Personal Allegiance and Role Responsibility: From Pre-modern to Modern Management

Imagine you are a young person with a modest income but proficient in a certain technical skill. An acquaintance, an older “Big Brother,” introduces you to a private gig. You complete the task beautifully, and the client company pays 200,000 yuan.

Now, the question is: How do you and “Big Brother” split this 200,000 yuan?

Your intuition might suggest that since you completed the task, you should take the larger share, giving “Big Brother” a decent referral fee. However, the common advice online is that you should accept the entire 200,000, hand it over to “Big Brother” in person, and let him decide the allocation. Even if he keeps 180,000 and gives you only 20,000, you should accept it cheerfully.

This is what is known as “being savvy” or “showing deference.” Only by doing so can you secure future cooperation opportunities, and with time, your share will naturally increase.

Admittedly, perhaps the task wasn’t solely dependent on your technical skill; what was truly scarce was the opportunity itself—for instance, the task might have come from a state-owned enterprise, and “Big Brother” happened to be the chairman’s brother-in-law. But you might still question: Why can’t everyone agree on a split beforehand? Why must you present the 200,000 with both hands afterward to “show deference”?

This isn’t just a transfer of benefits; it’s a clear declaration, an act of allegiance: “I acknowledge your superior position, I will not circumvent you, I will not act on my own initiative; I am your person.”

When power, responsibility, and benefits are vested in a specific individual, that individual will demand absolute loyalty and controllability.

This is why, in family businesses, the person managing finances is often a relative of the boss with mediocre abilities; it’s also why, even in the 21st century, Guo Degang can still use the traditional method of “expelling disciples from the school” against his apprentices.

All these phenomena can be summarized with one term: “pre-modern.”

The essence of pre-modern management lies in “personal allegiance,” while modern management emphasizes “role responsibility.” This article will explore the operational logic of pre-modern management and analyze its limitations.

The Operational Logic of Pre-modern Management: Favor, Authority, Kinship, and Declaration #

The operational methods of pre-modern management can be succinctly summarized by four principles: Favor, Authority, Kinship, and Declaration.

“Favor” (恩), means creating allegiant relationships through personal benefits. You don’t sign an equal and mutually beneficial contract with a company; instead, you are “favored by the boss’s appreciation.” A boss’s remark, “Haven’t I treated you well?”, implies that you are indebted.

“Authority” (威), uses fear to compel obedience. If there is only favor and no authority, one is easily perceived as weak and vulnerable to bullying. Machiavelli’s famous quote, “It is much safer to be feared than loved [1],” perfectly illustrates this principle.

“Kinship” (亲), refers to the reliance on trusted confidants. Although “nepotism” is a well-known derogatory term, in pre-modern organizations, reliability is precisely what is most valued in personnel. Consider this: an emperor’s court changes with each new ruler. If one doesn’t appoint trusted kin, are they to appoint strangers? Emperors, despite having a bureaucratic apparatus, often trusted their inner court, close attendants, and even eunuchs more. While civil officials held formal ranks and duties, relationships like mentor-disciple, fellow students, or contemporaries often determined trust and patronage more than simple superior-subordinate lines. Even outside formal structures, military commanders commonly maintained private armed forces such as personal guards and household retainers. Only “one’s own people” could be truly reliable and effectively utilized.

“Declaration” (表), means showing loyalty. Pre-modern management especially favors public declarations, even demanding direct “performances”: lining up to applaud, shouting slogans, writing reflections, and transmitting unified ideologies through layers. Loyalty must be demonstrated not only in actions but also expressed in language and demeanor.

In summary, all the rules of pre-modern management are rooted in specific interpersonal relationships. Your situation depends on your private connection with the boss—whether he appreciates you, whether he worries about your betrayal, whether he considers you “one of his own,” and the extent of your declared loyalty. This is the essence of “personal allegiance.”

One must ask, how can such an organization accommodate top talent and achieve great endeavors?

