Principles of Large Organization Incompetence

During my time in large corporations I noticed some repeated patterns of organizational behavior which I’ve come to view as unavoidable in organizations beyond a certain size or length of time in business. Beyond a certain critical point these will inevitably lead to a crippling level of corporate incompetence.

1. First rate people hire first-rate people, second-rate people hire third-rate people – and there aren’t many first-rate people.  Mathematician André Weil may have been the first to express a similar idea (in referring to university hiring practices) and it remains horrifyingly true in organizations of every size. Nobody wants to look bad and second-rate people act as though they fear that fate is more likely to be inflicted upon them by the first-rate than the third-rate, though the underlying assumptions are obviously suspect.

2. The geometric progression of stupidity. This occurs when two or more stupid people work in proximity to each other. When an area has only one stupid person the stupid person’s onerous output will eventually end up in the lap of someone with ability where it will be corrected (even when the stupid person jams their desk drawer shut and shoves all problem documents through the crack into supposed oblivion). However, when two or more stupid people are combined their screw ups start cycling back and forth in a viciously synergistic circle of stupidity, multiplying geometrically as each successive screw up is screwed up further. It doesn’t take too many steps into the combinatorial math to realize this can quickly get so out of hand it will destroy almost any company. The first principle makes this nearly impossible to avoid.

3. Gresham’s law of stupidity. Bad money drives out good and stupid people similarly drive out smart people. After the first two principles work their magic the remaining smart people will begin to flee like rats off a sinking ship. At first not necessarily because they already see the chasm at the end of the tunnel, but simply because they don’t like having to deal with all the stupid people. Any smart people inadvertently hired will either quickly assess the situation and move on, or simply churn out the average amount of work in a few hours a week and retire on the job.

4. The downward spiral of job requirements. This afflicts companies of any size as they grow. In a startup everyone necessarily wears many hats and therefore has an interesting and challenging job. But at some point those jobs have to be split up and soon everyone is wearing just one hat. Further growth results in more subdivision until eventually every job in a company wears only 1/10,000 of a hat, more of a thread really, and their keyboards have pictograms instead of letters on the keys. If the previous three principles don’t drive away anyone with a brain this perpetual dumbing down will. Beyond a certain size growth isn’t even required to experience the downward spiral. When a new position is created the original occupant can generally do all that is required and more. The following hires generally can’t and, rather than firing them and continuing the search, the job is continually reduced so that the lowest common denominator is able to handle it. Time only makes this worse.

Early retirement offers accomplish similar results. The talented know they will have no difficulty finding something else so they take the money and run, while the incompetent will cling to the creaking ship with all their might, leaving the offering company with a ship of fools (as well as some very happy second-rate managers).

If all of the above is true it’s somewhat mystifying how any large company could survive for long. However, the lucrative practice of political competition offers a lifeline to many. Lobbying for increased regulatory burdens, trade barriers, tariffs, bailouts, corporate welfare, favorable tax laws, and huge government contracts; as well as instigating patent lawsuits, antitrust suits, and other investigations have kept many of the walking dead animated for years.

For any number of sound reasons this may appear to be a very bad thing. But think about it – all those stupid people have to work somewhere.

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