Risk as decision

We see countless reports of “disasters” and constant warnings against “risky behavior” around us. The German sociologist Niklas Luhmann writes in his ‘Sociology of Risk’ (1991) how these themes are chosen: risks are discussed when it becomes clear that damage that has occurred or threatens to occur is directly related to decisions to do or not to do something.

Even your decision not to decide is a decision. Of course, this goes for organisations as well. Organisation systems stabilize forms of action and behaviour by means of decisions about more or less strong conditions of membership (roles and positions) and their repeatable practices and redundant procedures. By these decisions, they also try to manage risks, that cannot be fully avoided.

Organisations, through their decisions, develop a self-constructed view of the world and a self-constructed certainty about and confidence in the world (Nassehi, 2005). After some damage has occurred, everything is suddenly crystal clear. Investigations might conclude “human error” after causal attribution on some chain of events- but technical high-risk systems are rarely linear systems with expected consequences. The use of additional safety technologies also makes the system more complex and introduces new interactions and risks. Maximum safety is not possible. So we trade risks off, exchange certain risky technologies for hopefully slightly less risky ones or design risky systems to be more error-forgiving.

Distinctions used when dealing with risk

Luhmann examines how modern society observes the risk problem. Every perception works by making a distinction. Luhmann observes that when dealing with risk, usually the distinction between risk and safety is used:

“The idea that the concept of risk should be defined as the opposite of safety is widespread. This has the advantage in political rhetoric that when you speak out against overly risky ventures, you also appear as someone who cares about the universally held value of safety. This quickly (and too quickly) leads to the idea that people actually want safety, but in the given world circumstances had to take risks. The risk form thus becomes a variant of the distinction between unpleasant and pleasant.” (Luhmann, 1991a, p. 28)

The distinction between risk and safety suggests that given the right decisions, risks could certainly be avoided by taking appropriate measures. Because the future remains unknown, safety is not a given and remains a risk. This can be obscured, but then you expect more from the technology or the right information than it can achieve given the still unknown future.

Luhmann confronts the observations of society through the code safe/risk with other observations, using the distinction risk/hazard. He looks at the process of social attribution:

- The possible damage can be seen as a consequence of the decision; the risk of the decision;

- The possible damage can be seen as caused by the environment (external); we then speak of hazard.

Risks affect society not only in the form of technical calamities. People can die from what we see as a risky way of life, which we then attribute either to decisions, to Western civilization or Western culture. Of course, people can also die as a result of legal, economic and political decisions. For example, criminal law may be risky if it prohibits abortion and then finds that abortion is still taking place, but in a medically more risky way.

The social aspect of risky decisions

What matters is how a decision is perceived. Whoever decides politically, legally, medically, or economically makes himself observable: You can blame him/her for the consequences of his/her decision and see that his/her risky behavior puts others at risk. The distinction between risk and hazard focuses mainly on the social aspect of risky behaviour: for whom (decision maker) is the decision a risk and for whom (person exposed) a hazard?

The protest movements of the risk society focus on rejecting situations in which one could become a victim of the risky behavior of others. Protest movements see hazards and thus make the problem of accountability for decisions visible. Ideally, decision makers see that the cause of the hazard is attributed to them, and those affected see that risks are inevitable where decisions are made. Risk perceptions are ultimately not reconcilable through understanding, or better insight. Decision-makers and stakeholders see things differently, but they must at least learn to see that they see things differently, thus paving the way for mutual observation of their observations. That cannot bridge the gap, but maybe make it manageable (Kneer and Nassehi, 1993).

Safety and the pointing finger

When it comes to hazards and risks, moral judgement lurks around the corner: explicitly or implicitly, views or actions are morally qualified with the distinction good/bad or good/evil, according to whether human respect or contempt is expressed. With the help of the moral code good/bad one can observe and judge everything in society, including risk. Morality often ends in stubborn disputes, or even violence or terror.

Morality is a risky business

Morality, according to Luhmann, is a risky business:

“Morality . . . tends to create strife or arise from strife and then tends to aggravate the strife.” (Luhmann, 1989, p. 370).

In our society, the binary code is used everywhere for moral reasons. This includes the risk-safety and the risk-hazard forms. These binary codes, according to Luhmann, in critical cases can not assume consensus at the program level (Luhmann 1991, p. 498). The use of binary codes creates paradoxes: "One cannot decide whether the distinction between good and bad is itself good or rather bad" (Luhmann, 1990, p.27).

