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With Katja Rost, Emil Inauen, Fabian Homberg and Margit Osterloh.

Two following and related articles published in American Review of Public Administration (2010) and Management Revue (2010) point to the original work published in Journal of Management History and cite the original work.


Abstract of the paper in Journal of Management History 2010:

"The monasteries that are examined show an average lifetime of almost 500 years and only a quarter of them dissolved as a result of agency problems. This paper argues that this success is due to an appropriate governance structure that relies strongly on internal control mechanisms." cites a German working paper of 2008 just by Inauen and Frey, see below.

parts largely identical to below article in American Review of Public Administration:

1) "In this paper, we will discuss the efficiency of internal control mechanisms by empirically analyzing how Benedictine monasteries have historically approached their specific governance problems." 2) "In a seminal paper, Kieser analyzes Benedictine monasteries and describes them as the “first deliberately designed organization in the Occident.” The great economic success of numerous monasteries in medieval times serves as an example of an efficient organization. However, the creation of wealth led to the temptation of misuse. For example, some abbots and monks lined their own pockets, and certain monasteries were undisciplined. Some monasteries became very rich through their rational labor organization (e.g., the division of labor) and their work morale. The resulting wealth was a significant reason why governance became important."

2) "External governance mechanisms

The interplay between internal and external control mechanisms in Benedictine monasteries is of particular interest for stock companies. History shows that the internal control mechanisms of monasteries sometimes fail. For example, in situations where the abbot and the Convent join in enriching themselves, or simply do not care about the economic situation, external control is important. The external control is hierarchically organized and consists of jurisdiction and periodical monitoring. Each monastery is embedded in a hierarchical structure of Congregations, the Benedictine Confederation and the Holy See. The Congregation is the umbrella organization of the monasteries, in most cases within a geographical region. It is responsible for the monitoring of a monastery in its area of accountability. Abbots and some delegates of the respective houses represent each Congregation. These representatives form the Congregational chapter and elect the archabbot as president. The archabbot is recruited from an associated monastery to guarantee internal know-how. Each Congregation is a part of the Benedictine Confederation. The Confederation is an independent institution and facilitates the exchange of experiences between Congregations and the Holy See, but has no direct influence on the decision process.Jurisdiction. Benedictine monasteries belong to the Catholic Church and its law, and depend on the Holy See. Besides, church and constitutional law, the legal norms of the Congregation are binding for a particular monastery. The jurisdiction of the Congregation is the first instance outside the monastery where disputes are settled. The Congregation supervises the election of abbots and organizes the “visitations” of monasteries. They complement this law with their own statutes, the so-called Consuetudines Periodical monitoring. As the legal rules are very general with respect to economic issues, the so-called “visitation” is the most important tool for disciplining the Convents. Every four to five years, delegates of the Congregation visit a community to evaluate the condition of the monastery. The visitation considers not only the economic situation of a monastery and its fields of activity, but also the spirit and the discipline of the community and their members, the personal relationships between monks and their superiors, and the abuse of authority (Schweizer Benediktinerkongregation, In addition to auditing, the visitors make use of questionnaires and interviews to detect any problems and failures. They analyze processes in-depth, ask specific questions and refer to aspects, which pass unnoticed in the normal daily routine.Archabbot and first “visitator” of the Swiss Congregation Benno Malfe`r says: “The most important function of “visitations” is to induce reflection, and not to exercise control and discipline. Visitations contribute assistance and exchange between the monasteries”

3) "since monasteries build on strong and uniform value systems, individuals not only increase their social identity with the group, but groups also become more cohesive (Tajfel, 1981). The theory of groupthink hypothesizes that cohesive groups are most likely to experience groupthink (Janis, 1972, 1982). Groupthink includes the belief in the inherent morality of the group and stereotypes of out-groups. It leads to the systematic and emotional devaluation of ideas which were not discovered or launched within their own social collective (Turner and Pratkanis, 1998). Second, social comparison theory hypothesizes that cohesive groups are more susceptible to expert power (Festinger, 1954), leading to dictatorship and abuse of power (Coleman, 1990).

Thirdly, the life long commitment to a monastery has to be considered. Strong commitment is desirable, but not in such an absolute way as in monastic institutions.

While giving voice and developing loyalty, they (consciously or unconsciously) tend to build exit barriers. When exit costs are exorbitant, hindering people from leaving, negative outcomes, like discouragement, will occur (Hirschman, 1970).

For these reasons, stock corporations have to balance the advantages and disadvantages of common value systems and commitment. Value systems should be strong enough to select and socialize appropriate employees and open enough to avoid dogmatism and unbalanced power. Stock corporations can prevent group cohesion by promoting the diversity of their employees and their managers (Flap, 1988).