Under a management model that emphasizes both favor and authority, relies heavily on trusted kin, and prioritizes attitude, an organization inevitably gains loyalty over ability, fear suppressing genuine feedback, cronies replacing professional expertise, and outward declarations triumphing over actual results.

In contrast, modern management aims to achieve reliable collaboration among people who may not know each other and do not need to like each other. Therefore, it must transform the organization from “a series of private relationships” into “a set of replaceable role interfaces.” It defines authority through positions, conveys information through processes, reports results through metrics, and enforces accountability through audits. People can move, but role responsibilities remain; emotions may change, but interface connections persist; the boss doesn’t need to know everyone, yet the organization can still operate efficiently.

In short, pre-modern management involves people being accountable to other people, while modern management involves people being accountable to roles.

The Rationality and Ceiling of Pre-modern Management #

So, what is the underlying rationality of this seemingly “backward” pre-modern management?

First, it must be noted that pre-modern management is not unique to China. For example, even today, when applying for academic positions or graduate programs at US universities, “letters of recommendation” are still used—a practice that dates back to ancient Rome. The collected letters of the Roman politician, orator, and philosopher Cicero (Marcus Tullius Cicero) include many standardized recommendation letters, typically phrased as: “I commend this person to you as one of my own household and closest kin; please treat him so kindly that he understands this recommendation has been of great use and assistance to him” [2]. Although Romans were among the most law-abiding people in the ancient world, the underlying logic of Roman society’s operation was also rooted in patron-client relationships.

Contemporary American society also values personal connections: besides recommendation letters, job seekers use “referrals” from acquaintances, and business dealings place high importance on networks of acquaintances and alumni.

Personal relationships form the most fundamental layer of social trust, and personalized trust incurs significantly lower costs than institutionalized trust.

Establishing a modern enterprise system requires a robust contract system, accounting and auditing, performance evaluation, and grievance mechanisms, and even more, enforceable commercial laws and a trustworthy market for professional managers. However, if you are merely leading dozens of workers to undertake earthwork projects in a rural area, are these complex systems truly necessary? All you seek is obedience and reliability.

The interpersonal network upon which pre-modern management relies is readily available. No one comes from nowhere; you always have relatives, fellow villagers, and old acquaintances. You cannot completely detach from this network, and therefore, you won’t easily betray those closely connected to you within it. Managing through relationships is undoubtedly extremely convenient.

The master sociologist Max Weber long ago pointed out that the authority system of traditional societies belongs to “patrimonialism”: the entire organization is seen as an enlarged version of the ruler’s household, and officials pledge allegiance to the ruler personally, not to some abstract office [3].

The logic of distribution in pre-modern societies also differs. If a boss secures an order not through open competition, maximum efficiency, and optimal quality, but because of a closer relationship with a superior, then what he has learned is not that “ability creates profit,” but that “relationships determine profit.” When a task’s contribution in terms of ability is clearly only worth 20,000, yet it yielded 200,000 due to relationships, why would you expect him to give you 100,000?

Enjoying an economic rent, it seems, one might as well enjoy a bit of emotional value. Pre-modern management offers an immediate sense of control: a single command from you, and the entire team complies; chat groups uniformly respond with “received”; unanimous applause in meetings… This kind of gratification is hard for modern systems to provide.

Some are forced to implement pre-modern management, some enjoy it, and others have a demand for it. Modern management aims to make power transparent. Once responsibilities are clearly defined, many informal powers, which previously relied on vague authorization, verbal communication, and guessing superiors’ intentions, become constrained and devalued by the system. Disorder is not always a sign of management failure; sometimes, it is a self-serving structure: the more ambiguous the boundaries, the more room certain individuals have for manipulation.

To put it plainly, as the saying goes, “Brothers fight tigers, father and son go to battle.” If I start a company with a few brothers, surrounded by those loyal to me, and we all make money together, what’s wrong with that?

