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89Journal of Management EducationKohn
© The Author(s) 2012
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Instructional Innovation
Federalist #10 in
Management #101:
What Madison Has
To Teach Managers
Journal of Management Education
37(5) 683­–703
© The Author(s) 2012
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DOI: 10.1177/1052562912458889
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Jennifer L. Kohn1
Abstract
Business students typically do not read James Madison’s Federalist #10, a
seminal work in political theory on the causes of and remedies for factions.
I make the case that they should and offer suggestions for teaching and assessment. Factions are a subset of stakeholders that have interests adverse
to the organization. Madison cogently argues that the causes of factions are
rooted in human nature; therefore, managers should embrace diversity and
not try to eliminate factions by surrounding themselves with “yes men.” Rather,
he urges managers to focus on organizational design to channel ambition in
a positive way and constrain the more corrosive effects of factions. Madison
emphasizes a critical lesson for negotiation by focusing on adverse interests
rather than positions or characteristics. Beyond these management lessons,
Federalist #10 exposes business students to the foundations of American politics and helps to inform the ongoing debate about the relationship between
business and government. Finally, Federalist #10 takes business students out of
their comfort zone, changing their reading workout and strengthening their
ability to learn management lessons from the broader world around them.
Keywords
factions, stakeholders, management education, business and government
1
Drew University, Madison, NJ, USA
Corresponding Author:
Jennifer L. Kohn, Department of Economics and Business Studies, Drew University, 301 Lewis
House, Madison, NJ 07940, USA.
Email: [email protected]
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What does Federalist #10 have to teach business students in Management
#101? I suggest a lot. Both admirers and critics of James Madison agree that
his Federalist #10 is the seminal work in American political theory on the
causes, consequences, and management of factions (Kernell, 2003). Madison
(1787a) defines a faction as:
A number of citizens, whether amounting to a majority or minority of
the whole, who are united and actuated by some common impulse of
passion, or of interest, adverse to the rights of other citizens or to the
permanent and aggregate interest of the community (p. 54).1
This definition of faction is different than the broader definition of “stakeholders” as groups with interests in what business does (Donaldson &
Preston, 1995). The critical distinction is that Madison defines factions by
their adversity to the aggregate interests of the community. By contrast,
stakeholders’ interests can be either congruent with or adverse to those of the
organization. Moreover, diverse stakeholders’ interests are often considered
by management in the process of defining the organizational interest in the
first place. By focusing on adversity, Madison highlights an important management reality: even if you consider all stakeholders, you cannot please all
the people all the time.
To set the stage, in the winter of 1787-1788 James Madison along with John
Jay and Alexander Hamilton authored 87 essays, known as The Federalist, to
urge ratification of the U.S. Constitution. Then as now, commercial interests
prompted political conflict. The Articles of Confederation that governed the
States after the Revolution established a weak central government without even
the power to tax or to regulate interstate commerce and international trade. This
weak government failed to secure what centuries later Dixit (2009) enumerated
as the three prerequisites for economic activity: the security of property rights,
enforcement of contracts, and collective action. Barbary pirates, similar to the
Somali pirates of today, attacked American ships; yet unlike today, the U.S.
Navy was powerless to help.2 Shay’s Rebellion, an uprising of citizens in debt
due largely to the governments’ inability to pay them for their service in the
Revolution, was the last straw prompting the Constitutional Convention (Zinn,
2003). Today, the subprime mortgage crisis has prompted animated protests
from the Tea Party and Occupy Wall Street, but not armed rebellion. Still,
Madison’s observation has a contemporary ring:
. . . complaints are everywhere heard . . . that the public good is disregarded in the conflicts of rival parties, and that measures are too often
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not decided according to the rules of justice and the rights of the minor
parties, but by the superior force of an interested and overbearing
majority. (p. 54)
Such complaints are heard today regarding several high-profile conflicts
between business and government, such as corporate free speech associated
with the Supreme Court’s Citizens United decision and the proper role of
government in health care (the Patient Protection and Affordable Care Act),
financial regulation (the Dodd–Frank financial reform), and industry more
generally (the 2010 auto industry bailouts). Similar complaints about favoritism, self-interest, and the role of senior management in frontline business
decisions surround internal conflicts among employees that managers face
daily.
In Federalist #10, Madison offers specific practical lessons for managers.
Madison’s first lesson is that in order to identify factions, managers must first
determine their organizational objective. This is often easier said than done,
both for big picture corporate strategy as well as daily meeting agendas.
Second, Madison provides a cogent argument that it is better to manage the
effects of factions than to try to prevent their causes. Madison argues that the
causes of factions are rooted in the very human nature and freedom that fuels
the dynamics of society and business. In other words, hiring “yes men” and
severely limiting what employees can do would be like a dictator extinguishing liberty, “. . . a remedy worse than the disease” (p. 55). Madison’s third
critical lesson is that managers are not immune to developing adverse interests
of their own. So what is a manager to do? Madison’s central message is that
organizational design matters. In order to provide enlightened management,
managers themselves need to work within carefully crafted governance structures that can channel ambition and harness the creative energy of diverse
interests toward the organizational objective. Madison’s prescriptions apply to
both the big picture of organizational structure as well as a manager’s day-today activities. His advice that decision makers should be “of a certain number”
can keep a manager from making decisions alone in her office; while his warning of “the confusion of a multitude” can help her keep meetings manageable.