Commitment should be fostered, without implementing exit barriers and constraining the employees too much.

Finally, the monastic constitution has some drawbacks and can learn from stock corporations. Many monastic institutions, which have to face substantial challenges, do so. While we argue that both institutions can learn from each other, we highlight the many aspects in which modern corporations can profit from the history proven monastic organization of Benedictine abbeys.

Conclusion

The monastery approach suggests that stock corporations can prevent agency problems by complementing external discipline with internal behavioral incentives and by utilizing democratic, supportive external control mechanisms. Internal behavioral incentives complement agency theory’s conception of the homo oeconomicus by referring to intrinsically motivated actors, who not slavishly react to external incentives. Internal arrangements facilitate a better control through voice in the form of democratic rights of participation and through loyalty and trust expressed in the protection of firm-specific investments. Democratic, supportive external control mechanisms expand agency theory’s conception of the homo oeconomicus by referring to self-determined actors, who mainly react to external incentives which are in their interest and do not crowd out their intrinsic motivation."


Abstract of the paper in the American Review of Public Administration 2010:

"Benedictine monasteries in Baden-Württemberg, Bavaria, and German-speaking Switzerland have an average lifetime of almost 500 years, and only a quarter of them broke up because of agency problems. The authors argue that they were able to survive for centuries because of an appropriate governance structure, relying strongly on the intrinsic motivation of the members and internal control mechanisms." cites Journal of Management History and below management revue article as well as Inauen, E., & Frey, B. S. (in press ). Benediktinerabteien aus ökonomischer Sicht. Über die ausserordentliche Stabilität einer besonderen Institution. [Benedictine abbeys from an economic perspective. About the extraordinary longevity of a remarkable institution]. Erbe und Auftrag. Monastische Welt.

parts largely identical to below article in Journal of Management History:

1) "In the next sections, we discuss the efficiency of monastic control mechanisms by empirically analyzing how Benedictine abbeys approach their specific governance problems." 2) "On the one hand, the great economic success of numerous monasteries in medieval times serves as an example of efficient organization of commercial enterprises. On the other hand the creation of wealth led to the temptation of misuse. In a seminal paper, Kieser p. analyses the monasteries as “first deliberately designed organization in the Occident.” They became enormously rich through their rational labor organization (e.g. the division of labor) and their work morale. The resulting wealth was a significant reason why governance became this important: for example, some abbots and monks lined their own pockets and certain monasteries were undisciplined."

2) "External Governance Mechanisms

The interplay between internal and external control mechanisms in Benedictine monasteries is of particular interest for public sector organizations. History shows that the internal control mechanisms of monasteries sometimes fail. For example, in situations where an abbot and the convent join in enriching themselves or simply do not care about the economic situation, external control becomes important. The organization of the external control in monasteries corresponds to insights in political economics. External control is hierarchically organized and consists of jurisdiction and periodic monitoring. Each monastery is embedded in a hierarchical structure of congregations, the Benedictine Confederation, and the Holy See. The congregation is the umbrella organization of the monasteries, in most cases, within a geographical region. It is responsible for monitoring the monasteries in its area of accountability. Abbots and some delegates of the respective houses represent each congregation. These representatives form the congregational chapter and elect the archabbot as president. The archabbot is recruited from an associated monastery to guarantee internal expertise. Each congregation is a part of the Benedictine Confederation.The Benedictine Confederation is an independent institution and facilitates the exchange of experiences between congregations and the Holy See, but it has no direct influence on the decision process.Jurisdiction. Benedictine monasteries belong to the Catholic Church, are subject to its laws, and depend on the Holy See. Besides church and constitutional law, the legal norms of the congregation are binding for any particular monastery. The jurisdiction of the congregation is the first instance outside the monastery where disputes are settled. The congregation supervises the election of abbots and organizes the “visitations” of monasteries. They complement this law with their own statutes, the so-called Consuetudines Periodical Monitoring. As the legal rules are very general with respect to economic issues, the so-called visitation is the most important tool for disciplining the convents. Every to years, delegates of the congregation visit a community to evaluate the condition of the monastery. The visitation considers not only the economic situation of a monastery and its fields of activity but also the spirit and the discipline of the community and its members, and it examines the personal relationships between the monks and their superiors and investigates abuses of authority (Schweizer Benediktinerkongregation, This institution focuses strongly on cultural and relational aspects. In addition to auditing, the visitors make use of questionnaires and interviews to detect any problems and failures. They analyze processes in-depth, ask specific questions, and refer to aspects, which pass unnoticed in the normal daily routine. Benno Malfèr, the Archabbot and first “visitator” of the Swiss Congregation, says “The most important function of ‘visitations’ is to induce reflection, and not to exercise control and discipline. Visitations contribute assistance and advance the exchange between monasteries.”