In the short term, pre-modern management indeed offers advantages in speed, cost-effectiveness, and quick results. However, it can only solve problems that are small-scale, low-complexity, and short-cycle. Once an organization needs to operate across regions, professions, and hierarchies, once it requires stable cooperation among strangers, timely reporting of bad news, and smooth handover of responsibilities, pre-modern management immediately hits its ceiling.

Dunbar’s Number: The Scale Limit and Trust Crisis of Pre-modern Management #

The upper limit of pre-modern management is precisely what we referred to earlier as “Dunbar’s number.”

Robin Dunbar, an evolutionary psychologist at Oxford University, discovered that the upper limit for the number of stable social relationships an individual’s brain can maintain is approximately 150 people. This is a physiological hard constraint of the neocortex [4]. You can only trust this many people at most. And the number of private relationships you can protect, intimidate, and simultaneously reward and punish will be even smaller.

If your relationship radius is limited to this, how can the organization you build handle complex matters?

Furthermore, if a department within a company is filled with the leader’s relatives, like Zeng Guofan’s Xiang Army where “soldiers belong to their generals, and move with their generals” [5], while internal trust is achieved, what would other company members think? If a business line only follows one leader, and the team identifies with the individual rather than the company, how could the company dare to entrust important business to them?

This is what is known as “not scalable.”

If you attempt to force scalability under the constraints of Dunbar’s number, you will inevitably be misled by your subordinates.

Middle managers play a crucial role in this process. Middle management is the hub and gatekeeper of information: superiors don’t understand the true situation at the grassroots, and subordinates can’t grasp the superiors’ true intentions, creating space for rent-seeking and survival for middle managers. They process information into versions most favorable to themselves: reporting only good news to superiors, fostering an aura of mystery around leaders for subordinates, withholding resources from peers, labeling dissenters, and finding scapegoats for failures.

So, is strict discipline feasible? “Whoever dares to deceive me, I will punish them!” Yet, how can you be sure you haven’t already been deceived? Your strict control will only breed fear. The management guru W. Edwards Deming once said, “Driving out fear [6]” is a prerequisite for unleashing employee potential. An organization shrouded in fear might be unusually quiet, but quietness is by no means order. Often, this quietness is merely collective blindness.

Once pre-modern management attempts to scale up, it falls into a paradox: it desperately seeks loyalty, but ultimately rewards those most skilled at performing loyalty. Those focused on actual work are often labeled as “purely professional without political savvy,” and those who dare to report the truth are branded as troublemakers or rebels; only those adept at performing loyalty secure promotions. It’s less that bosses fail due to stupidity, and more that they are spoiled by their middle managers.

You may think you control the entire organization, yet unknowingly, you only control its superficial posture.

Modern Management: A Leap from Personal Allegiance to Role Responsibility #

Modern management is, first and foremost, a core scaling technology.

To break through the limitations of Dunbar’s number, we must shift from private trust among individuals to collective trust in a shared narrative, and collectively gaze upon a “third entity.” For an organization, this narrative and “third entity” is the institutional system.

Douglass North, the 1993 Nobel laureate in Economic Sciences and an American institutional economist, won his prize precisely because he introduced “institutional change” into the explanatory framework for economic growth: whether a society can achieve long-term development depends not only on technology and capital but also on whether it possesses an institutional system capable of reducing transaction costs, stabilizing expectations, and enforcing commitments.

North pointed out in his Nobel Prize lecture: for complex division of labor to expand, society must move from personal exchange to anonymous, impersonal exchange [7]. Pre-modern trust is built upon specific individuals; the sophistication of modern institutions, however, lies in their ability to detach trust from specific individuals and embed it within roles, contracts, audits, judiciary, job responsibilities, and enforceable processes.

This is the fundamental shift from “personal allegiance” to “role responsibility.”

In fact, clear delineation of power and responsibility is not a constraint; on the contrary, it is liberation. With limited power, you only bear limited responsibility. When you are clear about what you can decide and what you are responsible for, you can truly act boldly and unleash your potential.

