimizing choices on the basis of consequences and preferences is not the whole story. Our decisions are influenced by a host of other factors, ranging from the rules that govern our work lives to our desires and fears, or even what happened at home yesterday. In short: the choices we make often depend on things we are only dimly aware of.

One of the central myths of modern organisations is that decision making is essentially a rational process.  In reality, decision making is often a ritualised activity consisting of going through the motions of identifying choices, their consequences and our preferences for them.  In such cases, information has a symbolic significance; it adds to the credibility of the decision. Moreover, the greater the volume of information, the greater the credibility (providing, of course, that the information is presented in an attractive format!). Such a process reaffirms the competence of those involved and reassures those in positions of authority that the right decision has been made, regardless of the validity or relevance of the information used.

Information is thus a symbol of rational decision making; it signals (or denotes) competence in decision making and that the decision made is valid.

Conclusion

In this article I have discussed the  unspoken life of information in organisations –  how it is used in ways that do not square up to a rational process of decision making. As March and Feldman put it:

Individuals and organizations invest in information and information systems, but their investments do not seem to make decision-theory sense. Organizational participants seem to find value in information that has no great decision relevance. They gather information and do not use it. They ask for reports and do not read them. They act first and receive requested information later.

Some of the reasons for such “information perversity” are straightforward: they include, limited human cognitive ability, irrelevant information, misaligned incentives and even lying!  But above all, organisations gather information because it symbolises proper decision making behaviour and provides assurance of the validity of decisions, regardless of whether or not decisions are actually made on a rational basis.  To conclude: the official line about information spins a tale about its role in rational decision-making but  the unspoken life of information in organisations tells another story.