Finally, Madison’s focus on interests rather than positions or characteristics
is a central lesson in negotiation that is highlighted in the classic Getting to
Yes (Fisher, Ury, & Patton, 1981).
Beyond these practical lessons, Federalist #10 is a powerful teaching tool.
Madison yanks business students out of their comfort zone with both his political content and old-world prose. Like changing an exercise routine, reading
Madison can sharpen business students’ critical reading and thinking skills. In
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addition, Madison shows business students that smart thinkers outside of
business have grappled with similar problems. Federalist #10 demonstrates to
students that they can get useful insights from a variety of sources, such as history, philosophy, and political science, which they may not have considered
before. Finally, business students are also citizens. Federalist #10 is one of the
foundational texts that underlie the U.S. political system in which most will live,
work, vote, and, we hope, engage as active members of their communities.
This essay proceeds as follows: the next section briefly traces the development of Madison’s arguments in Federalist #10 and then summarizes
Madison’s lessons for managers; the subsequent section suggests specific
classroom activities to explore Federalist #10’s lessons with business students and assess their learning of these lessons; the final section concludes,
and the appendix (which is posted online at http://jme.sagepub.com/
supplemental) provides specific examples of questions for classroom activities as well as assessments.
Madison on Management
The Roots and Evolution of Madison’s Philosophy of Factions
Madison was perhaps the most scholarly of the founding fathers, and as such
an apt choice for business students’ scholarly pursuit of management. Despite
his dated prose, Madison might speak more easily to today’s managers than
other political philosophers. McLean (2003) suggests that “Madison is the
most modern of the ancients . . . we like the way he argues. He thinks like an
economist and reasons like a game theorist” (p. 14). Kernell (2003) argues that
Madison has enjoyed a resurgence riding the coattails of the rise of corporations as forces in economic and political life. Corporations have been compared with governments: “The emergence of huge multinational corporations
with economic powers comparable to those of nations has brought awareness
that these private-sector institutions have impacts on human lives comparable
to the impacts of political governments . . .” (Markley, Campbell, & Harman.,
1982, p. 58). Thus, in both his style and substance, Madison should appeal to
future managers. This brief review of the development of Madison’s thought
focuses on those elements that may be of most interest to management students to draw them into Madison and to provide context for the management
lessons in Federalist #10.
Madison did not sit down one day in the heat of political battle over the
ratification of the U.S. Constitution, and whip off Federalist #10. To the contrary, this seminal work was the culmination of years of study of and
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experience in government. Madison was born the eldest son of a wealthy
Virginia tobacco plantation owner in 1751. Yet Virginia at the time was not
far removed from the frontier, and many students will relate to his experience
as the first in his family to attend college. Madison attended the College of
New Jersey, now Princeton University, rather than the local College of
William and Mary in the then-swamps of Virginia, because the Northern climate was better for his fragile health. Madison’s poor health led him to a life
of politics rather than on the plantation (Wood, 2006).
In college, Madison was strongly influenced by the Enlightenment efforts
to apply scientific reason to the study of human interactions. He read the
works of several Scottish Enlightenment philosophers, including Adam
Smith and David Hume. Adam Smith is likely known to business students for
his conception of the “invisible hand” in economics; however, business students are probably less familiar with Hume who also focused on social coordination. After college, Madison was further exposed to ideas about social
coordination by his friend and fellow Virginian Thomas Jefferson, then ambassador to France, who brought back to Madison work by French theorist Marquis
de Condorcet. Condorcet’s so-called “jury theorem” suggests that majorities
are more likely to make “correct” decisions than individuals. Condorcet’s work
is formulated in a mathematical language that is consistent with much modern
economics, and even the title, “Essays on the Application of Analysis to the
Probability of Majority Decisions,” evokes a desire to reduce human relations
to scientific theorems. This secular, scientific perspective will be reflected in
Madison’s later work (Adair, 1974; McLean, 2003; Wood, 2006). In particular, this coordination of decision making will be reflected in Federalist #10.
An emphasis on coordination is important for managers because it implies
that human relations are an ongoing effort that is subject to analysis. This
perspective contrasts with a one-time, preordained or predetermined “social
contract” view of human relations that students may recall from another key
philosopher of the time, John Locke.
Some, including Richard Matthews (1996) in If Men Were Angels: James
Madison and the Heartless Empire of Reason, have criticized Madison’s
rationalist instrumental approach to analyzing human interactions. However,
Wood (2006) argues that “despite the often curious and probing quality of his
mind, he was at heart very idealistic, if not a utopian” (Wood, 2006, p. 165).
