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September 2012 2013 37: 683 originally published online 17Journal of Management Education

Jennifer L. KohnManagers

Federalist #10 in Management #101: What Madison Has To Teach

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1Drew University, Madison, NJ, USA

Corresponding Author:Jennifer L. Kohn, Department of Economics and Business Studies, Drew University, 301 Lewis House, Madison, NJ 07940, USA. Email: [email protected]

Federalist #10 in Management #101: What Madison Has To Teach Managers

Jennifer L. Kohn1

Abstract

Business students typically do not read James Madison’s Federalist #10, a seminal work in political theory on the causes of and remedies for factions. I make the case that they should and offer suggestions for teaching and as-sessment. Factions are a subset of stakeholders that have interests adverse to the organization. Madison cogently argues that the causes of factions are rooted in human nature; therefore, managers should embrace diversity and not try to eliminate factions by surrounding themselves with “yes men.” Rather, he urges managers to focus on organizational design to channel ambition in a positive way and constrain the more corrosive effects of factions. Madison emphasizes a critical lesson for negotiation by focusing on adverse interests rather than positions or characteristics. Beyond these management lessons, Federalist #10 exposes business students to the foundations of American poli-tics and helps to inform the ongoing debate about the relationship between business and government. Finally, Federalist #10 takes business students out of their comfort zone, changing their reading workout and strengthening their ability to learn management lessons from the broader world around them.

Keywords

factions, stakeholders, management education, business and government

Instructional Innovation



684 Journal of Management Education 37(5)

What does Federalist #10 have to teach business students in Management #101? I suggest a lot. Both admirers and critics of James Madison agree that his Federalist #10 is the seminal work in American political theory on the causes, consequences, and management of factions (Kernell, 2003). Madison (1787a) defines a faction as:

A number of citizens, whether amounting to a majority or minority of the whole, who are united and actuated by some common impulse of passion, or of interest, adverse to the rights of other citizens or to the permanent and aggregate interest of the community (p. 54).1

This definition of faction is different than the broader definition of “stake-holders” as groups with interests in what business does (Donaldson & Preston, 1995). The critical distinction is that Madison defines factions by their adversity to the aggregate interests of the community. By contrast, stakeholders’ interests can be either congruent with or adverse to those of the organization. Moreover, diverse stakeholders’ interests are often considered by management in the process of defining the organizational interest in the first place. By focusing on adversity, Madison highlights an important man-agement reality: even if you consider all stakeholders, you cannot please all the people all the time.

To set the stage, in the winter of 1787-1788 James Madison along with John Jay and Alexander Hamilton authored 87 essays, known as The Federalist, to urge ratification of the U.S. Constitution. Then as now, commercial interests prompted political conflict. The Articles of Confederation that governed the States after the Revolution established a weak central government without even the power to tax or to regulate interstate commerce and international trade. This weak government failed to secure what centuries later Dixit (2009) enumerated as the three prerequisites for economic activity: the security of property rights, enforcement of contracts, and collective action. Barbary pirates, similar to the Somali pirates of today, attacked American ships; yet unlike today, the U.S. Navy was powerless to help.2 Shay’s Rebellion, an uprising of citizens in debt due largely to the governments’ inability to pay them for their service in the Revolution, was the last straw prompting the Constitutional Convention (Zinn, 2003). Today, the subprime mortgage crisis has prompted animated protests from the Tea Party and Occupy Wall Street, but not armed rebellion. Still, Madison’s observation has a contemporary ring:

. . . complaints are everywhere heard . . . that the public good is disre-garded in the conflicts of rival parties, and that measures are too often



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not decided according to the rules of justice and the rights of the minor parties, but by the superior force of an interested and overbearing majority. (p. 54)

Such complaints are heard today regarding several high-profile conflicts between business and government, such as corporate free speech associated with the Supreme Court’s Citizens United decision and the proper role of government in health care (the Patient Protection and Affordable Care Act), financial regulation (the Dodd–Frank financial reform), and industry more generally (the 2010 auto industry bailouts). Similar complaints about favorit-ism, self-interest, and the role of senior management in frontline business decisions surround internal conflicts among employees that managers face daily.

In Federalist #10, Madison offers specific practical lessons for managers. Madison’s first lesson is that in order to identify factions, managers must first determine their organizational objective. This is often easier said than done, both for big picture corporate strategy as well as daily meeting agendas. Second, Madison provides a cogent argument that it is better to manage the effects of factions than to try to prevent their causes. Madison argues that the causes of factions are rooted in the very human nature and freedom that fuels the dynamics of society and business. In other words, hiring “yes men” and severely limiting what employees can do would be like a dictator extinguish-ing liberty, “. . . a remedy worse than the disease” (p. 55). Madison’s third critical lesson is that managers are not immune to developing adverse interests of their own. So what is a manager to do? Madison’s central message is that organizational design matters. In order to provide enlightened management, managers themselves need to work within carefully crafted governance struc-tures that can channel ambition and harness the creative energy of diverse interests toward the organizational objective. Madison’s prescriptions apply to both the big picture of organizational structure as well as a manager’s day-to-day activities. His advice that decision makers should be “of a certain number” can keep a manager from making decisions alone in her office; while his warn-ing of “the confusion of a multitude” can help her keep meetings manageable. Finally, Madison’s focus on interests rather than positions or characteristics is a central lesson in negotiation that is highlighted in the classic Getting to Yes (Fisher, Ury, & Patton, 1981).

