Exit, Voice, and Loyalty

Exit, Voice, and Loyalty (1970) is a treatise written by Albert O. Hirschman. The work hinges on a conceptual ultimatum that confronts consumers in the face of deteriorating quality of goods: either “exit” or “voice”.

In many regards, the treatise is a polemical piece; Hirschman uses his analysis of “exit” and “voice” in order to strike at the foundational assumptions of liberalism as supported by Friedrich Hayek and Milton Friedman.

Summary

The basic concept is as follows: members of an organization, whether a business, a nation or any other form of human grouping, have essentially two possible responses when they perceive that the organization is demonstrating a decrease in quality or benefit to the member: they can exit (withdraw from the relationship); or, they can voice (attempt to repair or improve the relationship through communication of the complaint, grievance or proposal for change). For example, the citizens of a country may respond to increasing political repression in two ways: emigrate or protest. Similarly, employees can choose to quit their unpleasant job, or express their concerns in an effort to improve the situation. Disgruntled customers ask for the manager, or they choose to shop elsewhere.

The implications of the above concept can be enormous and can allow for a new perspective on daily examples of social interaction. Exit and voice themselves represent a union between economical and political action. Exit is associated with Adam Smith's invisible hand, in which buyers and sellers are free to move silently through the market, constantly forming and destroying relationships. Voice, on the other hand, is by nature political and at times confrontational.

While both exit and voice can be used to measure a decline in an organization, voice is by nature more informative in that it also provides reasons for the decline. Exit, taken alone, only provides the warning sign of decline. Exit and voice also interact in unique and sometimes unexpected ways; by providing greater opportunity for feedback and criticism, exit can be reduced; conversely, stifling of dissent leads to increased pressure for members of the organization to use the only other means available to express discontent, departure. The general principle, therefore, is that the greater the availability of exit, the less likely voice will be used. However, the interplay of loyalty can affect the cost-benefit analysis of whether to use exit or voice. Where there is loyalty to the organization (as evidenced by strong patriotism politically, or brand loyalty for consumers), exit may be reduced, especially where options to exit are not so appealing (small job market, political or financial hurdles to emigration or moving).

By understanding the relationship between exit and voice, and the interplay that loyalty has with these choices, organizations can craft the means to better address their members' concerns and issues, and thereby effect improvement. Failure to understand these competing pressures can lead to organizational decline and possible failure.

Special problems

Hirschman provides an example simplified here: Consider a publicly funded school where the quality of education declined. Quality-conscious parents would increasingly remove their child to a privately funded school, given that they are relatively indifferent to the cost. A price-conscious parent, being similarly indifferent to the quality, would not notice that decline. At some point then, the school would know there was a problem, having been abandoned, but have no parents left who cared sufficiently about the quality to point to exactly where it had failed, locking the school into that state. Hirschman notes that in this and similar fields ("connoisseur goods"), a "tight monopoly could be preferable", preventing parents from moving. This would be better for the school, if not the child, by keeping an active voice among the parents.

Applying the theory to political situations

It's also interesting to note that exit need not be physical, but can be mental or emotional. For example, under communism, many could not physically exit the country, but did not want to participate in the system either. In these cases, citizens could be said to exit from civic or political participation, as they were neither loyal to the party nor were they willing to voice their dissatisfaction (except for noted times of dissent, e.g., 1956 in Hungary, 1968 in Prague and the Revolutions of 1989) because doing so could lead to imprisonment, exile, or even death. Many thus mentally and emotionally exited their countries for the duration of a repressive regime they did not agree with but felt they could not fight or topple. The consequences of this exit can sometimes provide an explanation for why voter turnout is often low in countries where free elections are being held for the first time in years (or ever).

References

• Albert O. Hirschman. 1970. Exit, Voice, and Loyalty: Responses to Decline in Firms, Organizations, and States. Cambridge, MA: Harvard University Press. ISBN 0-674-27660-4 (paper).
• Sethi, Rajiv. 2010. "The Astounding Voice of Albert O. Hirschman."
• Wilfried Bion: articles for the journal Human Relations 1940s and 1950s; Experiences in Groups (1961).