The Mafia optimization problem

Non-market entities such as the Mafia have unique management challenges. These organizations certainly try to maximize shareholder value. Since the strategy is primarily based on uniquely defined criminal activities, the most important thing for the organization is the people involved and their loyalty. Specific functions such as those delivering justice or negotiate arrangements in the state of operations with non-willing participants are especially important. Successful leaders will fill these functions first with close associates who will always stay loyal to the leader and will be willing to partake in anything the leader desires. So, hiring is fundamentally important for a successful mafia operation.

On the human resource side, selection, design and portfolio management are all equally important. With stringent quality criteria applied to a limited pool of available resources, the selection problem is particularly acute. Identification and retention of quality personnel is the key. On the design side, there is a lot of risk in assembling people with long criminal records, who do not typically play well together. So, it is important to segregate and manage, as organizations that allow a lot of contact among the members, may not succeed. And, the portfolio management problem is the most challenging for the leader. As turnover is likely to be high, it is important that the person in charge of justice delivers it with high accuracy. If the turned-over personnel escape, that substantially increases the risk of failure.

History indicates that successful organizations have had high domain focus. They seldom deviated from their core competencies, whether it is religion, government or even hospitality. As the mafia itself does not typically have any assets of value, they have to continuously replenish their coffers with activities they focus on. Operational efficiency is the key here. As the customers are typically non-willing, it is important to find ways to coerce and confuse. This is a significant operational challenge as they have to navigate around laws and regulations. Once the prey is cornered, they have to move with high precision.

Family has always been the critical component of a successful mafia operation. Grooming the next generation to take over has been optimal for the leader as the immediate layer below has high loyalty, by definition. Often, as the enterprise grew, the leader found it difficult to plug the gaps with non-family members, who have an inherent risk of disloyalty. Often, it may be better to leave the positions open rather than filling those with outside members as vacant positions may reduce the overall risk of the enterprise.

Dealing with laws and regulations of the land have always been a bane for a mafia organization. Successful ones have always understood them and figured out how to circumvent them. Domicile is also an important optimization criterion. In general, a mafia organization would like to avoid scrutiny or be able to create or change laws by itself when needed. Often, they have to approach it in two directions – by attempting to invalidate the status-quo or by suggesting ideas as to how to improve it.

The Mafia is the most efficient organizational structure known today. Modern societies have been attempting to fight it but with limited success.