Beyond these practical lessons, Federalist #10 is a powerful teaching tool. Madison yanks business students out of their comfort zone with both his polit-ical content and old-world prose. Like changing an exercise routine, reading Madison can sharpen business students’ critical reading and thinking skills. In




addition, Madison shows business students that smart thinkers outside of business have grappled with similar problems. Federalist #10 demonstrates to students that they can get useful insights from a variety of sources, such as his-tory, philosophy, and political science, which they may not have considered before. Finally, business students are also citizens. Federalist #10 is one of the foundational texts that underlie the U.S. political system in which most will live, work, vote, and, we hope, engage as active members of their communities.

This essay proceeds as follows: the next section briefly traces the develop-ment of Madison’s arguments in Federalist #10 and then summarizes Madison’s lessons for managers; the subsequent section suggests specific classroom activities to explore Federalist #10’s lessons with business stu-dents and assess their learning of these lessons; the final section concludes, and the appendix (which is posted online at http://jme.sagepub.com/ supplemental) provides specific examples of questions for classroom activi-ties as well as assessments.

Madison on ManagementThe Roots and Evolution of Madison’s Philosophy of Factions

Madison was perhaps the most scholarly of the founding fathers, and as such an apt choice for business students’ scholarly pursuit of management. Despite his dated prose, Madison might speak more easily to today’s managers than other political philosophers. McLean (2003) suggests that “Madison is the most modern of the ancients . . . we like the way he argues. He thinks like an economist and reasons like a game theorist” (p. 14). Kernell (2003) argues that Madison has enjoyed a resurgence riding the coattails of the rise of corpora-tions as forces in economic and political life. Corporations have been com-pared with governments: “The emergence of huge multinational corporations with economic powers comparable to those of nations has brought awareness that these private-sector institutions have impacts on human lives comparable to the impacts of political governments . . .” (Markley, Campbell, & Harman., 1982, p. 58). Thus, in both his style and substance, Madison should appeal to future managers. This brief review of the development of Madison’s thought focuses on those elements that may be of most interest to management stu-dents to draw them into Madison and to provide context for the management lessons in Federalist #10.

Madison did not sit down one day in the heat of political battle over the ratification of the U.S. Constitution, and whip off Federalist #10. To the con-trary, this seminal work was the culmination of years of study of and



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experience in government. Madison was born the eldest son of a wealthy Virginia tobacco plantation owner in 1751. Yet Virginia at the time was not far removed from the frontier, and many students will relate to his experience as the first in his family to attend college. Madison attended the College of New Jersey, now Princeton University, rather than the local College of William and Mary in the then-swamps of Virginia, because the Northern cli-mate was better for his fragile health. Madison’s poor health led him to a life of politics rather than on the plantation (Wood, 2006).

In college, Madison was strongly influenced by the Enlightenment efforts to apply scientific reason to the study of human interactions. He read the works of several Scottish Enlightenment philosophers, including Adam Smith and David Hume. Adam Smith is likely known to business students for his conception of the “invisible hand” in economics; however, business stu-dents are probably less familiar with Hume who also focused on social coordi-nation. After college, Madison was further exposed to ideas about social coordination by his friend and fellow Virginian Thomas Jefferson, then ambas-sador to France, who brought back to Madison work by French theorist Marquis de Condorcet. Condorcet’s so-called “jury theorem” suggests that majorities are more likely to make “correct” decisions than individuals. Condorcet’s work is formulated in a mathematical language that is consistent with much modern economics, and even the title, “Essays on the Application of Analysis to the Probability of Majority Decisions,” evokes a desire to reduce human relations to scientific theorems. This secular, scientific perspective will be reflected in Madison’s later work (Adair, 1974; McLean, 2003; Wood, 2006). In particu-lar, this coordination of decision making will be reflected in Federalist #10. An emphasis on coordination is important for managers because it implies that human relations are an ongoing effort that is subject to analysis. This perspective contrasts with a one-time, preordained or predetermined “social contract” view of human relations that students may recall from another key philosopher of the time, John Locke.

Some, including Richard Matthews (1996) in If Men Were Angels: James Madison and the Heartless Empire of Reason, have criticized Madison’s rationalist instrumental approach to analyzing human interactions. However, Wood (2006) argues that “despite the often curious and probing quality of his mind, he was at heart very idealistic, if not a utopian” (Wood, 2006, p. 165). Wood suggests that Madison was influenced by Jefferson who had a greater faith in, and less fear of, people than Madison.3 Dougherty (2003) suggests that Madison’s college teacher, John Witherspoon, who was a preacher as well as president of the College, took the harsher rationalist edge off of Smith and Hume by balancing discussions of self-interest with sincere talk




of virtue, good faith, and noble character. Madison’s pragmatic balance of realism and idealism is in itself an inspiring role model for managers, and this balance will be important to understanding Madison’s faith in organizational design.

