Organisation Psychosis: Deal with the enemy within

Key takeaways

§? Psychosis is when someone loses touch with reality

§? Organisations often become misaligned with their environment

§? Consequences can be severe for firms that were once market leaders

§? Firms should adopt a learning approach and encourage dissent

§? Hire an external entity with the expertise to craft a reality-checking plan

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. 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 industry leaders, for assistance. However, they did not like his concept. Fortunately, Sony finally accepted his prototype and overcame many obstacles.

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.

Despite its early successes, Nokia and Blackberry were 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 regulated it to market follower status.

Confronting realities

How do you, as an entrepreneurial leader, deal with organisational psychosis? As with psychological psychosis, the prescription has to be varied and specific. You may need to do an organisation audit first to find where the delusions, groupthink, denials, overconfidence, and resistance to change exist. Frequently, politics can mask the hidden realities of the organisation. 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.

§? 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.

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

§? Intrapreneurship has potential: If you want your staff to perform like you, you need them to think and act like entrepreneurs. Intrapreneurship is encouraged in firms like Google, 3M, and Amazon, which 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 fail to achieve its goals several times. A consultant will do the audit and make recommendations for change.

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Possessing cognitive blindness can be dysfunctional for individuals. However, being out of touch with reality and disruptive changes in the external environment can lead to disastrous effects for enterprises. Leaders may not be suffering from psychiatric disorders; however, the lack of appropriate perspective on certain realities can hurt the firm. Distorted truths have hurt shareholders and employees since the beginning of bureaucracy.

The enemy inside might be the greatest foe to conquer. Entrepreneurial leaders carry a heavy responsibility and should manage the feedback loops within and outside the organisation to have a microscopic and telescopic view with a big-picture perspective.

Sajjad is an SME and Family Business Advisor who supports entrepreneurs in scaling their ventures. In his spare time in Trinidad and Tobago, he tries to produce organic tropical fruits and vegetables and practise sustainable farming in his home garden.

His book,?Build Your Legacy Business: Solopreneur To Family Business Hero, is unique in its combination of entrepreneurship and family enterprise .

You can contact him at [email protected] or www.entrepreneurtnt.com

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