Is Your Business Suffering from Organizational Inertia?

Is Your Business Suffering from Organizational Inertia? | The Sterling Woods Blog

Over the next four weeks, the Sterling Woods Group will focus on organizational inertia. Think back to your introductory physics class. Sir Isaac Newton’s Laws of Motion state that an object at rest tends to stay at rest. This is as true for baseballs as it is for businesses. Once an organization matures and falls into an established trajectory, it tends to stay on that path. But an unwillingness to proactively shake things up can lead to disaster down the road when you’re met with unexpected disruption from the outside. This month-long series on organizational inertia will cover the ins and outs of what it is, why it happens, and how you can prevent it from destroying your business.

Disruption has become a hot topic in the business community of late. And it’s easy to understand why. We’ve seen giants like Polaroid and Blockbuster get pummeled, and we’ve seen entire industries like traditional taxi and car services and publishing get upended by radical changes in the ecosystem in which they operate.

It’s also easy to understand the urge to fall into a routine and stick with it. When your business is coasting along and doing alright, why even begin to think about making big changes? In reality, the causes of organizational inertia are more complex than just the desire to stick to a routine. There are psychological principles and organizational systems at work that make it not only easy to stick with the status quo, but difficult to switch things up.

Why Does it Happen?

Most business owners understand intellectually that maintaining existing conditions forever is a poor choice; no one sets out to run an organization where employees just go through the prescribed motions each day. But as we can see from those examples above, preventing organizational inertia isn’t about having more money, resources, or business savvy. Polaroid, for example, was a market leader with all the funds, influence, and clout in the world. And yet they still fell apart when digital photography came on the scene.

The root causes of organizational inertia are a faulty mindset and an ineffective company structure.

The Psychological Principles at Work

Understanding the role that human psychology plays in organizational inertia requires another trip down memory lane to another high school science class. In introductory psychology, you likely learned about how biases impact our decision-making processes.

In an article for Harvard Business Review, Sean Ryan, a partner at A.T. Kearney, outlines how the negativity bias and conformity inhibit an organization’s ability to change.

What is the Negativity Bias, and Why Does it Matter?

The negativity bias says that we are more afraid of the feeling of losing than we are excited about the feeling that comes from winning. This is a bias that every human being inherently has. And it’s one that can hide under the guise of pragmatism. The thought process can easily go: “I run a company. The decisions I make impact me and all of my employees. Taking a risk could harm our bottom line and lead to even bigger problems than the ones we’re already experiencing. I better not risk it.”

This is precisely how the negativity bias can trick us into inertia. And the tendency towards this bias is only amplified in a group setting. That means that when company leadership meets to discuss a major decision, your individual fears will all come together and multiply. This in turn makes you even less likely to consider the radical change that might keep your business alive.

What is Conformity, and Why Does it Matter?

The other psychological principle at work is that of conformity. Humans would rather conform to an idea, even if we’re not all that fond of it, than take a stand against the group and propose an alternative.

The problem is that with everyone falling in line with a proposed idea, you can never find out if the majority of people actually agree with it. Eight out of the 10 people in a room could be secretly opposed to the idea. But as soon as the second person jumps on board, the eight doubters are likely to just embrace it.

When negativity bias and conformity join forces, it compounds the issue. Someone is more likely to propose a maintenance of the status quo because of the negativity bias. And the majority of people are likely to simply go along with that proposal rather than risk rocking the boat.

How Company Structure Breeds Inertia

In addition to human psychology, there are structural factors that can be inhibiting your ability to change tack.

Stanford Business School released a study in which they explored the roles that company complexity and opacity can have on organizational inertia. They found that the more complex and opaque an organization is, the harder it is to change.

What is Complexity, and Why Does it Matter?

Complexity in an organization can take a number of forms. It could be an organization that has too many layers of leadership, or complex organizational charts with multiple direct and indirect reporting lines. Or maybe it has lots of departments, each with information siloed and no clear way to share it.

Whatever the cause of the complexity at your particular company, the result of complexity is the same everywhere: There is too much information coming from too many sources for decision-makers to consider. When there is no clear chain of command, when departments are siloed, and when you never make changes to prune workflows and manage teams’ bandwidths, you’ll be hearing a different story from everyone you speak with in your organization, and you’ll be bogged down by superfluous information about out-of-date systems and processes that are still in place despite their ineffectiveness.

This complexity prevents good ideas from rising to the top and getting implemented. Not only that, it can also work to prevent someone from proposing a good idea in the first place. If an employee sees the obstacle course that they’d have to run through just to get an idea considered, they may not share their thoughts on how to improve the business simply to avoid the organizational headache associated with change.

What is Opacity, and Why Does it Matter?

Business experts are always advocating for transparency and communication in organizations. The benefits of clear communication are many, and combating organizational inertia is just one of them.

When organizations are not transparent about the way they do things, their goals, and the work going on across the organization, employees’ foresight is limited. Without being able to see the big picture and how all parts of the organizational puzzle come together as a whole, they’re not able to accurately weigh the potential costs, benefits, challenges, and opportunities associated with a given change.

Without the ability to weigh the pros and cons, they’ll be less likely to push implementation. Why risk changing something to benefit one team when it might also cause major issues on another?

What’s the Cost of Organizational Inertia?

As I noted earlier, the cost of organizational inertia can be great. We all know that the publishing industry has been experiencing radical disruption for years now. We’ve seen some publishers rise to meet the changes head-on (like the New York Times, who recently reported their ninth straight quarter of growth), while countless others have shuttered, unable to overcome their organizational inertia.

Without the proper organizational structure in place, you’ll keep hitting upon unforeseen roadblocks and will miss opportunities to best utilize the skills and resources you already have. And all this results in wasted time, money, and energy.

Stay tuned, as in the coming weeks I’ll be taking a look at the specific threats organizational inertia can pose to your business and how to overcome the inertia and push through change so you can stay afloat in an ever-shifting world.

About the Author

Rob Ristagno, Founder and CEO of Sterling Woods, previously served as a senior executive at several digital media and e-commerce businesses, including as COO of America’s Test Kitchen. He started his career as a consultant at McKinsey. Ristagno holds degrees from the Harvard Business School and Dartmouth College and has taught at both Harvard and Boston College.

Rob is the author of A Member is Worth a Thousand Visitors: A Proven Method for Making More Money Online. He regularly speaks at key media conferences, including at Niche Media events, Specialized Information Publishers Association meetings, and the Business Information and Media Summit.

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