Madison’s thought combined thorough study of political theory with extensive political practice. Prior to writing Federalist #10, Madison was almost continuously engaged in politics, starting in the Virginia State Legislature in 1776, becoming the youngest member of the Continental Congress in 1780, returning to the Virginia State Legislature in 1784 (because of the term limits in the Articles of Confederation), and returning again to Philadelphia for the Constitutional Convention in 1787.4 Madison spoke from experience when he talked about “the instability, injustice, and confu-sion introduced into the public councils . . .” (p. 53). When Madison arrived in Philadelphia in 1780, the national government was a mess. Not only was the government unable to pay the Revolutionary War debts, or continue to supply the tattered army, but on many days they could not even get a quorum to make any decisions at all. Madison witnessed the States’ shirking of their responsibilities to fund the national debts and the self-interest of States as they jockeyed over claims to Western lands. Wilson (2003) argues that Madison’s experiences at the Constitutional Congress “shaped the way he viewed institutional design” (Wilson, 2003, p. 251). Just as there was a ten-sion in Madison’s thought between the realist and the idealist, there was ten-sion between his wanting a stronger central government to get the States to pay their debts and his fear of a central power that can be coopted by factions to oppress minorities.

Madison found just such a faction when he returned to the Virginia state-house in the spring of 1784. Patrick Henry had proposed a tax on all Virginians to support teachers of the Christian religion. In this incident, Madison proved himself both a theorist and practitioner of managing fac-tions. Madison was a strong advocate for religious freedom, perhaps reflect-ing his secular philosophical roots. Madison “. . . rallied Methodist, Baptist, and Presbyterian leaders who had chaffed under years of Virginia’s tax sub-sidy for the Episcopal Church and were understandably wary of any new proposals that would reintroduce state subsidies of religion” (Kernell, 2003, p. 105). Madison wrote to Jefferson in Paris: “The mutual hatred of these sects has been much inflamed . . . I am far from being sorry for it, as a coali-tion between them could alone endanger our religious rights” (quoted from “The Papers of James Madison,” p. 345 in Kernell, 2003 p. 105). This back-ground stands behind Madison’s discussion of “passions” and factional competition in Federalist #10.



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After the fight over religious freedom in Virginia, Madison entered another scholarly interlude (1784 to 1987) to study ancient and modern confederacies. Kauffman (1997) refers to Madison’s work in the summer of 1786 as “the greatest one-man ‘skull session’ in history.” Kauffman continues,

. . . there are bookworms and then there are bookworms, and it isn’t every student who can plow through the strengths and weaknesses of the Amphyctionic Confederacy of early 16th century Greece, the Helvitic Confederacy of 14th century Switzerland or the Belgic and Germanic confederacies of the mid-1600s. (http://www.earlyamerica.com/review/summer97/madison.html)

The result of this herculean effort was the Notes on Ancient and Modern Confederacies finished in the Spring of 1787. Madison concludes that states must grant national governments a certain amount of power to govern. In addition to comments on government structure, Madison also noted weak-nesses in people across time and space that reflected what he had witnessed in Philadelphia and Virginia. Madison recorded these observations in “Vices of the Political System of the United States,” from which passages in Federalist #10 are lifted practically verbatim.

“Vices” is on some points clearer than Federalist #10.5 Specifically, “Vices” notes that there are two sources of the instability: free-riding and self-dealing. Madison had both read about these in his studies and observed them firsthand in Philadelphia and Virginia. The two are “in the Representative bodies” and “in the people themselves” (Madison, 1787b, p. 332).6 According to Madison, representatives are motivated by “1. Ambition 2. Personal interest. 3. Public good” (p. 332), and that “Unhappily the two first are proved by experience to be most prevalent . . . But how easily are base and selfish measures masked by pretexts of public good and apparent expediency” (pp. 332-333). Then, foreshadowing Federalist #10, Madison writes,

A still more fatal if not more frequent cause lies among the people themselves. All civilized societies are divided into different interests and factions, as they happen to be creditors or debtors Rich or poor—husbandmen, merchants or manufacturers, members of different reli-gious sects—followers of different political leaders—inhabitants of different districts—owners of different kinds of property . . . what is to restrain them from unjust violations of the rights and interests of the minority or of individuals? Three motives only 1. A prudent regard to




their own good . . . 2dly. Respect for character . . . 3dly. Will Religion the only remaining motive be a sufficient restraint? (p. 333)Madison then reasons from both his experience and a game-theoretic logic

that none of these is sufficient to protect the interests of a minority against an aggressive faction. Rather, his remedy is in “enlarging the sphere” because “a common interest or passion is less apt to be felt and the requisite combina-tions less easy to be formed by a great than by a small number” (p. 334). This is identical to the conclusion Madison reaches in Federalist #10: “Extend the sphere, and you take in a greater variety of parties and interests; you make it less probable that a majority of the whole will have a common motive to invade the rights of other citizens . . .” (p. 61).