Wood suggests that Madison was influenced by Jefferson who had a greater
faith in, and less fear of, people than Madison.3 Dougherty (2003) suggests
that Madison’s college teacher, John Witherspoon, who was a preacher as
well as president of the College, took the harsher rationalist edge off of Smith
and Hume by balancing discussions of self-interest with sincere talk
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of virtue, good faith, and noble character. Madison’s pragmatic balance of
realism and idealism is in itself an inspiring role model for managers, and this
balance will be important to understanding Madison’s faith in organizational
design.
Madison’s thought combined thorough study of political theory with
extensive political practice. Prior to writing Federalist #10, Madison was
almost continuously engaged in politics, starting in the Virginia State
Legislature in 1776, becoming the youngest member of the Continental
Congress in 1780, returning to the Virginia State Legislature in 1784 (because
of the term limits in the Articles of Confederation), and returning again to
Philadelphia for the Constitutional Convention in 1787.4 Madison spoke
from experience when he talked about “the instability, injustice, and confusion introduced into the public councils . . .” (p. 53). When Madison arrived
in Philadelphia in 1780, the national government was a mess. Not only was
the government unable to pay the Revolutionary War debts, or continue to
supply the tattered army, but on many days they could not even get a quorum
to make any decisions at all. Madison witnessed the States’ shirking of their
responsibilities to fund the national debts and the self-interest of States as
they jockeyed over claims to Western lands. Wilson (2003) argues that
Madison’s experiences at the Constitutional Congress “shaped the way he
viewed institutional design” (Wilson, 2003, p. 251). Just as there was a tension in Madison’s thought between the realist and the idealist, there was tension between his wanting a stronger central government to get the States to
pay their debts and his fear of a central power that can be coopted by factions
to oppress minorities.
Madison found just such a faction when he returned to the Virginia statehouse in the spring of 1784. Patrick Henry had proposed a tax on all
Virginians to support teachers of the Christian religion. In this incident,
Madison proved himself both a theorist and practitioner of managing factions. Madison was a strong advocate for religious freedom, perhaps reflecting his secular philosophical roots. Madison “. . . rallied Methodist, Baptist,
and Presbyterian leaders who had chaffed under years of Virginia’s tax subsidy for the Episcopal Church and were understandably wary of any new
proposals that would reintroduce state subsidies of religion” (Kernell, 2003,
p. 105). Madison wrote to Jefferson in Paris: “The mutual hatred of these
sects has been much inflamed . . . I am far from being sorry for it, as a coalition between them could alone endanger our religious rights” (quoted from
“The Papers of James Madison,” p. 345 in Kernell, 2003 p. 105). This background stands behind Madison’s discussion of “passions” and factional
competition in Federalist #10.
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After the fight over religious freedom in Virginia, Madison entered another
scholarly interlude (1784 to 1987) to study ancient and modern confederacies.
Kauffman (1997) refers to Madison’s work in the summer of 1786 as “the
greatest one-man ‘skull session’ in history.” Kauffman continues,
. . . there are bookworms and then there are bookworms, and it isn’t
every student who can plow through the strengths and weaknesses of
the Amphyctionic Confederacy of early 16th century Greece, the
Helvitic Confederacy of 14th century Switzerland or the Belgic and
Germanic confederacies of the mid-1600s. (http://www.earlyamerica.
com/review/summer97/madison.html)
The result of this herculean effort was the Notes on Ancient and Modern
Confederacies finished in the Spring of 1787. Madison concludes that states
must grant national governments a certain amount of power to govern. In
addition to comments on government structure, Madison also noted weaknesses in people across time and space that reflected what he had witnessed
in Philadelphia and Virginia. Madison recorded these observations in “Vices
of the Political System of the United States,” from which passages in
Federalist #10 are lifted practically verbatim.
“Vices” is on some points clearer than Federalist #10.5 Specifically,
“Vices” notes that there are two sources of the instability: free-riding
and self-dealing. Madison had both read about these in his studies and
observed them firsthand in Philadelphia and Virginia. The two are “in the
Representative bodies” and “in the people themselves” (Madison, 1787b,
p. 332).6 According to Madison, representatives are motivated by “1.
Ambition 2. Personal interest. 3. Public good” (p. 332), and that “Unhappily
the two first are proved by experience to be most prevalent . . . But how
easily are base and selfish measures masked by pretexts of public good and
apparent expediency” (pp. 332-333). Then, foreshadowing Federalist #10,
Madison writes,
A still more fatal if not more frequent cause lies among the people
themselves. All civilized societies are divided into different interests
and factions, as they happen to be creditors or debtors Rich or poor—
husbandmen, merchants or manufacturers, members of different religious sects—followers of different political leaders—inhabitants of
different districts—owners of different kinds of property . . . what is to
restrain them from unjust violations of the rights and interests of the
minority or of individuals? Three motives only 1. A prudent regard to
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their own good . . . 2dly. Respect for character . . . 3dly. Will Religion
the only remaining motive be a sufficient restraint? (p. 333)
Madison then reasons from both his experience and a game-theoretic logic
that none of these is sufficient to protect the interests of a minority against an
aggressive faction. Rather, his remedy is in “enlarging the sphere” because “a
common interest or passion is less apt to be felt and the requisite combinations less easy to be formed by a great than by a small number” (p. 334). This
is identical to the conclusion Madison reaches in Federalist #10: “Extend the
sphere, and you take in a greater variety of parties and interests; you make it
less probable that a majority of the whole will have a common motive to
invade the rights of other citizens . . .” (p. 61).
