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9 Dec 09 Why the corporate world is broken
Large corporations as well as public sectors are hugely inefficient, and for good reason.
Both sides are to an alarming extent run by career bureaucrats: peoples incentives are bound to activity based targets rather than value based achievement.
Working towards bad incentives and targets get rewarded with “upward mobility” in the hierarchy, remuneration in most organizations is tied to how wanky your official title is and how big a budget you get to spend.
In other words, people are rewarded for doing the wrong things, spending as much as possible, building up fiefdoms and having mind-numbingly stupid titles like “VP of Corporate Resource Imagineering”.
There is rarely much reward for the actual value provided to customers, return created for shareholders, it’s all about who literally has the biggest corporate wiener.
This is why individuals, entrepreneurs and small start-ups will always up-end large corporations: IBM lost its dominance in the eighties, Microsoft looked unbeatable in the nineties but now look like has-beens, Google dominate the internet today, but I would not be surprised if they have or will reach their zenith soon.
As long as activity is incentivised over achievement, remuneration is tied to titles, money spent and short term goals rather than long term value, governments will keep wasting taxpayer money at a horrifying clip and the corporate masters of yesteryear will slowly stumble into obscurity.
That’s why the 21st century will belong to entrepreneurs and daring individuals.