There has been a relatively recent controversy as to whether or not Madison’s prescription for extending the sphere in Federalist #10 and his enumeration of checks and balances in Federalist #51 are inconsistent.7 The former relies on a representative scheme while the latter uses the less repre-sentative Senate, Executive, and Judiciary to constrain popularly elected rep-resentatives.8 However, Wood (2006) argues that there is no “Madison problem.” He reconciles Madison’s fear and embrace of authority by revealing Madison’s ultimate optimism, perhaps idealism, that envisioned the central government as “a disinterested judge, a dispassionate umpire adjudicating among the various interests in the society” (Wood, 2006, p. 163). This raises interesting parallels with the role of managers as neutral arbiters in some stakeholder theory (Freeman, 1984; Laplume, Sonpar & Litz, 2008, and refer-ences therein). The key difference, in my opinion, is that Madison envisions representatives in the government as a whole being able to act dispassionately. He does not envision individual legislators, akin to individual managers, at any specific time and place being able to act as “neutral” participants in deci-sion making. Moreover, the representatives’ ability to serve the public good is not a function of their individual desire to do the right thing, but of strong incentives built intentionally to channel their baser motives of ambition and self-interest to serve the greater good.

Madison on ManagementThe purpose of this section is to summarize Madison’s lessons for managers. While Madison was focused on the workings of government, the problems he analyzed are pervasive in the workings of businesses. Both governments and businesses require collective action, loosely defined as individuals working together for a common objective. Chester Barnard, one of the first manage-ment theorists, offered a definition of collective action in his seminal work,



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The Functions of the Executive (1938): “[A]n essential element of organiza-tions is the willingness of persons to contribute their individual efforts to the cooperative system” (p. 139). As Madison was frustrated with the State’s unwillingness to contribute to the national debts, many a manager has been frustrated with employees’ unwillingness to contribute their best efforts to their organizations.

Madison’s first lesson for managers is that they must clearly identify their organizational objective. Students cannot use Madison’s definition of faction unless they first identify the interest to which the faction is adverse. Identifying organizational objectives is neither easy nor obvious in either the big picture or the day-to-day tasks. Collis and Rukstad (2008) note that few executives can concisely state their organizational objective, and even fewer line employ-ees have a clear enough understanding to be able to align their daily activities with the organization’s interest, even if they were so inclined. The key point is that different objectives define different sets of factions. For example, when Boeing changed its organizational objective from market share to profit mar-gin, staff with formerly congruent interests in producing planes at any cost became adverse factions torn between production and costs. Boeing experi-enced substantial labor strife as they shifted from a focus on maintaining costly 6 months of manufacturing capacity to a more lean operation willing to give up sales to preserve profit margins. If management did not also change incentives for the sales staff (e.g., if they were still rewarded on the number of planes sold no matter the discount), then the sales staff may also have become adverse to the new organizational objective. Identifying objectives is also important in everyday activities that implement the larger organizational goals. In my own management experience, I have failed to recognize that my interest in creating cross-functional teams was adverse to some of my staff’s interest in preserving their monopoly on a particular function. Similarly, although a manager may have a specific goal for a meeting, such as finalizing a marketing strategy, the primary objective for some staff in the meeting may be simply to get home in time for a child’s soccer game. The message here is that factions are fluid, changing with organizational and individual interests. Recognizing factions in both the big and the small can help managers to iden-tify and to understand the sometimes obstructive behavior of the humans they work with.

An important distinction between Madison’s theory of factions and stake-holder theory is that Madison is agnostic as to how the organizational objective is defined. By contrast, Donaldson and Preston (1995) suggest that the instru-mental value of stakeholder theory rests on a normative base that “requires simultaneous attention to the legitimate interests of all appropriate




stakeholders” (p. 67).9 Yet such “simultaneous attention” does not itself define an organization’s objective any more than Madison identifies the “permanent and aggregate interests of the community.” However, Madison’s harsh real-ism suggests to managers that even if they consider all stakeholders, some will still be left adverse to the organization’s interests. By focusing on adver-sity, Madison helps managers to answer the normative question raised by stakeholder theory: “Which stakeholders should managers then pay attention to?” (Laplume et al., 2008, p. 1161). While all stakeholder theorists may not agree with his answer, Madison would certainly say those stakeholders with adverse interests should receive substantial management attention.

