The world of management now has its own corporate ready reference manual. Organizational Pathologies, published by LID Editorial, outlines 41 different organizational illnesses and for each case, provides a complete diagnosis and suggests proper treatments. In preparation for their work, Javier Fernández Aguado, a Spanish business theoretician; Marcos Urarte, president of the Pharos strategic consulting firm; and Francisco Alcalde, author of Who’s Who in Spanish Management, consulted a dozen medical doctors who helped them use the proper terminology.
Universia-Knowledge at Wharton: What constitutes an organizational pathology, and who suffers it?
Marcos Urarte: A pathology is a dysfunction that an organization suffers as a result of its activities and functioning. All organizations suffer them because, just as with people, no organization is completely healthy. In some cases, their suffering is of little importance (headache, cold, sprain), and in others it is more serious (cancer, stroke, schizophrenia). As a result, the process of curing these ailments becomes more or less complicated.
UKnowledge at Wharton: If a company, like a person, can get sick, does this mean that models for corporate management are more anthropomorphic?
Javier Fernández Aguado: When you try to understand an organization, you can use various metaphors: a machine, a living organism or a prison, for example. A decade ago, I proposed that the best way to understand an organization is the ‘anthropomorphic paradigm’ – that is to say, understanding that organizations function a lot like people. This implies behaving by pulling lots of levers such as will (which leads to the ‘Will Management’ model that I developed with Jose Aguilar); feelings (which leads to the ‘Feelings Management’ model); work habits (the model of ‘Work Habits’ Management); and managing errors (the model of managing what is imperfect).
When it comes to curing pathologies, that means applying the Model of Organizational Pathologies. This process begins from a diagnosis of the institution based on observing its symptoms and identifying their causes, so that you can apply the right sort of treatment after that. To get cured, an organization has to carry out a monitoring process involving periodical reviews that tests whether the illness has reproduced [and spread] itself, or whether other sorts of ailments or tumors have appeared. Hundreds of organizations in more than 30 countries have been interested in my models.
UKnowledge at Wharton: What approach do you use to classify illnesses according to their typology, and what are the most dangerous illnesses?
Francisco Alcalde: We have identified 15 criteria for classifying organizational pathologies: By their seriousness (light, serious or very serious); by their age (childhood, adolescence, maturity or old age); by the character of the ailment (physical, psychological, or psychiatric); by its frequency (sporadic, endemic, epidemic); by its origins (endogenous and internal, exogenous and external); by time of origin (before, during or after the gestation of the organization); by the likelihood it can be cured (curable, degenerative, terminal); by the system it affects (respiratory, circulatory, nervous, reproductive, excretive and digestive); by the lack or excess of nutrients (plastic, energetic and regulatory); by the size of the company (big, midsize and small); by its ownership (public or private); by profit motive (for profit, or non-profit); by its speed and duration (acute or chronic); by its nationality (foreign or Spanish); by its location within the organization (in marketing, finance, human resources, strategic planning, information technology or law).
Some years ago, Fernández Aguado pointed out in an essay entitled “Conspiracy of Fools,” that the especially dangerous illnesses are blindness and deafness, and we don’t think of them strictly in terms of physiology. Thus, it is common to say, “No one is blinder than he who does not want to see,” or “No one is deafer than he who doesn’t want to listen.” The organization must always be led by humble people who don’t believe that they know everything and are ready to open their eyes and ears to other opinions, as well as the viewpoints of their employees, customers, suppliers and other stakeholders.
UKnowledge at Wharton: Among all the illnesses, what is the hardest to cure, and what are the symptoms of a company that suffers this sort of illness?
M.U.: Depression, which can be described as an illness of sadness, is a pathology whose consequences are shattering. The world of business is not a relaxed battle. Competition, conflict and tension are day by day components. The only way to deal with such a difficult environment is through a great deal of excitement and optimism. Good spirits are essential when it comes to confronting any challenging project. On the other hand, when an organization falls into dispiritedness, sadness, apathy and melancholy, it can be said that the organization does not have a very promising future. When excitement is in the air, any problem seems smaller than it really is. In contrast, when an organization is overcome by depression, any small problem becomes an entire world in itself. Depression can be manifested by a combination of symptoms. Sometimes, they are of a rational and quantitative nature (lower quality work than expected; dropping sales; a decline in profitability ratios; an increase in complaints by customers). Other times, they have an emotional or qualitative character (labor absenteeism; stressed workers; high rates of labor turnover; unhappy personnel; workers who suffer from burn-out; and uncalled for complaints by workers).
UKnowledge at Wharton: What is the most frequent pathology for Latin American companies? What are its symptoms? And what about Spanish and Portuguese companies?
J.F.A.: Latin cultures generally rely on such important virtues as passion and strength but, at the same time, they suffer from such defects as less planning and less rigor in their work. There is a tendency to leave things until the last moment, and worry about problems only when they are on top of you and when you have less capacity to react. People say that “the best improvisation is the one that you’ve planned for the right way.” In addition, there is a short-term mindset, resulting from a lack of strategic vision, in some organizations.