The Predicament of Family Businesses: Lack of Trust and Institutional Lag #

A 2018 paper [8] studied 1,284 private Chinese family businesses and found that 57.09% of these firms had at least one family member in their middle management team. These “insiders” were largely concentrated in financial and procurement roles, which manage funds, but were exceptionally rare in R&D positions. This might seem reasonable: family members control the finances, while external personnel handle operations. However, how effective is such an arrangement?

Researchers calculated that the higher the degree of family involvement in middle management, the lower the firm’s per capita output. Specifically, for every one standard deviation increase in family member participation in middle management, the firm’s average annual per capita output decreased by approximately 10,200 yuan. More critically, if the top executive himself is also a family member rather than an external professional manager, the dragging effect of family members in middle management on productivity is further amplified.

Another study on Chinese private enterprises found that family managers typically enjoy higher salaries, more senior positions, and greater decision-making authority—yet, when facing rewards or penalties, they are not as strongly constrained by performance as external managers. If external personnel mess things up, their bonuses, positions, and authority may all be affected; but if family members err, the organization often tends to explain away their mistakes and provide fallback support [9].

The quality of management directly translates into economic efficiency.

Nicholas Bloom, an economist at Stanford University, and John Van Reenen, an economist at the London School of Economics, initiated the “World Management Survey” [10]. They dispatched trained interviewers to score management practices across thousands of factories in various countries—including how performance is tracked, how goals are set, how quickly problems are discovered, and whether promotions are based on merit or seniority. The results showed a strong correlation between a firm’s management score and its productivity and profit.

The research also indicated consistency in management patterns between China and the US: companies with higher management scores were more likely to export, had a wider variety of export products, reached more destinations, and achieved higher export revenues and profits. However, the difference between China and the US lay in the fact that, within the Chinese sample, the variation in management quality had a more significant impact on firm efficiency and product quality. This plainly suggests that Chinese enterprises, compared to their US counterparts, have a greater need to improve their management capabilities.

Therefore, family businesses find it difficult to achieve large-scale development. They easily fall into a vicious cycle: distrusting systems, they rely on relatives; relying on relatives, institutional development struggles to mature; and because institutions struggle to mature, they become even more hesitant to trust external personnel [11].

Over-relying on “one’s own people” leads to the dilemma that “one’s own people” may neither be competent nor willing to work for you. In Bloom and Van Reenen’s survey, family businesses practicing primogeniture were found to have the worst management scores globally. A 2021 PwC survey also showed that in mainland China’s family businesses, only 19% had a mature and written succession plan [12]…

As Professor Li Xinchun of Sun Yat-sen Business School stated: “A business might operate for three to five years by relying on individuals or opportunities; but to operate for thirty or fifty years, or even to become a century-old establishment, it must rely on systems” [13].

The Essence of Modernization: From Status to Contract #

The essence of modernization is not towering skyscrapers, bustling traffic, or unparalleled technological dominance.

The 19th-century British legal historian Henry Maine famously said: “The movement of the progressive societies has hitherto been a movement from Status to Contract [14].”

Status, even before an individual’s birth, firmly restricts them within a predetermined network of personal relationships—whose offspring you are, what family lineage you come from, to whom you are beholden; these pre-exist you yet define you. Contract, on the other hand, is a relationship that you, as an independent individual, voluntarily choose and take responsibility for.

Allegiance carries a certain warmth. You are not only a subordinate but also receive protection and certainty, and even a position where you don’t have to bear sole responsibility: you just need to be “savvy,” and someone will shield you from the storms.

However, moving towards modernization means you must abandon this security to strive for more difficult yet more precious treasures: rights and dignity.

But we must ultimately take this step, and in fact, many people have already completed this leap. When others ask, “Whose person are you?”, they will firmly reply—

I am no one’s person. I am the one who gets things done.