Madison’s next lesson for managers is that “the causes of faction cannot be removed, and that relief is only to be sought in the means of controlling its effects” (p. 57). This follows from the prior point that no process of consult-ing stakeholders will prevent factions. Rather, managers need to get comfort-able with adversity because realistically they cannot please everyone all the time. Managers have not always heeded this lesson. There are many examples of corporations that try to reduce the diversity and liberty that Madison per-suasively argues are the root causes of factions. Students may be familiar with images of homogeneous post–World War II corporate life from the HBO series Mad Men, or the more classic Man in the Grey Flannel Suit, where white men dress the same, act the same, and keep any sense of individuality tightly under wraps. More recently, Foxconn’s stifling the freedom of its employees even to talk with each other has been implicated in a rash of sui-cides that occurred among their employees in 2009. Consistent with Madison’s prescription, much has been written about the value of diversity to corporate culture and performance. For example, Slater, Weigand, and Zwirlein (2008) found that diverse firms have an economically meaningful 1% to 4% higher net profit margin, and 2.5% to 6.0% higher return on equity, than comparable (matched on SIC code) less diverse firms. They suggest that diversity improves performance by improving decision quality, innovation, and customer out-reach. However, they note that diversity also entails costs associated with communication, conflict, employee turnover, and reduced incentives for cooperation. All these costs can be linked to the corrosive effects of factions as noted by Madison. Thus, Madison’s lesson is that managers should focus on their organizational design to benefit from diversity while minimizing unavoidable transactions costs.

Madison’s third lesson to managers is that they are not immune to becom-ing factions themselves. Recall that Madison emphasized in “Vices” that both the people and their representatives are motivated by self-interest and that representatives have the additional potentially corrosive motive of ambition.



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Federalist #10 could not be clearer on this point: “It is in vain to say that enlightened statesmen will be able to adjust these clashing interests, and ren-der them all subservient to the public good. Enlightened statesmen will not always be at the helm” (p. 57).

That we cannot count on having enlightened leaders does not mean that Madison is pessimistic about the potential for leadership. Despite Madison’s frank discussions on the corrosive effects of passions on collective action, Madison is ultimately optimistic about the potential for well-designed institu-tions to bring out the best in otherwise selfishly motivated individuals. In “Vices,” Madison still lists “public good” as a motive for representatives, though a weak third relative to ambition and self-interest. Madison’s core con-tribution is to argue that while we cannot count on people behaving consistent with the public good, we can set up incentives and controls so that positive collective action is more likely than corrosive self-dealing. Madison writes,

. . . by passing (public views) through the medium of a chosen body of citizens, whose wisdom may best discern the true interest of their country and whose patriotism and love of justice will be least likely to sacrifice it to temporary or partial considerations. Under such regula-tion it may well happen that the public voice pronounced by the repre-sentatives of the people will be more consonant to the public good than if pronounced by the people themselves . . . (p. 59).

As noted previously, Madison is more optimistic than Hume, perhaps reflecting the optimism of his teacher Witherspoon. Moreover, he is more secular and process oriented than Locke, believing that man’s reason can win out over his passions not by the hand of God, but by the design of men setting up the right rules of the game (Strahan, 2003).

Thus, Madison’s key message to managers is that organizational design matters. However, managers cannot simply copy Madison’s design for a large republic. First, a few multinational corporations aside, most enterprises are not that large. More important, Madison’s government structure is intended to make any action difficult. He states, “. . . the majority, having such coexistent passion or interest must be rendered, by their number and location, unable to concert and carry into effect schemes of oppression” (p. 58). In other words, according to Madison, lack of collective action, or government gridlock, is preferable to a majority being able to impose destructive policies. However, at the end of the day, managers must act. Gridlock is not a viable option for businesses, especially in today’s fast-paced economy.




So what lessons about organizational design should managers take from Madison? While they cannot literally reproduce a large republic, they can adopt the mindset that bigger is better for mitigating narrow self-interest. Specifically, managers should talk to a lot of people and consult a lot of different opinions. Having a large network for consultation can both check managers’ own ten-dencies toward self-interest and filter the self-interests of different factions affecting their business. Again, Madison would not rely merely on managerial prerogative. Rather, he would advise managers to set up more formal structures by which they would be exposed to others and be forced to consult with them by being held accountable to specific incentives that channel their self-interest. For example, I believe that Madison would endorse a managerial practice of regular “town-hall meetings” in large organizations, consistent with his repre-sentative scheme of governance. On a smaller scale, 360-degree reviews and management by walking around can expose managers to influence of those around them. Of course, these tactics have costs and downsides. For example, 360-degree reviews are likely to be tainted by the self-interests of the different factions of reviewers; however, this would be no surprise to Madison and should be expected by managers. By contrast, Madison would not condone management that relies on force of personality. I suspect that Madison would frown upon a manager sitting alone in an office, issuing orders that rely on her sole authority, rather than out building support, if not consensus.

