Second SSPM post: Decisionmaking in the NFL & Reflections on Friedman

Decision-making in the NFL: The Ray Rice fiasco

Commissioner Goodell tries to save face in front of the media. (http://rack.0.mshcdn.com/media/ZgkyMDE0LzA5LzE5L2ExL0dvb2RlbGxUaHVtLjkwNmI3LnBuZwpwCXRodW1iCTk1MHg1MzQjCmUJanBn/8e9657ed/c81/GoodellThumb.jpg)

On July 25th, 2014 the Commissioner of the NFL, Roger Goddell, suspended Ray Rice for two games after he knocked his wife unconscious. A duration few could take seriously, in relation to the season long suspension Josh Gordon received for smoking a joint. The commissioner's decision turned into a fiasco in August, when TMZ published a video that clearly showed Ray Rice hitting his fiancée unconscious and exhibiting little distress in doing so. The general public was infuriated about the short suspension and the league's decision-making in this situation. In the weeks following Rice's initial suspension the league was forced by public opinion to make Rice's suspension indefinite.
But why was the league incapable of taking proper initial action? Certainly a league as powerful as the NFL would be able to make the right judgment call in a situation as delicate as this one. This case study will be used to illustrate the implications that different assumptions about the decision-making capabilities of actors have.

Rational decision-making:
The rational decision-making model assumes that the NFL was in possession of every piece of information pertaining to this assault, that it was able to weigh all the possible courses of action, and that it knew about all consequences of their actions. Under the assumption that the NFL as an organization were fully rational, the decision to suspend Ray Rice for only two games is extremely shocking. It means that the NFL had seen all the evidence, weighed the options and decided that two games would be enough as an initial suspension.

Speaking from a moral point of view, it is difficult to understand how a rational actor would act so mildly in a case as shocking as this. The implications for the NFL would be disastrous. It would have become a league that systematically turned a blind eye towards abuse. In comparison to the suspension of Josh Gordon (possession of marijuana), it would mean that the league perceived smoking weed as eight times worse than hitting your fiancée unconscious. In essence, the league's entire personal conduct policy would be meaningless if the NFL were fully rational, because players were not properly brought to justice.

Bounded Rationality (Behavioral theory of Choice):
Bounded rationality is a critique of the fully rational decision making model. An element of this principle is the behavioral theory of choice, which points to the limits of rational choice and shows how humans and organizations actually make decisions. In his article, B.D. Jones describes that organizations might fall prey to the same limitations of human choice. Jones identifies six facets of behavioral choice that apply for organizations.

    1.Organizational memory: the rules and regulations of organizations that specify what actions they take at what points.
    2. Agenda setting: Organizational capacities that help categorizing and prioritizing features from the world.
    3. Parallel processing: By decentralizing, delegating organizations can process different inputs in a parallel fashion.
    4. Serial processing: only if previously prepared solutions stemming from organizational routines are judged as inadequate, new solutions are sought.
    5. Emotional contagion: emotions are an element in moving from parallel to serial processing.
    6. Identification: People identify emotionally as well as cognitively with the organizations they participate in.


As an organizational actor, the NFL's decision-making process can also be described by using the facets of behavioral choice that are outlined by Jones.
When the Ray Rice incident first broke the news, the NFL treated it as a common occurrence. To them, it was a mere off-season incident that would be treated as any other. There were no deaths, no drugs, and not REAL publicity involved- a typical low priority case (Agenda setting).

After all, incidents with players happen year round and the NFL usually responds very quickly, since they have a policy in place that specify suspension lengths depending on what happened.  In its history, however, the majority of suspensions were based on substance abuse policy (such as steroids, marijuana) and public misdemeanor incidences (such as driving under the influence). For example, when Josh Gordon suspended for smoking weed, substance abuse was a prioritized topic that was highly relevant to the NFL.
This, however, was not the case with domestic violence. The NFL has arguably been too tolerant of aggressive behavior. In 2005, nine players were arrested for domestic violence charges. Of these, only one player received the maximum suspension of one game (Organizational memory).

