The Iron Law of Institutions is much like cancer for organisations Despite this It is also an inevitable feature of most organisations. The term was coined by Robert Michels in his 1911 work Political Parties: A Sociological Study of the Oligarchical Tendencies of Modern Democracy. The Iron Law posits that in any organisation, no matter how democratic, a small elite group will eventually gain control and wield disproportionate power. Once in power they will care more about maintaining their position of power within the organisation rather than the success of the organsation itself. The Iron Law of institutions must be opposed and ultimately defeated for organizations to function successfully and establish the rule of law. This chapter will show that the Iron Law, if left unchecked, will inevitably lead to decline in leadership and a widespread failure of organisational systems.
The Iron Law starts off fairly benign. It is considered by Michels to be a fundamental feature of organizational dynamics because of the need for practical considerations, like making decisions in a timely fashion. A small group will find it more convenient to make decisions quickly without following proper boardroom processes or engaging in wider consultation with colleagues. For example, many small companies may start off with only two or three people involved. it may seem pointless to hold regular meetings, vote on propositions or elect roles, when individuals may be making decisions on behalf of the whole company already. In larger organizations there may be a reluctance to go through a slow bureaucratic process to obtain permission for an action, when it can simply be implemented without necessarily informing superiors.
Often there is a lack of competition for roles in small to medium organizations, reducing reliance on democratic processes. When a role in an organization is quite specialized they will feel justified in making executive decisions, relating to their area of expertise, without the need to discuss it with colleagues in other, less-relevant roles. For example if someone is the Webmaster they will not see any point asking the board whether they prefer JavaScript or Python code for their web-app, they will simply decide. More significantly, the treasurer could spend money on the organization’s behalf without proper authorisation. This could lead to a siloing of the specialist roles, with minimal input from the rest of the organization. If there is no one else who can do the roles then there is no risk of replacement if others disagree with their decisions later.
The lack of competition for various boardroom roles makes democratic processes either non-existent or the board will simply vote themselves back in at each AGM without any alternative candidates. There is less incentive for high performance standards when there is no threat of being replaced. Over time a small elite group tends to perpetuate its control by shaping the institution’s rules, procedures and decision-making processes to serve its own interests, often at the expense of the wider membership. Generally they fear losing control to others in the same organization so they consolidate power and resist newcomers taking on board positions.
As a result, organizations grow stagnant from lack of fresh leadership and ideas. A key feature of the Iron Law is that those in power will care more about maintaining their positions within the organization than they will about the success of the organization itself. This is partly because prestige comes with holding the titles alone rather than the amount of work put into the role. More focus will go on maintaining power and less on growing a bigger team. Those in the organization who feel excluded will grow disillusioned and quit the organization, reducing its pool of talent. Often the organization will become dysfunctional and those who have made such an effort to consolidate power will seem almost oblivious to the neglect of the organization’s primary goals and functions. In extreme cases they will even allow the organization to collapse completely.
If there is any opposition on the board to the core power block, they may use their majority to overrule the opposition on every occasion. However, in many cases they will become reluctant to even hold meetings, preferring to make decisions illegitimately, behind the back of the board. It is not uncommon for organizations to go months or even years without holding proper board meetings or AGMs. This lack of ability to communicate in a proper forum results in exacerbated, unresolved problems and even protracted power struggles within the organization.
At its core, the Iron Law arises from a fear of what will be involved in becoming a successful organization. The inability to be truly successful is masked by attributing it to the inherent complexities that come with running the organization. Despite the lack of organizational success, they have the attitude that only they have the ability to do that particular role and it would be a risk to let anyone else replace them and try to do it differently. It is ultimately a reversion to the safety of the status quo and a resistance to change. By endeavoring to prevent anyone else saving the organization from decline, they avoid the awkward situation of someone else taking credit for succeeding in the same role they were neglecting.
As has been demonstrated, the Iron Law of Institutions is a slippery slope. It starts with entirely innocent and practical measures to cut corners at the thin end of the wedge but gradually leads to the complete collapse of functional governance and possible liquidation of the organization. The fact that the Iron Law is widespread across almost all organizations to some extent, presents a serious threat to democratic principles, the rule of law and good leadership across the whole of Society. Ergo, its spread and expansion must be met with resistance, the inherent decline reversed by conscious will and appropriate countermeasures deployed against it.