Corporate Structure Can Turn Information into Currency – Part 1

The corporate structure is based on a division of labor into specialized groups who tend to isolate themselves from the rest of the company. Each division has its own professional organizations that reinforce this view. Within these divisions of labor are further structural elements that stratify the chain of command into pyramid-like structures.

Although these structures seem unavoidable just to get the job done, they can have a sinister creative-stifling side effect. The heads of each mini- and maxi-pyramid can actually stop good ideas simply because they did not think of them, and they find that threatening to their position. Job preservation can become job number one, even at the expense of the company itself. When this happens, the flow of information and ideas become constricted.

Add to all that the well-meaning policy of  “need to know.” Now you have inadvertently put a price on information. It can become a commodity used as a type of corporate currency where one person will only tell what he knows in return for administrative favors or other scraps of information. When you add in the possibility of incorrect information, rumors and gossip, corporate culture and morale can suffer. This results in a decline in productivity and profitability.

Since the top of the pyramid is narrower, there’s simply not enough room there for all the ambitious and aspiring folks further down the pyramid. So there’s a natural competition for those top jobs. Many see using and controlling information as critical to their advancement.

We recently attended a fund-raising dinner and sat next to a top executive from a major corporation. We were talking about why so many of the new good ideas seem to be coming from the entrepreneurs and not the big companies. When we pointed out the free flow of information and ideas enjoyed by entrepreneurs and the restriction of information flow in some corporate structures, due to their size, he responded, “We don’t have those problems in my division.”

When companies are in their start-up phase, information and ideas flow freely. They listen to all ideas, from anyone who will offer them, because they are struggling just to stay in business. Being small and undercapitalized encourages this to happen naturally. Everybody in a start-up knows that their job is dependent on the survival of the company. They readily share information with other divisions because they are not cast in stone – yet.

As a company grows, it’s hard to say where this potential “hardening of the arteries” begins to set in, but we think it is more likely to happen as more employees are hired. However, without governing factors, it can happen in a company of any size.

Next time, we will share some ideas we employed to encourage the free flow of ideas and communication, and ways to prevent information from becoming a currency.