There has been a relatively recent controversy as to whether or not
Madison’s prescription for extending the sphere in Federalist #10 and his
enumeration of checks and balances in Federalist #51 are inconsistent.7 The
former relies on a representative scheme while the latter uses the less representative Senate, Executive, and Judiciary to constrain popularly elected representatives.8 However, Wood (2006) argues that there is no “Madison
problem.” He reconciles Madison’s fear and embrace of authority by revealing
Madison’s ultimate optimism, perhaps idealism, that envisioned the central
government as “a disinterested judge, a dispassionate umpire adjudicating
among the various interests in the society” (Wood, 2006, p. 163). This raises
interesting parallels with the role of managers as neutral arbiters in some
stakeholder theory (Freeman, 1984; Laplume, Sonpar & Litz, 2008, and references therein). The key difference, in my opinion, is that Madison envisions
representatives in the government as a whole being able to act dispassionately.
He does not envision individual legislators, akin to individual managers, at
any specific time and place being able to act as “neutral” participants in decision making. Moreover, the representatives’ ability to serve the public good is
not a function of their individual desire to do the right thing, but of strong
incentives built intentionally to channel their baser motives of ambition and
self-interest to serve the greater good.
Madison on Management
The purpose of this section is to summarize Madison’s lessons for managers.
While Madison was focused on the workings of government, the problems he
analyzed are pervasive in the workings of businesses. Both governments and
businesses require collective action, loosely defined as individuals working
together for a common objective. Chester Barnard, one of the first management theorists, offered a definition of collective action in his seminal work,
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The Functions of the Executive (1938): “[A]n essential element of organizations is the willingness of persons to contribute their individual efforts to the
cooperative system” (p. 139). As Madison was frustrated with the State’s
unwillingness to contribute to the national debts, many a manager has been
frustrated with employees’ unwillingness to contribute their best efforts to
their organizations.
Madison’s first lesson for managers is that they must clearly identify their
organizational objective. Students cannot use Madison’s definition of faction
unless they first identify the interest to which the faction is adverse. Identifying
organizational objectives is neither easy nor obvious in either the big picture
or the day-to-day tasks. Collis and Rukstad (2008) note that few executives
can concisely state their organizational objective, and even fewer line employees have a clear enough understanding to be able to align their daily activities
with the organization’s interest, even if they were so inclined. The key point is
that different objectives define different sets of factions. For example, when
Boeing changed its organizational objective from market share to profit margin, staff with formerly congruent interests in producing planes at any cost
became adverse factions torn between production and costs. Boeing experienced substantial labor strife as they shifted from a focus on maintaining
costly 6 months of manufacturing capacity to a more lean operation willing
to give up sales to preserve profit margins. If management did not also change
incentives for the sales staff (e.g., if they were still rewarded on the number
of planes sold no matter the discount), then the sales staff may also have
become adverse to the new organizational objective. Identifying objectives is
also important in everyday activities that implement the larger organizational
goals. In my own management experience, I have failed to recognize that my
interest in creating cross-functional teams was adverse to some of my staff’s
interest in preserving their monopoly on a particular function. Similarly,
although a manager may have a specific goal for a meeting, such as finalizing
a marketing strategy, the primary objective for some staff in the meeting may
be simply to get home in time for a child’s soccer game. The message here is
that factions are fluid, changing with organizational and individual interests.
Recognizing factions in both the big and the small can help managers to identify and to understand the sometimes obstructive behavior of the humans they
work with.
An important distinction between Madison’s theory of factions and stakeholder theory is that Madison is agnostic as to how the organizational objective
is defined. By contrast, Donaldson and Preston (1995) suggest that the instrumental value of stakeholder theory rests on a normative base that “requires
simultaneous attention to the legitimate interests of all appropriate
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stakeholders” (p. 67).9 Yet such “simultaneous attention” does not itself define
an organization’s objective any more than Madison identifies the “permanent
and aggregate interests of the community.” However, Madison’s harsh realism suggests to managers that even if they consider all stakeholders, some
will still be left adverse to the organization’s interests. By focusing on adversity, Madison helps managers to answer the normative question raised by
stakeholder theory: “Which stakeholders should managers then pay attention
to?” (Laplume et al., 2008, p. 1161). While all stakeholder theorists may not
agree with his answer, Madison would certainly say those stakeholders with
adverse interests should receive substantial management attention.