As the poem goes:

Favors and might build the grand, ornate hall, Close confidants seated, central to all. Their sight encompasses what’s close at hand, But how can the vast nation be spanned? By written decree, commands are now made known, Principles set, and order firmly sown. Ask not whose kin I am, or whence I hail, I am the one to make the task prevail.

Annotations #

[1] Machiavelli, Niccolò. The Prince. Translated by W. K. Marriott. London: J. M. Dent and Sons, 1908. Chapter 17. Project Gutenberg. https://www.gutenberg.org/files/1232/1232-h/1232-h.htm. Italian original: “è molto più sicuro l’essere temuto che amato”；Marriott English translation: “it is much safer to be feared than loved.”

[2] Cicero. Epistulae ad Familiares. Book 13, letter 71. The Latin Library. https://www.thelatinlibrary.com/cicero/fam13.shtml. Latin original: “quare sic tibi eum commendo, ut unum de meis domesticis et maxime necessariis. Pergratum mihi feceris, si eum ita tractaris, ut intelligat hanc commendationem sibi magno usui atque adiumento fuisse.”

[3] Weber, Max. Economy and Society: An Outline of Interpretive Sociology. Edited by Guenther Roth and Claus Wittich. Berkeley: University of California Press, 1978.

[4] Dunbar, R. I. M. “Neocortex Size as a Constraint on Group Size in Primates.” Journal of Human Evolution 22, no. 6 (1992): 469–493.

[5] Luo, Ergang. Xiangjun Bingzhi (Treatise on the Xiang Army).

[6] Deming, W. Edwards. Out of the Crisis. Cambridge, MA: MIT Press, 1986. ——“Drive out fear” is one of Deming’s fourteen points for management.

[7] North, Douglass C. Institutions, Institutional Change and Economic Performance. Cambridge: Cambridge University Press, 1990. See also North, Douglass C. “Economic Performance through Time.” Nobel Prize Lecture, December 9, 1993. NobelPrize.org. https://www.nobelprize.org/prizes/economic-sciences/1993/north/lecture/; The Nobel Prize. “The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel 1993.” NobelPrize.org. https://www.nobelprize.org/prizes/economic-sciences/1993/summary/.

[8] Hu, Qiongjing, Yanlong Zhang, and Jingjing Yao. “Family Involvement in Middle Management and Its Impact on the Labor Productivity of Family Firms.” Management and Organization Review 14, no. 2 (2018): 249–274.

[9] Cai, Hongbin, Hongbin Li, Albert Park, and Li-An Zhou. “Family Ties and Organizational Design: Evidence from Chinese Private Firms.” Review of Economics and Statistics 95, no. 3 (2013): 850–867. https://doi.org/10.1162/REST_a_00268.

[10] Bloom, Nicholas, Kalina Manova, John Van Reenen, Stephen Teng Sun, and Zhihong Yu. “Managing Trade: Evidence from China and the US.” NBER Working Paper no. 24718, National Bureau of Economic Research, 2018. https://www.nber.org/papers/w24718. See also Bloom, Nicholas, and John Van Reenen. “Why Do Management Practices Differ across Firms and Countries?” Journal of Economic Perspectives 24, no. 1 (2010): 203–224.

[11] Fukuyama, Francis. Trust: The Social Virtues and the Creation of Prosperity. New York: Free Press, 1995.

[12] PwC China. Global Family Business Survey 2021 — China Report. PwC China, February 16, 2021. https://www.pwccn.com/zh/services/entrepreneurial-and-private-business/private-family-business-services/global-family-business-survey-2021.html.

[13] Sun Yat-sen Business School. “【World Manager】Family Business Management in a Key Era – Interview with Professor Li Xinchun, Director of China Family Business Research Center.” November 24, 2014. https://bus.sysu.edu.cn/article/2708.

[14] Maine, Henry Sumner. Ancient Law: Its Connection with the Early History of Society, and Its Relation to Modern Ideas. London: John Murray, 1861. Chapter 5. Original sentence: “we may say that the movement of the progressive societies has hitherto been a movement from Status to Contract.”