Teaching Madison to ManagersI have argued that a benefit of teaching Madison’s Federalist #10 to busi-ness students is that it is difficult: the mental weight lifting will strengthen their analytic skills and allow them to reach for new sources of inspiration. However, acknowledging that reading Madison will be challenging puts an additional burden on professors to design activities to support student learning, lest students give up before they reap these benefits. In the fol-lowing section, I draw from my experiences in the classroom teaching Federalist #10 to undergraduate junior and senior Business Studies majors in a class on management. I have used Federalist #10 as a transitional piece, which moves the class from a brief introduction to strategy to a focus on organizational architecture. In this context, I have emphasized Madison’s lessons about human nature and the role of managers in designing organi-zations to achieve a predetermined strategic objective. That said, Federalist #10 could also add value to other parts of a business curriculum. As noted, there are interesting comparisons and contrasts between factions and



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stakeholders that would make Federalist #10 a provocative addition to classes on business strategy development, business ethics, or organiza-tional behavior. There are also clear connections between Madison’s political philosophy and Bolman and Deal’s “political frame” that make Federalist #10 a useful addition to classes that use this text. In particular, Bolman and Deal warn that “. . . it is foolhardy to plunge into a minefield without knowing where explosives are buried, yet managers unwittingly do it all the time” (Bolman & Deal, 2008, p. 216). Madison can help managers to identify the factions that are most likely to bury the explosives, and to design formal and informal mechanisms to diffuse them.

In what follows, I offer a step-by-step guide to introducing Madison and sup-porting students’ application of Madison’s lessons for management. While these steps follow a logical progression, I do not intend to imply a rigid order: Some steps will be more relevant to certain class applications than others. I conclude with strategies for assessment and assessment results from my own classes.

Step #1: Set the StageTeaching Madison to business students provides an opportunity to review basic American history that informs the political environment where most of our students will work and live. Such opportunities to teach history are rare in most business curricula that tend to focus on the here and now. I suggest starting class by painting a picture of life in the colonies in the mid-1780s after the Revolution. There are numerous visual aids from classic paintings, to poems, to short and fun School House Rock videos that can help students brush up on the basics and put Madison’s messages in context.10 The key image for students is that Madison was writing in and for a country in chaos.

Step #2: Link to the PresentFor better or worse, the daily newspaper often offers similar scenes of chaos and conflict. Recently, I have used images from Occupy Wall Street, Tea Party rallies, and rallies for and against health care reform to illustrate cur-rent political conflicts. These current events also highlight Madison’s time-less observation that “the most common and durable source of factions has been the various and unequal distribution of property” (p. 56). Discussing current events in light of Madison’s political philosophy can be core activity for classes that are focused on the relationship between business and govern-ment and the larger society.




Step #3: Link to Internal Business Management

Classes that are focused more on internal management than on external busi-ness relationships need to explicitly draw the comparison between societal conflict and conflict within organizations. These conflicts are not hard to find. I have used the “think-pair-square-share” technique to brainstorm examples of internal organizational conflict. Students have found many examples in their clubs, sports teams, and families, as well as in their work experiences. Some common examples are conflicts on sports teams among players who want playing time, or among club members who want to spend resources on different activities, or those who fight over leadership roles. Discussions of these examples frequently foreshadow Madison’s discussions of passion, self-interest, and ambition. As an added bonus, these examples of internal strife are often accompanied by examples of managerial blunders that further inform class discussions of optimal organizational design.

Step #4: Define FactionsWith both external and internal examples in hand, it is time to formally define factions. Madison’s definition is clear, but not easy to apply. Students easily identify groups with common interests, but they have a harder time isolating those with interests adverse to the interests of the organization. This highlights a key management skill: clearly identifying the organizational objective. As noted, neither Madison nor stakeholder theorists provide much guidance as to how to specifically define the “aggregate interest of the com-munity.” For strategy classes, Madison’s definition of faction can be a power-ful prompt to get students to wrestle with defining a strategy that is specific enough so that they can then identify those groups with adverse interests. Bolman and Deal (2008) offer a poignant example of the Challenger disaster, which highlights the hazard of papering over factions by making the objective overly broad. Specifically, defining the aggregate interest as the “success of the space shuttle program,” to which few could object, glossed over the criti-cal conflicts between those who felt success required an on-time launch and the engineers who defined success according to the performance of the equip-ment. The narrow shareholder perspective, that the objective of the firm is to maximize shareholder value, is also not specific enough to identify factions. There are many paths to value maximization. For example, those whose interest is in minimizing manufacturing expenses may be adverse to an orga-nization focused on product customization and innovation.



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Step #5: Human Nature

Madison’s Federalist #10 offers a substantive opportunity to confront students on their own views about human nature. The crux of Madison’s argument is that “the latent causes of faction are thus sown in the nature of man . . . [and there-fore] . . . that the causes of faction cannot be removed and that relief is only to be sought in the means of controlling its effects” (pp. 55-57). I emphasize to my students that, while Madison was an intense scholar, much of his writ-ing about human nature draws from his own experience. I urge my students similarly to draw on their own experiences and to challenge both overly opti-mistic and pessimistic descriptions with specific examples to the contrary. In my class, this discussion of human nature is recurrent. It begins with a review of neoclassic economic assumptions of rationality and continues after Federalist #10 with readings from Nobel laureates Oliver Williamson (2010) and Elanor Ostrom (2010). Williamson and Ostrom illustrate an evolving view of people that incorporates an ability to negotiate, to learn, and to create new understanding in the process of collective action. The ultimate lesson of this discussion of human nature reflects my own experience as a manager: you can’t pull off what you don’t believe. Given this message, I urge students to find organizations and management strategies, both in class and in their career pursuits, that are consistent with their own views of human nature.