Madison’s next lesson for managers is that “the causes of faction cannot
be removed, and that relief is only to be sought in the means of controlling its
effects” (p. 57). This follows from the prior point that no process of consulting stakeholders will prevent factions. Rather, managers need to get comfortable with adversity because realistically they cannot please everyone all the
time. Managers have not always heeded this lesson. There are many examples
of corporations that try to reduce the diversity and liberty that Madison persuasively argues are the root causes of factions. Students may be familiar with
images of homogeneous post–World War II corporate life from the HBO
series Mad Men, or the more classic Man in the Grey Flannel Suit, where
white men dress the same, act the same, and keep any sense of individuality
tightly under wraps. More recently, Foxconn’s stifling the freedom of its
employees even to talk with each other has been implicated in a rash of suicides that occurred among their employees in 2009. Consistent with Madison’s
prescription, much has been written about the value of diversity to corporate
culture and performance. For example, Slater, Weigand, and Zwirlein (2008)
found that diverse firms have an economically meaningful 1% to 4% higher
net profit margin, and 2.5% to 6.0% higher return on equity, than comparable
(matched on SIC code) less diverse firms. They suggest that diversity improves
performance by improving decision quality, innovation, and customer outreach. However, they note that diversity also entails costs associated with
communication, conflict, employee turnover, and reduced incentives for
cooperation. All these costs can be linked to the corrosive effects of factions
as noted by Madison. Thus, Madison’s lesson is that managers should focus
on their organizational design to benefit from diversity while minimizing
unavoidable transactions costs.
Madison’s third lesson to managers is that they are not immune to becoming factions themselves. Recall that Madison emphasized in “Vices” that both
the people and their representatives are motivated by self-interest and that
representatives have the additional potentially corrosive motive of ambition.
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Federalist #10 could not be clearer on this point: “It is in vain to say that
enlightened statesmen will be able to adjust these clashing interests, and render them all subservient to the public good. Enlightened statesmen will not
always be at the helm” (p. 57).
That we cannot count on having enlightened leaders does not mean that
Madison is pessimistic about the potential for leadership. Despite Madison’s
frank discussions on the corrosive effects of passions on collective action,
Madison is ultimately optimistic about the potential for well-designed institutions to bring out the best in otherwise selfishly motivated individuals. In
“Vices,” Madison still lists “public good” as a motive for representatives,
though a weak third relative to ambition and self-interest. Madison’s core contribution is to argue that while we cannot count on people behaving consistent
with the public good, we can set up incentives and controls so that positive
collective action is more likely than corrosive self-dealing. Madison writes,
. . . by passing (public views) through the medium of a chosen body of
citizens, whose wisdom may best discern the true interest of their
country and whose patriotism and love of justice will be least likely to
sacrifice it to temporary or partial considerations. Under such regulation it may well happen that the public voice pronounced by the representatives of the people will be more consonant to the public good than
if pronounced by the people themselves . . . (p. 59).
As noted previously, Madison is more optimistic than Hume, perhaps
reflecting the optimism of his teacher Witherspoon. Moreover, he is more
secular and process oriented than Locke, believing that man’s reason can win
out over his passions not by the hand of God, but by the design of men setting
up the right rules of the game (Strahan, 2003).
Thus, Madison’s key message to managers is that organizational design
matters. However, managers cannot simply copy Madison’s design for a
large republic. First, a few multinational corporations aside, most enterprises
are not that large. More important, Madison’s government structure is intended
to make any action difficult. He states, “. . . the majority, having such coexistent
passion or interest must be rendered, by their number and location, unable to
concert and carry into effect schemes of oppression” (p. 58). In other words,
according to Madison, lack of collective action, or government gridlock, is
preferable to a majority being able to impose destructive policies. However,
at the end of the day, managers must act. Gridlock is not a viable option for
businesses, especially in today’s fast-paced economy.
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So what lessons about organizational design should managers take from
Madison? While they cannot literally reproduce a large republic, they can adopt
the mindset that bigger is better for mitigating narrow self-interest. Specifically,
managers should talk to a lot of people and consult a lot of different opinions.
Having a large network for consultation can both check managers’ own tendencies toward self-interest and filter the self-interests of different factions
affecting their business. Again, Madison would not rely merely on managerial
prerogative. Rather, he would advise managers to set up more formal structures
by which they would be exposed to others and be forced to consult with them
by being held accountable to specific incentives that channel their self-interest.
For example, I believe that Madison would endorse a managerial practice of
regular “town-hall meetings” in large organizations, consistent with his representative scheme of governance. On a smaller scale, 360-degree reviews and
management by walking around can expose managers to influence of those
around them. Of course, these tactics have costs and downsides. For example,
360-degree reviews are likely to be tainted by the self-interests of the different
factions of reviewers; however, this would be no surprise to Madison and
should be expected by managers. By contrast, Madison would not condone
management that relies on force of personality. I suspect that Madison would
frown upon a manager sitting alone in an office, issuing orders that rely on her
sole authority, rather than out building support, if not consensus.
Teaching Madison to Managers
I have argued that a benefit of teaching Madison’s Federalist #10 to business students is that it is difficult: the mental weight lifting will strengthen
their analytic skills and allow them to reach for new sources of inspiration.