Due to rising player arrests and a growing negative image of NFL players in the public, commissioner Roger Gooddell introduced a new conduct policy in 2007. The NFL now had two independent departments for player conduct: one drug-related and one for other policy violations. This decentralization and delegation was intended to allow for faster and swifter action against transgressive players (Parallel processing). Since these departments were independent of each other, suspension lengths were not coordinated anymore, leading to diverging trends in suspension lengths.

So far, the entire process of player suspension appears to be very standard and nothing out of the ordinary for the organization. The tipping point in the Ray Rice scandal, however, was the publication of the video and the strong critique from the public, which caused emotional contagion of decision-makers in the NFL. The heavy public backlash forced NFL decision-makers to reassess their "standard, out-of-the drawer" decision on Ray Rice an suspend him indefinitely (Serial processing). The previous suspension was therefore judged to be inadequate and handled by the commissioner himself, who needed to diffuse the extremely tense public relations situation.

Lastly, it is important to note the conflicting loyalties that Roger Gooddell felt during this process.  On one hand, there was a strong identification towards fans and the public, which were the main source of income for the organization as well as the 32 privately owned teams. On the other hand though, Roger Gooddell is elected by the 32 team owners and is their "agent". So, while fans might favor a strong policy against domestic violence, owners might not be willing to easily accept the commissioner suspending superstar players from their teams. In this case, he had to weigh the two interests and find a way that would appease both sides of the spectrum accordingly.

Conclusion:
The fact that the NFL had to retreat on its original verdict and change the suspension length shows that the rational actor model is not a representation of reality. If it were, the decision for indefinite suspension would have been immediately taken, the NFL would also have known about the existence of the video and the public's negative reaction.
By understanding how human decision-making really works, one can also better understand how organizations reach conclusions. Based on this example, I conclude that bounded rationality and the associated behavioral choice model yields a more accurate prediction than the rational actor model.


Sources: 
http://grantland.com/features/nfl-football-domestic-violence-ray-rice/

Jones, B. D. (2003). Bounded rationality and political science: Lessons from public administration and public policy. Journal of Public Administration Research and Theory, 13(4), 395-412.

static.nfl.com/static/.../0ap3000000441677.pdf

http://edition.cnn.com/2014/12/11/opinion/robbins-nfl-domestic-violence-rules/

 

Reflections on Friedman:

Both the papers by Friedman and Jones were very useful for this assignment. Friedman's paper gave a very concise and precise outline on the theoretical principles of profit maximization. His argumentation however is very one-sided, which makes it extremely important to differentiate the arguments and add different points. In terms of understanding the assumptions about rationality, the paper of Jones gives a very good overview about the differences in bounded rationality and full rationality and the implications.  Apart from the papers that were distributed in class, I was able to utilize tutorial material from my bachelor's degree in business economics.

Additional points for argumentation:
In my opinion, Friedman makes a compelling argument by saying that it would be selfish of the firm’s agent to steal the shareholder’s money by going above and beyond their task of maximizing the shareholder’s profits. It makes no sense then to criticize managers for solely thinking about profits, because the entire economic system is based upon profit maximization and the ability of the market to regulate itself.  In a market economy, profit maximization leads to the most optimal allocation of resources. 

Jones' article on bounded rationality were helpful, because they gave a good introduction to the tenets of the principle. Friedman's argument is derived in a very technical and economic way that builds on a lot of assumptions from economics such as full rationality. He presupposes that actors know how to maximize profits and are aware of all the options. After reading Jones' article, the additional insight gained about human choice and the availability of information gives me another opportunity to discredit Friedman's argument. After all, if humans were fully rational, there would be no pollution. Rational actors would devise perfectly efficient processes that would not produce any waste or emissions.  

Ultimately, Friedman's argumentation for profit maximization would only hold if and only if the markets were completely efficient at incorporating these aspects. Nevertheless, the argument has to be ultimately dismissed because Friedman's assumptions about markets are wrong. He forgets to mention market failures, externalities, and the true social costs that stem from transactions.In my opinion however, there are certain assumptions about perfect markets, such as full rationality, which are just impossible to attain in reality. Therefore, Friedman's argument qualifies as strong in theory, but in practical implementation, it cannot hold. In order to strive for the best possible allocation of resources, business need to go above and beyond the notion of profit maximization.