3) "because monasteries build on strong and uniform value systems, not only do individuals increase their social identity within the group, but groups also become more cohesive (Tajfel, 1981). The theory of groupthink hypothesizes that cohesive groups are most likely to experience groupthink—the belief in the inherent morality of the group and stereotypes of out-groups (Janis, 1972, 1982). Groupthink leads to the systematic and emotional devaluation of ideas, which were not discovered or launched within their own social collective (Turner & Pratkanis, 1998). Fourth, social comparison theory hypothesizes that cohesive groups are more susceptible to expert power (Festinger, 1954), leading to dictatorship and abuse of power (Coleman, 1990). Finally, the lifelong commitment to a monastery has to be considered. In public service, strong commitment is desirable but not in such an absolute way as in monastic institutions. While giving voice and developing loyalty, they (consciously or unconsciously) tend to build exit barriers.

When exit costs are exorbitant, hindering people from leaving, negative outcomes, like discouragement, will occur (Hirschman, 1970).

For these reasons, public sector organizations have to balance the advantages and disadvantages of common value systems and commitment. On the one hand, value systems should be strong enough to select and socialize appropriate employees. On the other hand, value systems should be open enough to avoid dogmatism and unbalanced power. Public sector organizations can prevent groupthink by promoting the diversity of their employees and their managers (Flap, 1988). Commitment should be fostered without creating exit barriers and constraining the employees too much.

Finally, it should be mentioned that we presented an idealized picture of monastic governance.

Such an extreme way of life, as chosen by the Benedictine monks, can present serious drawbacks.

For example, Goffman, (1961) depicts monasteries as “total institutions,” which may deprive an individual of his rights. Symbols such as the monk’s cowl, rituals such as the reception of a religious name, or the expropriation of a novice’s possessions would lead to a degeneration of the personality. Such concerns are not addressed in this paper. Although we argue that both institutions can learn from each other, we highlight some governance aspects in which the public sector can profit from the historic monastic organization of the Benedictine abbeys.

Conclusion

The monastery approach suggests that public sector organizations can prevent agency problems by complementing external discipline with internal behavioral incentives and by using supportive external control mechanisms. Internal behavioral incentives refer to intrinsically motivated actors who will not slavishly react to external incentives. Internal arrangements facilitate improved control through voice in the form of democratic rights of participation and through loyalty and trust expressed in the protection of organization-specific investments. Democratic, supportive external control mechanisms refer to self-determined actors who are interested in improving their self-governance."


Abstract of the paper in the Management Revue - The international Review of Management Studies 2010:

"Derived from an analysis of the Benedictine monastery of Engelberg we offer three improvements of applied governance designed to reduce agency problems. First, monastic governance emphasizes clan control rather than output control. Monasteries demonstrate that organizations can prevent agency problems by complementing external discipline with internal behavioral incentives, such as value systems and voice."


References:

Inauen, Emil, Bruno S. Frey (2008), "Benediktinerabteien aus ökonomischer Sicht. Über die ausserordentliche Stabilität einer besonderen Institution", Institute for Empirical Research in Economics - University of Zurich IEW - Working Paper 388.

Inauen, Emil; Frey, Bruno S (2010), "Benediktinerabteien aus ökonomischer Sicht", Erbe und Auftrag, Monastische Welt, 86(3), 267-307. DOI: 10.5167/uzh-44778 http://www.erbe-und-auftrag.org/archiv/heftarchiv/heft.3_10/heft.3_10.4/index.html

Inauen, Emil, Katja Rost, Bruno S. Frey, Fabian Homberg, Margit Osterloh (2010), "Monastic Governance: Forgotten Prospects for Public Institutions", The American Review of Public Administration, 40(6), 631-53. DOI: 10.1177/0275074009360372

Inauen, Emil, Katja Rost, Margit Osterloh and Bruno S. Frey (2010), "Back to the Future – A Monastic Perspective on Corporate Governance", management revue, 21(1),  38-59. DOI 10.1688/1861-9908_mrev_2010_01_Inauen

Rost, Katja, Emil Inauen, Margit Osterloh, Bruno S. Frey (2010) "The corporate governance of Benedictine abbeys: What can stock corporations learn from monasteries?", Journal of Management History, 16(1) , 90 - 115. DOI: 10.1108/17511341011008331

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