How to prevent the next market crisis (created by current companies structure and management)

Organizations are critical for human success. That was true in the past; it’s true right now and will be true in the future. Collecting people together to achieve common purpose generate an emergent behavior and skillsets (properties) that unique to the group, but not to the individual in the group. Those emergent properties are what enabled, and will enable, us as humans to deal with complexity (uncertain & unplanned reality).

Complexity is an emergent behavior of a system and complexity will grow as the number of elements in the system and interaction between them grow. People and all the system that they interact with are also co-evolving. People are changing the systems they interact with, the same as systems change people. This cycle (loop) relationship is an evolutionary process where each element in the eco-system impact all the rest.

The co-evolution caused all element to change. The change usually ends up with more components or more interaction, which mean more complexity. Therefore we are in an endless loop of complexity (that, by the way, is growing exponentially). As the environment becomes more and more complex, it forces humans to group (usually into bigger and bigger groups). As a group composed of a verity of groups and individuals, it can create new emergent properties that will help to deal with increasing complexity.

The phenomena of people grouping into bigger and bigger organizations can be seen through history. We started as an organization of few hunters and gatherers. Then moved to larger groups such as villages, cities, and states. This trend, by the way, is not going to change. New and larger organizations will always emerge to deal with growing complexities humans need to deal with.

Companies are crucial and one of the key organizations in our society. Companies are subject to the same rule of emergent behavior. Some of them are already bigger than states with cross continents influence. Companies are one of the successful vehicles to enhance humanity due to their emergent properties. Companies are also the primary provider of the current (virtual) resource people earning, gathering and exchanging to get their needs.

The problem is that companies didn’t evolve too much for a long time and the lack of evolvement can be seen all around. If you stop for a second and look at the current datasets described below, you can see and understand the problem we are facing. The percentage of companies disappeared from the “fortune 500” in the last 100 years, the rate of companies that went out of business from the origin fortune 500 in the last 100 years, the lifespan of companies that decrease from 60 to 15 years in the last 100 years, the engagement level of people working for companies. Those are just several datasets that prove we are facing a systematic issue in the ability of companies to produce emergent properties to deal with current business world complexity. Since complexity just increasing this is also an indication that the future is not promising as well.

This systematic problem is a real threat. No one should be surprised by a major financial crisis as a result of the systematic problem in today’s company structure and management.

So what we can do about it? We should aggressively explore new ways to structure organizations and increase the emergent properties of companies. I believe that we have enough data to prove that the current structure and management theory failed. It will take time and perspective (history) to find out what is the new standard that will make companies more for the future of our economy and business environment.

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