Step #6: Lessons in Organizational DesignFinally, we put the rubber to the road to apply Madison’s lessons to identify-ing and solving real business problems. Practically any day’s newspaper can offer a “ripped from the headlines” example of factions at work. In addition, I have used two Harvard case studies: “Pandora: Royalties Kill the Web Radio Star?” (# 310026 by Pozen & Rosenfeld) and “Medysis Corp.: The IntensCare Product Development Team” (# 4059 by Donnellon & Margolis). I have found both of these cases accessible to an undergraduate audience. The Pandora case more closely corresponds to Madison’s political setting, exploring government decision making and factions external to the firm that directly affect internal management decisions. By contrast, the Medysis case focuses on internal team dynamics, vividly depicting the corrosive effect of factions defined along traditional functional lines of marketing, R&D, com-pliance, and production. Sample questions and grading rubrics for these cases appear online at http://jme.sagepub.com/supplemental.

Students apply many of Madison’s lessons in these cases. First, they use Madison’s definition to identify factions. This first requires them to state the




organizational objective to which the faction is adverse. Then using their anal-ysis of factions, they determine a strategy to move forward. Strategies span both new organizational designs (e.g., new teams, new incentives, policies etc.) as well as specific management tactics (holding group vs. one-on-one meetings, promoting or firing specific individuals). In this context, Madison’s focus on interests rather than job titles or established positions leads to useful lessons on negotiation, which follow the precepts of the classic text Getting to Yes (Fisher et al., 1981). Finally, in applying Madison’s lessons to both big and small decisions, students see that interests and thereby factions are fluid, requiring managers to continuously reassess.

Step #7: AssessmentI assess mastery of Madison’s lessons along several dimensions of Bloom’s (1956) taxonomy. First, I assess basic knowledge and reading comprehension with a simple online multiple choice quiz that students take after the class discussion.11 This quick quiz serves two purposes: first it provides an incen-tive to focus on a difficult reading, and second it reinforces the key points on the definition, causes, and effects of factions. Without this basic vocabulary, students would find it difficult to apply Madison’s lessons to case studies and their semester projects. Over the past four semesters, with between 12 and 19 students per semester, the average score on this assessment has been consis-tently between 4 and 4.5 out of 5. This high score demonstrates the students’ ability to master knowledge of Madison’s basic concepts.

Beyond mere knowledge of vocabulary, the most tangible lesson to assess is whether or not students can apply Madison’s definition of faction to iden-tify important players both internal and external to a business. This is consis-tent with the steps enumerated by Bolman and Deal (2008): “1. Identify relevant relationships; and 2. Assess who might resist, why and how strongly” (p. 219, and references therein). On this point, my assessment has been mixed. In case studies, current events discussions, and final projects, I have found that students easily identify groups with common interests. However, students consistently have a harder time identifying groups with interests that are adverse to the business. The primary challenge is for students to identify the interest of the business to which the group is adverse.

Finally, I assess whether students evaluate their organizational designs with respect to how the design addresses the threats from factions and is con-sistent with their vision of human nature. As Bolman and Deal (2008) colloqui-ally note, consistent with Madison, “People rarely give their best efforts and fuller cooperation simply because they have been ordered to do so” (p. 219). I



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have found that students are more likely to have an authoritarian view of management before reading Federalist #10 and engaging in the learning activities. I ask students about their view of management on the first day of class. A common response is that management is “telling people what to do,” and students’ initial response to poor performance tends to be to fire people. However, by the end of the semester, their management strategies are much more nuanced. Reflecting Madison’s lessons, many students incorporate ambition as an incentive by outlining specific incentives for career advance-ment. For example, one student project last semester was to build a chain of sports bars, and a core part of the motivation strategy was to promote from within when opening new locations. Another indicator of Madison’s impact on my students has been more specific discussions of team composition and meeting structure. Students acknowledge the value of cross-functional teams to constrain the narrow interests of each function. They also note the potential of teams to create new ideas and improve outcomes. However, reflecting Madison’s realism, they critically assess the challenges and costs of getting different factions to work together. Their organizational designs explicitly evaluate these costs and benefits to get self-interested individuals to work together for a common organizational objective.

Since Federalist #10 is just one of several readings that students use to develop their analysis, it is not possible to link all these outcomes directly to this assignment. However, I did ask my most recent class for qualitative feed-back on how Federalist #10 affected their thinking. Several students said that they used Madison’s definition of faction to help “figure out the players in my business.” Others noted that Federalist #10 helped them to focus on the over-all objective of their business. One student wrote, “factions will always arise as humans will always look out for their own needs. This needs to be moni-tored in a firm or it will get out of hand.” I take this as suggestive evidence that Madison’s lessons have gotten through in a meaningful and useful way.