However, acknowledging that reading Madison will be challenging puts an
additional burden on professors to design activities to support student
learning, lest students give up before they reap these benefits. In the following section, I draw from my experiences in the classroom teaching
Federalist #10 to undergraduate junior and senior Business Studies majors
in a class on management. I have used Federalist #10 as a transitional
piece, which moves the class from a brief introduction to strategy to a focus
on organizational architecture. In this context, I have emphasized Madison’s
lessons about human nature and the role of managers in designing organizations to achieve a predetermined strategic objective. That said, Federalist
#10 could also add value to other parts of a business curriculum. As noted,
there are interesting comparisons and contrasts between factions and
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stakeholders that would make Federalist #10 a provocative addition to
classes on business strategy development, business ethics, or organizational behavior. There are also clear connections between Madison’s
political philosophy and Bolman and Deal’s “political frame” that make
Federalist #10 a useful addition to classes that use this text. In particular,
Bolman and Deal warn that “. . . it is foolhardy to plunge into a minefield
without knowing where explosives are buried, yet managers unwittingly do
it all the time” (Bolman & Deal, 2008, p. 216). Madison can help managers
to identify the factions that are most likely to bury the explosives, and to
design formal and informal mechanisms to diffuse them.
In what follows, I offer a step-by-step guide to introducing Madison and supporting students’ application of Madison’s lessons for management. While these
steps follow a logical progression, I do not intend to imply a rigid order: Some
steps will be more relevant to certain class applications than others. I conclude
with strategies for assessment and assessment results from my own classes.
Step #1: Set the Stage
Teaching Madison to business students provides an opportunity to review
basic American history that informs the political environment where most of
our students will work and live. Such opportunities to teach history are rare
in most business curricula that tend to focus on the here and now. I suggest
starting class by painting a picture of life in the colonies in the mid-1780s
after the Revolution. There are numerous visual aids from classic paintings,
to poems, to short and fun School House Rock videos that can help students
brush up on the basics and put Madison’s messages in context.10 The key
image for students is that Madison was writing in and for a country in chaos.
Step #2: Link to the Present
For better or worse, the daily newspaper often offers similar scenes of chaos
and conflict. Recently, I have used images from Occupy Wall Street, Tea
Party rallies, and rallies for and against health care reform to illustrate current political conflicts. These current events also highlight Madison’s timeless observation that “the most common and durable source of factions has
been the various and unequal distribution of property” (p. 56). Discussing
current events in light of Madison’s political philosophy can be core activity
for classes that are focused on the relationship between business and government and the larger society.
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Step #3: Link to Internal Business Management
Classes that are focused more on internal management than on external business relationships need to explicitly draw the comparison between societal
conflict and conflict within organizations. These conflicts are not hard to find.
I have used the “think-pair-square-share” technique to brainstorm examples
of internal organizational conflict. Students have found many examples in
their clubs, sports teams, and families, as well as in their work experiences.
Some common examples are conflicts on sports teams among players who
want playing time, or among club members who want to spend resources on
different activities, or those who fight over leadership roles. Discussions of
these examples frequently foreshadow Madison’s discussions of passion, selfinterest, and ambition. As an added bonus, these examples of internal strife
are often accompanied by examples of managerial blunders that further
inform class discussions of optimal organizational design.
Step #4: Define Factions
With both external and internal examples in hand, it is time to formally
define factions. Madison’s definition is clear, but not easy to apply. Students
easily identify groups with common interests, but they have a harder time
isolating those with interests adverse to the interests of the organization. This
highlights a key management skill: clearly identifying the organizational
objective. As noted, neither Madison nor stakeholder theorists provide much
guidance as to how to specifically define the “aggregate interest of the community.” For strategy classes, Madison’s definition of faction can be a powerful prompt to get students to wrestle with defining a strategy that is specific
enough so that they can then identify those groups with adverse interests.
Bolman and Deal (2008) offer a poignant example of the Challenger disaster,
which highlights the hazard of papering over factions by making the objective
overly broad. Specifically, defining the aggregate interest as the “success of
the space shuttle program,” to which few could object, glossed over the critical conflicts between those who felt success required an on-time launch and
the engineers who defined success according to the performance of the equipment. The narrow shareholder perspective, that the objective of the firm is to
maximize shareholder value, is also not specific enough to identify factions.
There are many paths to value maximization. For example, those whose
interest is in minimizing manufacturing expenses may be adverse to an organization focused on product customization and innovation.
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Step #5: Human Nature
Madison’s Federalist #10 offers a substantive opportunity to confront students
on their own views about human nature. The crux of Madison’s argument is that
“the latent causes of faction are thus sown in the nature of man . . . [and therefore] . . . that the causes of faction cannot be removed and that relief is only
to be sought in the means of controlling its effects” (pp. 55-57). I emphasize
to my students that, while Madison was an intense scholar, much of his writing about human nature draws from his own experience. I urge my students
similarly to draw on their own experiences and to challenge both overly optimistic and pessimistic descriptions with specific examples to the contrary. In
my class, this discussion of human nature is recurrent. It begins with a review
of neoclassic economic assumptions of rationality and continues after
Federalist #10 with readings from Nobel laureates Oliver Williamson (2010)
and Elanor Ostrom (2010). Williamson and Ostrom illustrate an evolving
view of people that incorporates an ability to negotiate, to learn, and to create
new understanding in the process of collective action. The ultimate lesson of
this discussion of human nature reflects my own experience as a manager:
you can’t pull off what you don’t believe. Given this message, I urge students
to find organizations and management strategies, both in class and in their
career pursuits, that are consistent with their own views of human nature.