"In view of this state of affairs, perhaps the most important task of ethics is to warn against morality." (Luhmann, 1990, p. 41)

Risk and organizational culture

Luhmann (2011) studied the concept of control in organizations. He asks whether there are decision-making premises that are beyond the control of an organization or individual and how these uncontrolled factors might be considered when making decisions. These uncontrolled factors are often spoke about as "the organizational culture". Luhmann writes that this concept has been used to describe and understand changes in organizations, particularly those related to the increasing informality of decision-making and reliance on trust, as well as the greater flexibility and faster pace of organizational change. The concept of organizational culture has come up relatively recently (Luhmann wrote this in the 1990s) and has undergone some changes in meaning over time. Luhmann suggests that the concept of organizational culture may eventually be dissolved into other, more specific frameworks for understanding organizational phenomena.

The common understanding of organizational culture, which refers to the symbolic elements of an organization, according to Luhmann does not adequately capture the complexity of the concept. Instead, he proposes defining organizational culture as the specific differences that exist within an organization, which may include uncontrolled decision-making premises. Organizational culture emerges spontaneously through the actions of individuals within the organization and it is often anonymous and latent, requiring anthropologists or sociologists to identify and analyze it.

Organizational culture can be difficult to examine or question because it is often taken for granted and any attempt to do so may be viewed as a challenge or joke. It also can be challenging to communicate about organizational culture, particularly in the context of the specific situation at hand, and it requires special effort to do so. In conclusion, it is important to consider organizational culture in the study of organizations, and we need more precise language to describe it. 

Organizational culture has an important role in decision-making and change within organizations. Organizational culture influences the way that new ideas and deviations from the norm are received within an organization. Established organizational cultures often overestimate the contribution of individuals to decision-making and exaggerate the role of psychological factors in resolving the paradoxes of decision-making. Efforts to increase the participation of members in planning and rationalization may fail due to the influence of organizational culture. Changes in societal values may induce changes in organizational culture, but such changes can also be driven by internal factors and may involve a struggle for power.

Organizational culture is often understood in terms of symbols, but these symbols are difficult to define and are often used to convey a sense of identity or belonging within the organization. Organizational culture can influence the acceptance of new ideas or innovations, and it can be influenced by societal values. Organizational culture is a product of the communication within the organization, but it can also have an impact on communication and decision-making within the organization. The evolution of organizational culture can vary between different organizations and in response to different societal conditions.

Routine and stability play a role in decision-making within organizations. Routine helps to reduce the burden on cognitive processes, allowing individuals to concentrate their attention on self-referential aspects of decision-making situations. But this reliance on routine can lead to a lack of consideration for potential deviations or novel experiences. Disappointment and surprise in the decision-making process can sometimes lead to a breakdown of the decision-making complex and the destruction of cognitive stability. Cognitive routines, which are themselves the result of processes of self-reference, are necessary for any decision-making situation, but the system tends to overlook the paradoxes inherent in their repeated use. An organizational system can have a cultural identity; a system's accumulated routines and their associated cognitive structures. This cultural identity can be disrupted by societal value changes or by individual experiences that challenge the established routines. Decision-making involves the use of routines and cognitive processes to make choices, and the creation and maintenance of these routines is an important part of organizational design. Organizations deal with this ambiguity and the challenges of making decisions in complex and changing situations. Effective communication, including the use of language to describe and understand organizational issues, is important in navigating these challenges.

Sources:

Kneer, G., Nassehi, A. (1993), Niklas Luhmanns Theorie sozialer Systeme: eine Einführung, München: Fink.

Luhmann, N. (1989), Gesellschaftsstruktur und Semantik. Studien zur Wissenssoziologie der modernen Gesellschaft, Band 3, Frankfurt am Main: Suhrkamp.

Luhmann, N. (1990), Paradigm lost: Über die ethische Reflexion der Moral. Speech by Niklas Luhmann anläßlich der Verleihung des Hegel-Preises, Frankfurt am Main: Suhrkamp.

Luhmann, N. (1991), Politik und Moral. Zum Beitrag von Otfried Höffe, in: Politische Vierteljahreszeitschrift 32, pp. 497-500.

Luhmann, N. (1991), Soziologie des Risikos, Berlin: De Gruyter.

Luhmann, N. (2011), Organisation und Entscheidung, 3. Auflage, Wiesbaden: Springer VS.

Nassehi, A. (2005), Organizations as Decision Machines: Niklas Luhmann's Theory of Organized Social Systems, in: The Sociological Review, Vol. 53 (1), pp. 178-191.