Tuesday, 30 October 2007

Supporting whistleblowers / 2

A sense of fair-play is an innate characteristic of humans. There is a well known psychological experiment in which a 'proposer' divides a reward between him / her and a 'responder'. The responder can either accept or reject this. If he / she rejects it, both players receive nothing. Economics suggests that the responder should accept any division in which their share is not zero. But that is not what happens.

An article in last week's Economist explains:

"Scores of studies have run the ultimatum game across cultures and ages. Universally, people reject any share lower than 2-% - apparently to punish the greed of the proposer. People do not act like Homo economicus. Instead, they are the arbiters of fairness."

The article then goes on to review a series of experiments that contrast this sense of fair play in humans compared to its absence in chimpanzees. So this characteristic really is something rather special.

Gary Hamel explains how this is put to effect at Semco:

"The company has no internal audit staff. No one double-checks expense reports. Instead, Semco works hard to cultivate a deep sense of honour and trust among its employees, and since employees share in the profits of the unit, they have a big stake in rooting out fraudulent behaviour."

I bet fraud isn't a big an issue for Semco as it would seem to be elsewhere.