Step #6: Lessons in Organizational Design
Finally, we put the rubber to the road to apply Madison’s lessons to identifying and solving real business problems. Practically any day’s newspaper can
offer a “ripped from the headlines” example of factions at work. In addition,
I have used two Harvard case studies: “Pandora: Royalties Kill the Web
Radio Star?” (# 310026 by Pozen & Rosenfeld) and “Medysis Corp.: The
IntensCare Product Development Team” (# 4059 by Donnellon & Margolis).
I have found both of these cases accessible to an undergraduate audience.
The Pandora case more closely corresponds to Madison’s political setting,
exploring government decision making and factions external to the firm that
directly affect internal management decisions. By contrast, the Medysis case
focuses on internal team dynamics, vividly depicting the corrosive effect of
factions defined along traditional functional lines of marketing, R&D, compliance, and production. Sample questions and grading rubrics for these
cases appear online at http://jme.sagepub.com/supplemental.
Students apply many of Madison’s lessons in these cases. First, they use
Madison’s definition to identify factions. This first requires them to state the
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organizational objective to which the faction is adverse. Then using their analysis of factions, they determine a strategy to move forward. Strategies span
both new organizational designs (e.g., new teams, new incentives, policies
etc.) as well as specific management tactics (holding group vs. one-on-one
meetings, promoting or firing specific individuals). In this context, Madison’s
focus on interests rather than job titles or established positions leads to useful
lessons on negotiation, which follow the precepts of the classic text Getting
to Yes (Fisher et al., 1981). Finally, in applying Madison’s lessons to both big
and small decisions, students see that interests and thereby factions are fluid,
requiring managers to continuously reassess.
Step #7: Assessment
I assess mastery of Madison’s lessons along several dimensions of Bloom’s
(1956) taxonomy. First, I assess basic knowledge and reading comprehension
with a simple online multiple choice quiz that students take after the class
discussion.11 This quick quiz serves two purposes: first it provides an incentive to focus on a difficult reading, and second it reinforces the key points on
the definition, causes, and effects of factions. Without this basic vocabulary,
students would find it difficult to apply Madison’s lessons to case studies and
their semester projects. Over the past four semesters, with between 12 and 19
students per semester, the average score on this assessment has been consistently between 4 and 4.5 out of 5. This high score demonstrates the students’
ability to master knowledge of Madison’s basic concepts.
Beyond mere knowledge of vocabulary, the most tangible lesson to assess
is whether or not students can apply Madison’s definition of faction to identify important players both internal and external to a business. This is consistent with the steps enumerated by Bolman and Deal (2008): “1. Identify
relevant relationships; and 2. Assess who might resist, why and how strongly”
(p. 219, and references therein). On this point, my assessment has been
mixed. In case studies, current events discussions, and final projects, I have
found that students easily identify groups with common interests. However,
students consistently have a harder time identifying groups with interests that
are adverse to the business. The primary challenge is for students to identify
the interest of the business to which the group is adverse.
Finally, I assess whether students evaluate their organizational designs
with respect to how the design addresses the threats from factions and is consistent with their vision of human nature. As Bolman and Deal (2008) colloquially note, consistent with Madison, “People rarely give their best efforts and
fuller cooperation simply because they have been ordered to do so” (p. 219). I
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have found that students are more likely to have an authoritarian view of
management before reading Federalist #10 and engaging in the learning
activities. I ask students about their view of management on the first day of
class. A common response is that management is “telling people what to do,”
and students’ initial response to poor performance tends to be to fire people.
However, by the end of the semester, their management strategies are much
more nuanced. Reflecting Madison’s lessons, many students incorporate
ambition as an incentive by outlining specific incentives for career advancement. For example, one student project last semester was to build a chain of
sports bars, and a core part of the motivation strategy was to promote from
within when opening new locations. Another indicator of Madison’s impact
on my students has been more specific discussions of team composition and
meeting structure. Students acknowledge the value of cross-functional teams
to constrain the narrow interests of each function. They also note the potential
of teams to create new ideas and improve outcomes. However, reflecting
Madison’s realism, they critically assess the challenges and costs of getting
different factions to work together. Their organizational designs explicitly
evaluate these costs and benefits to get self-interested individuals to work
together for a common organizational objective.
Since Federalist #10 is just one of several readings that students use to
develop their analysis, it is not possible to link all these outcomes directly to
this assignment. However, I did ask my most recent class for qualitative feedback on how Federalist #10 affected their thinking. Several students said that
they used Madison’s definition of faction to help “figure out the players in my
business.” Others noted that Federalist #10 helped them to focus on the overall objective of their business. One student wrote, “factions will always arise
as humans will always look out for their own needs. This needs to be monitored in a firm or it will get out of hand.” I take this as suggestive evidence
that Madison’s lessons have gotten through in a meaningful and useful way.
