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The Efficacy of Exit, Voice, and Loyalty

Written by: on October 20, 2016

Albert Hirschman—Exit, Voice, and Loyalty: Responses to Decline in Firms, Organizations, and States

Summary

In this work, the late Albert Hirschman expounds, “Under any economic, social, or political system, individuals, business firms, and organizations in general are subject to lapses from efficient, rational, law-abiding, virtuous, or otherwise functional behavior.”[1] These lapses occur regardless of the construction of a society’s basic institutions and a certain amount of dysfunction is tolerated. But, society is obligated to revert the behavior back to proper functioning through its internal forces. Hirschman declares that major mechanisms of recuperation are readily available through competition.

When the quality of products or services provided by organizations deteriorate, management becomes aware of its shortcomings through the consumers who exercise their options. The exit option is when they withdraw from the organization or refuse its products, resulting in a drop in revenues and membership. In the second option customers or organization members express their dissatisfaction to managerial authority. This is the voice option. As the result of either option the client utilizes, management must search for causes and solutions for the dissatisfaction.

The power of the exit option is that it inflicts revenue losses on delinquent management that associates deterioration with loss in sales. For competition or exit to work as a mechanism of recuperation, from performance lapses, a firm needs a mixture of alert customers to provide feedback, and inert customers to provide monetary cushions to make it feasible.

Voice is defined as, “Any attempt at all to change, rather than to escape from, an objectionable state of affairs, whether through appeal to a higher authority or collective petition to the management directly in charge . . . with the intention of forcing a change in management . . . including mobilizing public opinion.”[2] Dissatisfied customers or members of an organization will remonstrate and force improved quality or service upon delinquent management.

The voice option can complement exit or it can be a substitute for it. In any firm or organization in deterioration, either exit or voice will normally have dominance. The voice option is the only way in which dissatisfied customers or members can react whenever the exit option is unavailable. This is especially true with the family, the state, or the church. Often the decision to exit will be influenced by the prospect of the effectiveness of voice. But, once exit is in operation, the opportunity is lost for voice. In some situations exit will be the last resort after voice has failed.

  There are customers who stay with firms or organizations out of loyalty. Many of these loyalists will actively participate in actions designed to change the deteriorating institution’s policies and practices to get them back on track. Hirschman’s theory of loyalty is a key factor in understanding the relationship between exit and voice. The likelihood of voice increases with loyalty. Generally speaking, loyalty holds exit at bay and activates voice.

Analysis/Reflection

In this small but insightful book, Hirschman managed to speak to interrelationships between economic, social, and cultural themes in society. The following themes caught my attention because they are seldom addressed or acknowledged.

Private vs public education

I can certainly resonate with Hirschman’s observations on the transitions that the public school systems have undergone. I have witnessed the decline and deterioration of schools in the Los Angeles Unified School District for decades. The net result being Hirschman’s scenario that “increasing numbers of quality-education-conscious parents will send their children to private schools.”[3] He felt those exits produced a void in the school system and contributed to further decline. The public schools lost those “member-customers who would be most motivated and determined to put up a fight against the deterioration if they did not have the alternative of private schools.”[4] He maintains that parents and their children will still have to deal with the public school’s impact in their community.

According to Hirschman, ”Situations in which exit is the predominant reaction to decline while voice might be more efficacious in arresting it can also be observed in the sphere of private business enterprise.”[5]  The common denominator regarding the private-public school situation and private enterprise is that “those customers who care most about the quality of the product and who, therefore, are those who would be the most active, reliable, and creative agents of voice are for that very reason also those who are apparently likely to exit first in case of deterioration.” [6] I do not think Hirschman was interested in begrudging anyone the ability to experience quality of life wherever they found it, but rather impressing upon his readers that these are not just personal problems, they are societal problems that need to be handled on a societal level as a whole. They won’t go away if not addressed appropriately. Could this be an example of a failure of nerve—resorting to a quick fix?

Price of Exit

Hirschman indicates an aberration in the loyalist model has occurred when an organization has the capability to exact a high price for exit. The price can be realized in loss of association, loss of livelihood, excommunication, or loss of life. The family, tribe, religious community, nation, as well as, gangs and totalitarian groups are entities that are able to exact high penalties for exit. In the case of the family or nation, the price of entry is zero because persons are born into them. In gangs and totalitarian groups, there is a high price for entry and exit. “If an organization has the ability to exact a high price for exit, it thereby acquires a powerful defense against one of the member’s most potent weapons: the threat of exit.”[7] Since the high price of exit negates the threat of exit as an effective instrument of voice, gangs and totalitarian groups will often be able to repress both voice and exit.  This may lead to some complications and extra challenges for Christian leaders of spiritual transformation serving this population.

Notes

  1. Albert Hirschman, Exit, Voice, and Loyalty: Responses to Decline in Firms, Organizations, and States (Cambridge: Harvard University Press, 1970), 1.
  2. Ibid., 30.
  3. Ibid., 45.
  4. Ibid., 47.
  5. Ibid., 97.
  6. Ibid., 100.
  7. Ibid., 102.

