The social loafing effect occurs when individual performance is not directly visible; it blends into the group effort. When there is an involvement of many people, individual performance will start reducing. Social loafing occurs when an individual is doing less when working in a group, as opposed to putting forth full effort if they were alone.
Social loafing has interesting implications. In groups, we tend to hold back not only in terms of participation but also in terms of accountability. Nobody wants to take the rap for the misdeeds or poor decisions of the whole group. If a team member feels their impact will not be worth much – especially in a large team – they may decide to back off and enjoy the ride at the expense of the others.
Investment – When a large group of people involves in the decision-making of an investment opportunity, and the decision goes wrong. Then no one will be ready to take responsibility. We should not involve large numbers of people in the decision-making process. And if large numbers of people get involved then we need to make sure that each person is accountable for their decision.
The disadvantages of groups can be mitigated by making individual performances as visible as possible. Reward and punishment for each member of a large group can help to reduce the effects of social loafing.