This post is the second half of a two-part series. To view the first post, click here.
In any given market system, elements of both small-group and large-group dynamics co-exist. What matters most, however, is which dynamic is dominant. As a result, when analyzing a market system to understand the prevalence of small group and large group institutions, it is useful to tease apart the regulative, normative and cultural-cognitive elements. Showing the ways in which large and small group thinking might co-exist at different institutional levels provides a sense of direction to programs looking to influence change towards a large group orientation.
Assessing how predominant or influential small group institutions manifest in market system behavior is critical. In addition, while regulative variables are considered “faster” (i.e., easier to change), interventions based on “slower” normative or cultural-cognitive variables will be more likely to yield sustainable, self-enforcing changes within the market system. For example, a common situation occurs when the regulative institutions have been reformed to align with large-group principles (e.g. employment equity laws and regulations), yet the normative and cultural-cognitive institutions continue to reflect small-group norms (e.g. discriminatory hiring based on kinship/family ties). In these cases, the informal institutions typically control behavior, leading to a disconnect between law and practice. For example, a Kenyan project used an earlier version of this framework to gain insights into cases where there was a high a prevalence of corruption/elite capture, which is a common manifestation of small group dynamics as normative/cultural-cognitive institutions around communal loyalty often create a ‘greater good’ perception that reinforces such behaviors.
The table below gives high-level insight on the kind of ‘map’ that could be produced for any given market system:
With a greater understanding based on a more nuanced and contextual perspective of local behavioral patterns, practitioners can design program strategies and intervention tactics that are more effective at catalyzing durable change.
As a default, most projects start with a set of assumptions that a society should be moving toward large group dynamics. While there is increasing evidence that such institutional change does result in higher life expectancy, better health and educational outcomes, etc. (i.e., key development objectives), the process of change will be messy, with winners and losers and shifting responsibilities for who manages the downside risk from change. As a recent book on the spectacular development in China lays out, (Ang, Yuen Yuen, How China Escaped the Poverty Trap, September 2016) institutional or systemic change involves co-evolution of institutions and market behaviors. The historical review of 40 years of China’s development reveals a process of smaller emergent ‘viable fit’ changes that catalyze additional nuanced changes that also fit the context. Each smaller change has to deal with systemic pushback as a result of eventual clashes with accepted institutions. Many small changes are reversed or blocked, while others take hold. Over time, this process can result in substantial change, as in China, but it is more meandering. The viability of any particular change is often uncertain at a given point and time.
For systems thinking practitioners, adaptive management has been normalized in the process of probe, sense, and respond. For this process to be effective, it requires some way to parse observable patterns to know where or how to probe, make sense of changing patterns, and respond tactically (including re-allocating resources). Typically, practitioners rely on observable manifestations of regulative, normative, and cultural-cognitive institutions drawn from countries defined as ‘developed’. These manifestations are often framed as best practices or the right way of doing something, but often do not fit ‘developing’ country contexts. Drawing again from the Kenyan case, donor programs have for years predefined that a cooperative organizational structure was the right way to improve cooperation within the dairy market system. When applying this framework, donors should have recognized that small group dynamics were at play. Instead, sustained focus on an organizational structure that reinforces group loyalty at times amplified adversarial relational contexts between farmers and processors as the answer. When an earlier version of the framework was applied, the project shifted away from pushing any specific organizational structure and focused more on amplifying specific behaviors that align with large group dynamics, such as clear performance-based supply chain management tactics that can form the foundation of building a trusted commercial relationship between farmers and processors.
The underlying management philosophy we propose is self-selection, which involves uncovering and directing attention and resources towards attractors. These examples of behavior attract attention and help move other system actors towards what’s new because of interesting and desirable features of the new behavior. This is not about an old, stable company making a dramatic change. Instead, programs should be looking for outliers - an actor or person keen to change (i.e., not vested in the current dynamic).
The idea of an attractor or outlier is that over time, the behavior can become normalized – reinforced by emerging normative institutions. Thus, change is driven by an internal process based on benefits – including social benefits. From this point of view, we understand leverage relative to the potential amplification of the attractiveness of the behavior. This way of thinking can have a substantial effect on tactics, as the idea of locating ‘problems’ and fixing them via training or other direct interventions ceases to make sense. Firms have more leverage than farmers, but the firm itself is not the point – it’s a signaling tool for propagating new norms. The firm’s behaviors signal back into the system that the behaviors are attractive and the source of new normative institutions. Over time, as those norms become more dominant, they may also replace assumptions of ‘how things work’, and become embedded as cultural-cognitive institutions.
Conclusion: Pragmatic questions for testing & call for partnerships
This way of thinking links important strands of systems thinking in development that need further exploration. Important next steps include building out practice guidance to help practitioners understand these strategies and tactical decisions (what to do and why), to move beyond the overly simplistic and inaccurate “direct” versus “indirect” understanding of facilitation. Here are some important questions that merit deeper investigation:
Written by Mike Klassen and Mike Field
The MSDHub Blog Series is authored by respected implementers and donors of market systems projects globally.