Speaking of Spanish companies, it’s worth noting that, like many other countries, we have some companies that are world class, and more and more Spaniards are in global managerial positions. Having said that, we need to make a greater effort when we create companies. On occasion, anemia resulting from a shortage of financial resources can be a recurrent evil in newly created organizations. Each organization, until it reaches cruising speed, has to be backed financially because, otherwise, projects that have a great future can wind up going sour.
Finally, envy is a psychological illness that limits organizations’ capability to perform. In such a case, too many people have the job of obstructing other people’s bicycles rather than moving their own bicycles forward. It’s been said that envy is the worst vice because the people who suffer from it don’t achieve anything from it. Envy is the collective capital sin of many Latinos, and it should be overcome, fundamentally, for the psychological good of those people who suffer from it.
UKnowledge at Wharton: Can illnesses spread contagiously between companies and between countries?
F.A.: We live in a world that is increasingly globalized and interconnected, with a greater number of relationships and ties between companies and countries. As a result, decisions and results are transmitted more easily and rapidly. Traditionally, they used to say that when Wall Street sneezed, Europe caught a cold. This happens not only in the relationship between America and the Old Continent [Europe] but with other countries of other latitudes. For example, dependence on crude oil is affecting both Spain and other surrounding countries. If we don’t find other alternatives, this will lead to an organizational osteoarthritis manifested in less agility to respond to changes in the marketplace, with a consequent loss of business opportunities. Another example involves international companies whose revenues are paid in a foreign currency, and who suffer from a weakness in their own currency (such as the dollar versus the euro), which winds up damaging their profitability and efficiency. More and more of these exogenous (external or foreign) pathologies are resulting from changes in the [business] environment.
UKnowledge at Wharton: Could you provide an example of a physical illness, a psychological illness, and a psychiatric illness that companies suffer. What are their symptoms? In each case, what might be the cure?
J.F.A.: One example of a physical illness is osteoarthritis – the incapacity to face changes in the market. Its symptoms are manifested in the following: producing obsolete products; insufficient capacity to innovate; a decline in the reputation of their brand; damage that results from oversight; and so forth. The treatment involves bringing in people who have the ability to take risks; creating a climate of trust that encourages people to make decisions; promoting a clear personnel promotion policy that makes sense and avoids routine; rejuvenation of the staff (because, as people age, they prefer stability to adventure); more investment in training programs that generate new ideas; and spending more money so you can deal with your problems. I have had the opportunity to know, very close up, two organizations of Spanish origin that suffered from this illness. Actually, learning about them provided the origins for my diagnostic plan. It pains me to say that projects that were initially very positive wound up becoming a total waste because their managers lacked strategic skills. They let themselves be ruled by hubris, that illness diagnosed by the [ancient] Greeks, in which uncontrolled pride leads to blindness.
Autism is an example of a psychological illness. Some organizations live in their own world, without having much contact with the world outside or with reality. They give their customers what they think they need; not what their customers actually demand. The symptoms of this illness are manifested in scorn for competition and for the opinions of partners; a superiority complex on the part of managers; little investment in marketing; and the absence of benchmarking and market research. The treatment involves [participating in] industry conferences, congresses and seminars; monitoring publications in their own sector; engaging in market research; increasing their investment in the market; and practicing employer branding.
An example of a psychiatric illness is schizophrenia; that is, distorted behavior or perception that, from the organizational viewpoint, leads to divergences between what is thought, what is said and what is done. What these organizations say actually has nothing to do with reality. Some examples: They say they will pursue austerity but their managers waste a lot of money; they call for participation [by personnel] but they impose decisions [on their employees]; they proclaim that they trust people but they actually increase their control [over employees]; they talk about [their support for] meritocracy but it is obvious that they pursue favoritism. To treat this illness, you have to hire managers who have a consistent approach. You need to develop practices for coaching people; practice programs for 360-degree feedback, and so forth.
UKnowledge at Wharton: Are there any exotic illnesses in the corporate world?
M.U.: When it comes to individuals, 70% of all Spaniards who travel to exotic destinations for which health authorities recommend people get shots do not actually get those shots. That means 10% of those people (or 25,000 people a year) come down with some sort of illness during their stay. The most common illnesses are hepatitis, diarrhea, dengue fever and malaria. This is also what happens with some organizations that set out to conquer markets that they don’t know well, and wind up failing. Each culture has its idiosyncrasies, and the ways of doing business differ country by country. When some “quixotic” organizations go abroad, they employ their own methodologies, experiences and working habits that are of little use in other working environments. The results are not hard to imagine.
UKnowledge at Wharton: Could it be said that there is a corporate epidemic? What would be the treatment?
F.A.: Epidemic illnesses are illnesses that affect a large number of organizations, although generally speaking not for a very long time. One example is financial weakness that originates in an economic crisis – global or domestic – and could be an example of [organizational] osteoporosis. In such a case, there is a decline in bone mass that makes bones more fragile and raises the risk of fractures. Although the proper treatment depends on the exact type of epidemic, some common cures include practicing greater austerity in spending; increasing aggressiveness in sales, and diversifying streams of revenues when times are good.