Corporate life is all about teamwork. Teams are everywhere, and the highest praise at job review time is, “You’re a team player.” We should assume, then, that teams and teamwork are always better than individual efforts, right?
Wrong. In terms of productivity, teams aren’t always better. And bigger teams are probably worse than smaller teams.
This fact of corporate life, whether acknowledged or not, influences every compliance professional and hangs over the heads of compliance leaders.
The problem is “social loafing.” It’s not what it sounds like. It’s not laziness or sloth.
Social loafing is when individuals give less than their full effort to the team because they’re team members.
The concept was first articulated by Max Ringelmann (1861 – 1931), a French professor and agricultural engineer. He was trying to work out efficiencies for machines, animals, and people when he made his discovery.
He found (by setting up tug-of-war experiments) that individuals gave 100 percent effort when they competed alone. But, when they competed as part of a team, they gave less than their full effort. Ringelmann also found that the bigger the team, the less effort each team member gave.
(He physically measured how hard people pulled the rope in the tug of wars and plotted the drop in effort against the increase in team size.)
The application to compliance is clear: A bloated or under-managed compliance team is likely to have less output per team member than its scaled-down version. Stay lean to stay productive.
In 2020, Citigroup (the parent of Citibank) disclosed that an astounding 15 percent of its employees were categorized as “risk, regulatory, and compliance staff,” meaning Citigroup then had 30,000 risk and compliance-related personnel.
Despite that army of compliance professionals, in October last year the Office of the Comptroller of the Currency (OCC) fined Citibank $400 million for multiple risk management and compliance-related deficiencies. The OCC described Citibank’s “unsafe or unsound banking practices for its long-standing failure to establish effective risk management and data governance programs and internal controls.”
Was social loafing a factor in Citibank’s “unsafe and unsound banking practices”? Did the bank’s compliance bloat lead to its compliance failures? I don’t know. But something went wrong.
Why do individuals give less effort when they’re members of teams, and proportionally less effort when team sizes increase?
One reason is dwindling motivation. Team members naturally assume the team’s chances of completing a task are greater than their individual chances of success. They therefore conclude that their individual effort is less important, so they don’t try as hard.
Another reason for the decrease in individual effort is the “free-rider effect.” Members of teams think other members aren’t giving a full effort, which is probably true. So, to avoid being victimized by the slackers, they withhold their effort. Eventually, everyone is doing less, dragging the team’s productivity into a downward spiral.
Notwithstanding the Ringelmann effect, when something goes wrong, most leaders try to fix it by adding “talent” or “depth” to the team. And when things go well, their instinct is to build on the success by growing a bigger team.
There’s danger in both directions. But here’s good news: effective leaders can blunt or even overcome the Ringelmann effect.
Creating strong group identities, setting out a clear sense of mission, communicating compelling reasons for achieving goals — these and other leadership skills can motivate members of any size team to pull the rope with all their strength.