Why is it that companies ( big companies ) are not not able to adjust themselves to environment?When I write this what I mean is the same problem which every management guru promises to solve ( and to give us an entirely new way to look into the problem) with his new book release.I am not a management guru who wants to earn bread n butter by selling my books but the question still remains weather management books,new tools,Information Technology...are of any help??
Let us consider an example of a fictional company UCS (small company with only 1000 employees) from India.This company does well in providing solutions to their clients.Economy does well and there is a lot of work.( since economy is well people earn more and spend fearlessly so Big companies have a lot of work and delegate some of it to UCS ).Now UCS has to recruit people in order to meet the requirements( say it recruits 5000 more employees).Now suddenly economic downfall begins,clients start scrapping the projects with UCS ( due to some unavoidable reasons economy crumbles,consider the latest US economy downfall,people prefer cash and start spending less on commodities thus creating less work for Big players,and they in turn create less work for UCS ).What should UCS do in this scenario,should it expel people or should it wait till everything becomes normal,or should it invest more in the business developing its own products ( and not only depending on Big players to give it contracts ) so that it can create additional revenue,or should it ask help from government?It can be said that it is up to top management to take decision ,but it has been found that bigger the organisation lesser( it becomes ) sensitive to environment.We will try here to see why it happens.
We will have to consider a concept from physics.'Second Law of Thermodynamics'.It says 'The amount of entropy in a closed system always increases with time'.Entropy is a measure of disorder.Consider a jigsaw puzzel,initially it is neatly arranged and is in a box,now you shake that box and the order will reduce i.e.,it will not be in a perfectly arranged shape.You again shake the box and the order further reducesi.e.,entropy increaes.Note the fact that the box we are talking about is a closed system.Simillarly our universe is a closed system.Now consider an open system like earth,it gets an energy from sun and in responce to that creates order,reduces entropy.( Everything that we see around ourselves is order e.g., your computer,cloths you are wearing,or consider yourself for that matter.The reason why we are discussing it here is that if this law is applicable to the entire universe then must be applicable to organisations also.Yes it does.This can be one of the reasons why there is so much disorder in an organization.This disorder can be compared with mist or fog which blurs your ( in this case organization's ) vision.This disorder makes taking fast action difficult.Thus we see beurocracies pop up in organisations after sometime.Private organisations try to remove those beurocracies but in
vain finding them pop up after every 2-3 years.
Let's get back to our UCS.Consider UCS in it's start up phase.There are only two departments say development and testing.They communicate with chairman and everything goes well.Now as company grows the number of departments increase say now there are now two more departments finance and legal department.Chairman now asks these departments to communicate with him as well as communicate with each other resulting more time to take decision and eventually odds of action not being taken increase since a lot more parameters now come into the picture.This is increase in complexity and it is found that it follows power law.
From these two examples we can figure out that it is 'management' which is problem it the very nature of organisation.It can be asked that whether the same is true for evolution ( biological ) since we know that economy itself is an evolution and is very similar to biological evolution. we have tried for years to apply mathematical,physical concepts to economy, thus if we could apply the concept we understood from economy to understand biological evolution it would simply be great!!!
Though the reasons we tried to explore here are not the only reasons for organisations becoming less receptive to environment ( Markets, Economies..etc ) but certainly are very important and enhance our knowledge of organisational problems and will also prove of great help in understanding how these problems should be tackled.