Organisational Psychosis: Conforting the Enemy Within

Key Takeaways

• Some firms lose touch with reality as humans do
• This loss of reality can be disastrous
• There are some strategies you can deploy 

Organisations often lose touch with reality, just as some people do. While psychosis is a reality-deficient state in humans, it does exist in companies but in a different form. If a firm enters this phase, it will start a slow and inevitable decline, as we saw with Kodak, Nokia, and Research in Motion (Blackberry). If you believe this is happening to your business, you must do a reality check before you have the wrong Kodak moment. 

While the concept of organisational psychosis does not exist in psychology or management, there is some parallel between persons and firms that are misaligned with the internal and external environment. It is a different lens to view how firms can decline and possibly what can be done to halt the degeneration. 

Psychosis in psychology is not a problem but a symptom. The causes can range from extreme stress, certain medical conditions, substance abuse, or neurological disorders. This multitude of root causes can be challenging for psychological or psychiatric interventions. It can be displayed as delusions, hallucinations, disorganised thinking, and abnormal motor behaviour.

Delusions can be expressed as behaviours that persist even with evidence to the contrary. Sears continued its brick-and-mortar strategy even though it saw what Amazon was doing. Hallucinations can happen when the CEO or upper management feel that things are okay, even when the firm is losing market share. Disorganised thinking can come from leaders who get confused about the new realities—processing some crucial facts as irrelevant.

Causes of firm psychosis

Organisations are social systems compared to individuals, akin to sociology and psychology. Extending a psychological diagnosis to a larger entity can have flaws; however, the overlapping of specific causes can reveal some similarities in effects. Nevertheless, prescriptions might be possible for organisations, but they can be more complex and diverse than biological organisms—organisations might have a mind of their own.

"Sometimes, companies can deny that a trend can become a megatrend. Sony initially saw the gaming business as a fad. Ken Kutaragi could not convince management of his idea for PlayStation. He had to go first to Nintendo, one of the leaders in the industry, for assistance. However, they did not like his concept. Fortunately, Sony finally accepted his prototype and overtook many encumberments"

If it is not denial, it could be overconfidence in what the organisation can do and combine that with group thinking. I once worked for Federal-Mogul, the world's largest automotive engine parts seller, in the 1990s. They hired a new CEO who had grandiose plans. Those plans were expressed as BHAG (Big, Hairy, Audacious Goals), growing fast and acquiring companies. Federal brought several firms, including one that was bigger than itself. The egotistic CEO forgot that merging different organisational cultures and pushing an international retail strategy (in which they did not have competencies) would bankrupt the one-hundred-year-old company. Management was behind the CEO; the board eventually stepped in, and the company was broken into two, destroying a legacy.

Some companies know the future but cannot capture new market opportunities. Kodak invented the digital camera but could not see its potential. Other traditional camera companies, such as Olympus, Nikon, and Pentax, made the appropriate strategic move. However, other firms with the first-mover status did not transition to the next disruption. Research In Motion failed to recognise the wide ecosystems application and the touch screen preferences for next-generation success. 

Despite its early successes, Nokia was slow to recognise the threat posed by Apple's iPhone and Samsung and move their "dumb' to smartphones with higher computing capabilities. This contributed to Nokia's decline and relegated it to market follower status.

Confronting realities

 Here are some suggestions you can implement:

·         Encourage diversity of thinking: Inspire staff to challenge the status quo and out-of-the-box thinking. Frequently, companies may not want to replace a successful product with a risky one. This was the case with Kodak. In addition, remove the fear of punishment and ask for a business case on suggestions.

·         Business case: Show staff how to make a convincing case and the steps they need for approval. Support failure but focus on learning; you have a knowledge organisation.

·         Support reviews and audits: Practise monitoring and encourage critical thinking on projects implemented.

·         Create a continuous learning culture: Attack group thinking and emotional decision-making with experimentation and a feedback loop on projects.

·         Leadership accountability: Senior managers must accept when they are wrong and be open to staff. Hiding your faults will make you look untrustworthy, and the members will joke about you. An authentic leader can earn trust and demonstrate that they make mistakes and will not repeat them. Sony was willing to give Kutaragi a chance, and while the first tests were not that successful, they encouraged him to proceed.

·         Intrapreneurship has potential: If you want your staff to perform like you, you need them to think and act as entrepreneurs. Intrapreneurship is encouraged in firms like Google, 3M, and Amazon. They continually reinvent themselves. At Amazon, Jeff Bezos says it is always Day 1, which means the online retailer will focus on creating innovation with an eye on the future.

·         Hire a consultant: Sometimes, an independent and qualified expert can speed the process up. Organisational change can be messy and many times fail to achieve its goals. A consultant will do the audit and make recommendations for change.

Sajjad Hamid is an Entrepreneurship Educator who supports entrepreneurs in scaling their ventures. In his spare time in Trinidad and Tobago, he tries to produce tropical fruits and vegetables and practises sustainable farming in his home garden. 

SME & Family Business Adviser & Fellow of the Family Firm Institute

His book, Build Your Legacy Business: Soloprneeur To Family Business Hero, combines entrepreneurship and family enterprise. 

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