Finally, my colleagues have responded very positively to my use of Federalist #10 in management. I presented this work at the first Business Professors Teaching Summit hosted by Temple University in 2011. Participants in this session commented that using Federalist #10 was “innovative” and “made me think about new sources of management education.” In a written peer review after a classroom observation my colleague wrote,

. . . [incorporating] James Madison’s Federalist #10 . . . [encourages] students to consider what those who seek to design and operate busi-ness organizations might learn from an understanding of the role of factions in politics and from a consideration of different notions of




liberty. A better example of the value of a liberal arts education in deal-ing with “the real world” I’d be hard pressed to find.

ConclusionThis article provides a rationale and a road map for including Federalist #10 in the business management curriculum. As the seminal work on factions, Federalist #10 gets at the essential underlying the challenge of management: How do we work together to get things done without killing each other? This challenge plays out on the small stages of daily business interactions just as poignantly as in the grander national and international arenas.

James Madison has been called a “scholarly politician—a politician who thought carefully about institutions in the context of action” (Kernell, 2003, cover). As such, Madison is an apt role model for our students. We should aspire for them to become scholarly managers who do not merely follow the latest 10-step management scheme but think carefully about the first princi-ples associated with human nature and organizational design. Madison offers a clear and useful definition of faction to help managers to identify the players, both inside and outside of their organization, with specific reference to their organizational objective. In addition, Madison argues that the design of orga-nizations matters because leaders are also subject to self-interested motives. However, Madison tempers his hard-nosed realism, born of both theory and practice, with an unyielding optimism in the capacity of men to create institu-tions that will support collective action and the common good. A careful read-ing of Madison that puts his harsh observations in context of his times, and recognizes the lasting impact of his prescriptions, foreshadows a more opti-mistic Elanor Ostrom (2010) more than two centuries later: “. . . a core goal of public policy should be to facilitate the development of institutions that bring out the best in humans” (p. 665). While Madison was focused on gov-ernment institutions, Ostrom and other contemporary theorists recognize the substantial opportunities for businesses and other nongovernment institutions to influence our society. There are many businesses that have enjoyed varying degrees of success by several measures, but none provide the “city upon a hill” example of an enduring organizational architecture that effectively manages factions. By exposing business students to Federalist #10, perhaps we increase the odds that one of them may lead such an organization in the future.

Acknowledgments

I would like to thank the JME Editor, Gordon Meyer, and two anonymous reviewers, participants at the 1st Business Professor Teacher’s Summit, my colleagues Fred



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Curtis and Bernard Smith and my Management students at Drew University for engaging in very helpful dialogues about teaching and learning. All errors in this article are my own.

Declaration of Conflicting InterestsThe author(s) declared no potential conflicts of interest with respect to the research, authorship, and/or publication of this article.

FundingThe author(s) received no financial support for the research, authorship, and/or pub-lication of this article.

Notes

1. All page numbers for Federalist #10 are from the 1937 Random House edition of The Federalist Papers.

2. There are several recent examples, including the U.S. Navy rescue of the captain of the U.S. cargo vessel Maersk Alabama as well as the rescue of Iranian fisher-men. See Boot (2009) for a historical analysis.

3. Wood (2006) notes that

When Madison was wringing his hands in the late 1780s over the turbulence of Shay’s Rebellion, Jefferson was writing blithely from France about the value of the spirit of popular resistance to government . . . I like a little rebel-lion now and then. (2006, p. 145)

4. After the ratification of the U. S. Constitution, Madison represented Virginia in the U. S. House of Representatives, represented the U. S. as Secretary of State, and ultimately as the fourth President of the United States from 1809-1817.

5. If time permits students may benefit from reading “Vices” because some pas-sages offer more specific examples of the theoretical points in Federalist #10.

6. Page numbers for “Vices of the Political System of the United States” are from the reprint in Kernell (2003).

7. Madison’s checks and balances have some interesting applications to corporate governance, particularly the separation of management and control, analysis of conflicts of interest and fiduciary responsibilities in light of the Sarbanes Oxley Act of 2002. This application of Federalist #10 is beyond the scope of the current article that focuses on ground-level management.

8. During the Constitutional Convention, Madison advocated an even more authoritarian power for the central government to veto state laws. This proposal was defeated.

9. Freeman (1984), arguably the originator of stakeholder theory, did not claim a normative basis: “the stakeholder approach offers no concrete, unarguable




prescriptions for what a corporation should stand for . . . it is not normative in the sense that it prescribes particular positions of moral worth to the actions of managers” (1984, p. 210 as quoted in Laplume et al., 2008, p. 1169).

10. A classic painting that is evocative of the “factions” at the founding is “Scene at the Signing of the Constitution of the United Sates” by artist Howard Chandler Christy. In this painting, students can see the passion and different groups of leg-islators even after they had reached agreement. You Tube has short yet dramatic clips on Shays Rebellion and the Constitutional Convention as well as School House Rock episodes, in particular: “The Preamble”; “No More Kings”; “I’m Just A Bill”;“Three Ring Government”; “Presidential Minute”; and “I’m Gonna Send Your Vote To College” are all on point and run under 6 minutes. All of these materials are easily found using Google.

11. Specific multiple choice questions are available from the author on request.

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