Why corporate stupidity is a necessary evil in complex organizations

The standardization of behavior serves to maintain the uniformity of action typical of multinationals operating on the global market. The perspective changes in local businesses: here the absence of "creativity" can put the very life of the company at risk. From issue 161 of the magazine

AboutPharma – di Ascensionato R. Carnà – Carnà & Partners – September 25, 2018

Spicer and Alvesson in their work "The stupidity paradox" have deepened, among others, the concept of the so-called "functional stupidity” defining it as the inability of (even good) executives to question the norms and expectations of their business organization. In this the paradox: very intelligent, competent and capable managers it seems subordinate their abilities to accommodate company dynamics rather than directing them to innovation and the study of strategies. In this perspective, corporate stupidity would reside precisely in carrying out activities in an uncritical and, above all, less efficient (if not completely inefficient or useless) way. In fact, the correct framing of the phenomenon outlined cannot disregard the perspective of analysis and evaluation: a lot depends on the "position" of the observer and it will be discovered that it isn't so "stupid" after all!

Two declinations of the concept

Therefore, the symptom of "stupidity" must be read at least through two perspectives: 1) the multinational and managerial company and 2) the local and entrepreneurial enterprise. For this purpose, think, for example, of a multinational company which operates, at the same time, on several markets with homogeneous products/services. In this "global" perspective, top management needs to control the organization due to the need to guarantee uniformity of behaviour, product quality, service delivery, etc., at a global level. Forgive the simplification, but it is obvious that the same product or service, net of possible and/or necessary local variations, must have the same connotations "from the Alps to the Pyramids, from Manzanares to the Rhine".

The uniformity of complex systems

The company is considered and must be perceived as unitary: it is an indispensable intangible value of the modern global enterprise. Could we ever imagine Amazon, Coca Cola, Ikea, or any other multinational company that does not have common and clearly identifiable traits with other companies belonging to the same brand? How, then, can the global manager guarantee such unity? The answer is far from simple but, for our purposes, two key concepts are useful: segregation of functions, formalization and standardization of corporate processes. Through segregation, corporate conflicts of interest are governed and complementary skills and responsibilities are shared, necessary for the definition of corporate processes and their consequent formalization and standardization.

It is true that bureaucracy is being nourished, but the necessary prerequisites for business continuity are being created in a multinational perspective. Furthermore, in the global scenario, any best practices or lessons learned from "accidents" must be analyzed and implemented on all affiliates. Even these new activities can be interpreted, simplistically, as corporate stupidity: “what is the point of this additional control? I'm only wasting time”… is the first sentence you hear in the company. The second is: "we used to do this and it was much better"... the phrasebook is broad and well known to all readers.

A method to ensure compliance with international rules

Last but not least, the described need for control is instrumental in guaranteeing compliance with the reference legislation and the integrity of the behavior of the entity's employees and collaborators. Think, for example, of the policies, and related controls, in matters of compliance, anti-corruption and anti-bribery and more dictated both by external legislation (for example: FCPA, UK bribery Act, Legislative Decree 231/2001, other) and from company choices. In summary: apparently meaningless behavior in multinational companies responds – often – to a need that is difficult to perceive (or know) at the local level. They serve, here is the paradox, to guarantee the continuity of the group in the most efficient and effective way possible (not in absolute terms). The complaint, correct, is on the ability of the groups to share and explain at a local level the underlying of certain decisions (and, therefore, the consequent standard operating procedures) which make them appear "stupid" with the risk of being implemented without conviction but as bureaucracy, mere fulfillment.

The damage is twofold. At the group level, it is believed to have mitigated a risk and normalized behaviors; at local level, the risk is not perceived as such and is not managed in the best way. But this limits the genius of managers, especially local ones. In order to avoid these possible consequences in evolved organizations there are specific departments dedicated to creativity which guarantee a continuous approach to the market in line with the evolution of its dynamics (including increasingly common acquisitions of innovative companies). In local, entrepreneurial realities, the perspective of analysis is different and we will limit ourselves to just a hint. If it is the entrepreneur who decides and the managers support him uncritically, we are faced with a very common and serious case of corporate "foolishness", the extreme consequence of which is the very economic survival of the company.

A phenomenon between physiology and pathology

In conclusion. Corporate stupidity exists. In some cases it is physiological, necessary for the growth and development of the company: upon closer analysis, one realizes that it is not so stupid, on the contrary! In others, it is pathological and is a prodrome of the corporate crisis in the long run. To understand what kind of stupidity we are dealing with, it is necessary to define the right dimension of observation: the perspective can change the final judgment, even considerably. A connotation of corporate intelligence, in reality, is found in the ability to explain the reasons for certain choices - apparently stupid - in order to obtain the agreement of those who will have to carry them out but also to listen to their needs and receive any proposals. Finally, corporate wisdom belongs to those who are able to recognize an error, listening to the "base", and to remedy it. Referring to Fernando Pessoa we can say that there is so much intelligence in stupidity.

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Note: According to the results of the HR Trends and Salaries Report 2016, the lack of skills affects 97.9% of Italian organizations.