  

 

About the Author

Claire Appiah

11 responses to “The Efficacy of Exit, Voice, and Loyalty”

  1. mm Marc Andresen says:

    Claire,

    You wrote of the decline of schools. Regarding exit as a strategy of some parents, what do you think might motivate parents toward loyalty and the exercise of voice rather than exit?

    • Claire Appiah says:

      Marc,
      You ask a very good question—What do I think might motivate parents toward loyalty and the exercise of voice rather than exit? I was thinking along those same lines after reading Hirschman. That is, what could or would I have done differently because I was among those parents who opted to send my children to private school rather than the neighborhood school. I think if I had to do it all over today, I would be making the same decision because the school system has dramatically deteriorated even further over the years.
      I believe the immediate need to provide my children with a high quality education in a basically safe and healthy environment superseded any thoughts of voice or loyalty. In fact, those notions never occurred to me at the time. I needed the timely, quick fix strategy of exit that worked on a more personal, albeit selfish level. I didn’t and still don’t have a clear understanding of the major systemic and bureaucratic problems that plague the LAUSD that take time to sort out and bring remedy. So, for me and a lot of other parents in that era, voice was not the pragmatic option. And where is loyalty for a system that does not work for its constituents?

      • mm Marc Andresen says:

        We parents will always opt for what is best for our kids, won’t we? I think that’s our responsibility. It would take very strategic and extraordinary parents to figure out how to make a deteriorating school a “win” for their kids.
        I wonder what Aaron thinks, since he works in LAUSD. His perspective would be interesting.

  2. Hi Claire. Thanks for writing about LAUSD!! LOL.
    We have witnessed the same phenomenon. I think the current popularity of Magnet Programs is the new micro-exit of public education. For example, at my comprehensive LAUSD high school we have two magnet programs. The parents that see the problems with public education but can not afford to exit to private, simply get into magnet programs. This creates a bazaar segregation on many campuses. The result is that the non-magnet classes continue to deteriorate and flounder.

    • mm Marc Andresen says:

      Aaron,
      I had just posed to Claire the curiosity of what you thought about all this – and here you have written about it.

  3. Claire Appiah says:

    Hi Aaron,
    I anticipated getting a reply from you. Then, you understand what I mean. I made sacrifices in order to put my children in private school until I discovered LAUSD’S (Permit With Transfer) PWT program. So, my children were bussed across town in the affluent areas of WLA. But, I believe that same program of social and ethnic integration that worked on a small scale lead to the demise of “great schools” in LA, when practiced on a grand scale. I’m sorry, but putting kids together from a variety of cultural, ethical, and socio-economic value systems, contributed to the doom of all the schools across all boundaries.

  4. mm Rose Anding says:

    Hi Claire,
    Thanks for a very thoroughly overview of the book, note 6, struck me, and caused me to think of the problems that have confronted me in the past.

    Sometime I have handled problems as personal problems but they were really societal problems, because they were also affecting others. Therefore, we miss handle how to voice our concerns,that are mixed with our personal emotions. They should have been addressed from societal level.

    This is a major concern within my culture, the lack of voice within the societal. Our voice is heard from the wrong level, which causes us to exit and not become loyal.

    Your blog gave much to chew on, that will impact my way of voicing in the future. It great sharing with you ! Rose Maria

  5. Claire Appiah says:

    Hello Rose,
    Thanks for replying to my blog and sharing your thoughts.
    I think our history of marginalization and oppression as African-Americans has influenced our responses in terms of exit, voice, and loyalty. A large number of African-Americans have no genuine or sustained sense of loyalty to the greater American society in which they have been invisible for decades. And since exit, is not a viable option, the only thing left to deal with the ills of society, is voice. But unfortunately, as you indicated we often mishandle the modes in which the voice option is carried out. We are often too myopic in our view of the problem beyond our own interests which stifles our ability to handle the problem on a societal level for the common good.

  6. mm Phil Goldsberry says:

    Claire:

    You mentioned: “The voice option can complement exit or it can be a substitute for it.” This is the balance point of discerning the “voice” and how you receive it and what you do with the information you are given.

    What would you say to leaders that are trying to listen to the “voice” and follow through so that the “exit” is NOT initiated?

    Phil

  7. mm Garfield Harvey says:

    Claire,
    Your blog came from a fresh perspective. You suggested that the church could potentially have problems reaching those in gangs where there’s a strong exit. This hold true for people like music artists who sign contracts to do something contradictory to their new faith. However, the fact that we’re having this conversation makes me wonder about the power of God in our churches. We often speak of God breaking chains and setting people free but we often fail to extend His power in some areas. Isn’t Paul a great example of someone who was on the wrong side but was willing to face anything that came along with certain God? I’m always curious about gang members who would die for the gang but not their faith; this remarkably interesting.

    Garfield

    • Claire Appiah says:

      Garfield,
      That is indeed a conundrum, a gang members’ willingness to die or be permanently maimed for the cause of the gang’s destructive objectives, but who does not exhibit that same degree of sacrificial bravado for the cause of the gospel of peace. A problem of nerve when it comes to Christ?

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