Corporate hubris – and a bit of festive cheer

Last week, in the pub, a friend of mine was reflecting on her recent consultancy assignments. From the outside, all the companies she worked for seemed to epitomise corporate excellence, with their gleaming headquarters and slick public images. Yet, once inside, she found chaotic management, fudged decisions and barely functioning teams.

This didn’t surprise me at all. Companies are rarely as efficient and sorted as they appear from the outside. J G March was onto something when he came up with the Garbage Can Model of decision-making, which still, in my view, comes closer than most to describing what actually happens in organisations.

Corporations are made up of people. People sometimes do bonkers stuff. Furthermore, large organisations are almost impossible to control. Therefore people continue to do bonkers stuff. Business leaders just have to do their best to minimise the effects of the bonkers stuff and hope that some of it leads to good stuff. And, of course, the business leaders sometimes do bonkers stuff as well.

The trouble is, the gleaming HQ and slick public image can sometimes fool the leaders of the business too. They start to believe their own propaganda. That’s when corporate hubris sets in. With the benefit of hindsight, it seems obvious that Lehman, Merrill Lynch, Enron and RBS were destined to fail but that’s not how it looked when they were at their peak. To the outside world, these organisations seemed like models of corporate efficiency. The wisdom of their leaders was rarely questioned. They were unassailable.

Someone reminded me earlier this week that it is ten years since Andersen went down the tube. They, too, seemed unassailable. One of the biggest accountancy/consultancy firms, and surely the most arrogant of the Big 5, the Andersen Androids thought they were the business. Which they were…until they weren’t!

At the time I was working for one of their major competitors and the news that Andersen had fallen was initially greeted with amusement. But schadenfreude soon gave way to shock as a there-but-for-the-grace-of-God unease descended on our firm. If Andersen could collapse overnight, well so could anyone.

And that’s the truth of it. Many of these seemingly all-powerful organisations could be gone within months if the right (or wrong) set of conditions happen to coincide. Suddenly, something in the business environment changes and dozens of bad judgements come home to roost. The arrogant organisations are more prone to making such errors of judgment. Hubris is often followed by nemesis.

Still, though the collapse of Andersen was sobering, it didn’t stop us all laughing when that clever Heineken video appeared. For the youngsters, or those with poor memories, to appreciate this, you need to remember that, just before Christmas 2001, Andersen’s employees were caught trying to shred the evidence of their work with Enron. The patricians of the accountancy world were left looking like some dodgy geezers on an industrial estate the day before a tax inspection.

So, for some seasonal cheer, and a gentle warning against corporate hubris, here is the video that marked the end of Andersen’s party.

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6 Responses to Corporate hubris – and a bit of festive cheer

  1. Pingback: Corporate hubris – and a bit of festive cheer - Rick - Member Blogs - HR Blogs - HR Space from Personnel Today and Xpert HR

  2. Stephen says:

    Many moons I ago I was a researcher into corporate failure prediction. One good predictor was whether a top level decision to tart up the corporate HQ with a fountain in the courtyard. statutes, and other monuments intended to confer prestige on senior management. Hubris indeed..

  3. Stephen says:

    Many moons I ago I was a researcher into corporate failure prediction. One good predictor was whether a top level decision to tart up the corporate HQ with a fountain in the courtyard. statutes, and other monuments intended to confer prestige on senior management had recently occurred. Hubris indeed.

  4. Lilly says:

    “Corporations are made up of people. People sometimes do bonkers stuff. Furthermore, large organisations are almost impossible to control. Therefore people continue to do bonkers stuff. Business leaders just have to do their best to minimise the effects of the bonkers stuff and hope that some of it leads to good stuff. And, of course, the business leaders sometimes do bonkers stuff as well.”

    Hahaha… that is like my whole MSc in Occupational Psychology in a single paragraph

  5. Gareth Jones says:

    Remind me again why this situation continues to exist?! Meanwhile in other news, new research shows that people are not a companies most important asset. They are now listed at number 3 – behind paperclips….

  6. Pingback: Interesting elsewhere – 20 December 2011 | Public Strategist

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