Finally, my colleagues have responded very positively to my use of
Federalist #10 in management. I presented this work at the first Business
Professors Teaching Summit hosted by Temple University in 2011. Participants
in this session commented that using Federalist #10 was “innovative” and
“made me think about new sources of management education.” In a written
peer review after a classroom observation my colleague wrote,
. . . [incorporating] James Madison’s Federalist #10 . . . [encourages]
students to consider what those who seek to design and operate business organizations might learn from an understanding of the role of
factions in politics and from a consideration of different notions of
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liberty. A better example of the value of a liberal arts education in dealing with “the real world” I’d be hard pressed to find.
Conclusion
This article provides a rationale and a road map for including Federalist #10
in the business management curriculum. As the seminal work on factions,
Federalist #10 gets at the essential underlying the challenge of management:
How do we work together to get things done without killing each other? This
challenge plays out on the small stages of daily business interactions just as
poignantly as in the grander national and international arenas.
James Madison has been called a “scholarly politician—a politician who
thought carefully about institutions in the context of action” (Kernell, 2003,
cover). As such, Madison is an apt role model for our students. We should
aspire for them to become scholarly managers who do not merely follow the
latest 10-step management scheme but think carefully about the first principles associated with human nature and organizational design. Madison offers
a clear and useful definition of faction to help managers to identify the players,
both inside and outside of their organization, with specific reference to their
organizational objective. In addition, Madison argues that the design of organizations matters because leaders are also subject to self-interested motives.
However, Madison tempers his hard-nosed realism, born of both theory and
practice, with an unyielding optimism in the capacity of men to create institutions that will support collective action and the common good. A careful reading of Madison that puts his harsh observations in context of his times, and
recognizes the lasting impact of his prescriptions, foreshadows a more optimistic Elanor Ostrom (2010) more than two centuries later: “. . . a core goal
of public policy should be to facilitate the development of institutions that
bring out the best in humans” (p. 665). While Madison was focused on government institutions, Ostrom and other contemporary theorists recognize the
substantial opportunities for businesses and other nongovernment institutions
to influence our society. There are many businesses that have enjoyed varying
degrees of success by several measures, but none provide the “city upon a hill”
example of an enduring organizational architecture that effectively manages
factions. By exposing business students to Federalist #10, perhaps we increase
the odds that one of them may lead such an organization in the future.
Acknowledgments
I would like to thank the JME Editor, Gordon Meyer, and two anonymous reviewers,
participants at the 1st Business Professor Teacher’s Summit, my colleagues Fred
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Curtis and Bernard Smith and my Management students at Drew University for
engaging in very helpful dialogues about teaching and learning. All errors in this
article are my own.
Declaration of Conflicting Interests
The author(s) declared no potential conflicts of interest with respect to the research,
authorship, and/or publication of this article.
Funding
The author(s) received no financial support for the research, authorship, and/or publication of this article.
Notes
1. All page numbers for Federalist #10 are from the 1937 Random House edition
of The Federalist Papers.
2. There are several recent examples, including the U.S. Navy rescue of the captain
of the U.S. cargo vessel Maersk Alabama as well as the rescue of Iranian fishermen. See Boot (2009) for a historical analysis.
3. Wood (2006) notes that
When Madison was wringing his hands in the late 1780s over the turbulence
of Shay’s Rebellion, Jefferson was writing blithely from France about the
value of the spirit of popular resistance to government . . . I like a little rebellion now and then. (2006, p. 145)
4. After the ratification of the U. S. Constitution, Madison represented Virginia in
the U. S. House of Representatives, represented the U. S. as Secretary of State,
and ultimately as the fourth President of the United States from 1809-1817.
5. If time permits students may benefit from reading “Vices” because some passages offer more specific examples of the theoretical points in Federalist #10.
6. Page numbers for “Vices of the Political System of the United States” are from
the reprint in Kernell (2003).
7. Madison’s checks and balances have some interesting applications to corporate
governance, particularly the separation of management and control, analysis of
conflicts of interest and fiduciary responsibilities in light of the Sarbanes Oxley
Act of 2002. This application of Federalist #10 is beyond the scope of the current
article that focuses on ground-level management.
8. During the Constitutional Convention, Madison advocated an even more
authoritarian power for the central government to veto state laws. This proposal
was defeated.
9. Freeman (1984), arguably the originator of stakeholder theory, did not claim
a normative basis: “the stakeholder approach offers no concrete, unarguable
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prescriptions for what a corporation should stand for . . . it is not normative in
the sense that it prescribes particular positions of moral worth to the actions of
managers” (1984, p. 210 as quoted in Laplume et al., 2008, p. 1169).
10. A classic painting that is evocative of the “factions” at the founding is “Scene at
the Signing of the Constitution of the United Sates” by artist Howard Chandler
Christy. In this painting, students can see the passion and different groups of legislators even after they had reached agreement. You Tube has short yet dramatic
clips on Shays Rebellion and the Constitutional Convention as well as School
House Rock episodes, in particular: “The Preamble”; “No More Kings”; “I’m
Just A Bill”;“Three Ring Government”; “Presidential Minute”; and “I’m Gonna
Send Your Vote To College” are all on point and run under 6 minutes. All of these
materials are easily found using Google.
11. Specific multiple choice questions are available from the author on request.
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