Why large organisations often seem to be so disorganised and inefficient

It is often heard that small organisations can be tight, agile and efficient, while large organisations are slow and lumbering with poor process and structure. People seem to take that as a given. In information technology, professionals despondently blame their problems on the size of the organisation: “this is a large company, they are all like that – if I worked for some startup things would be much better.”

Generally, it is true. However, I’ve come to realise something recently. Disorganisation in large companies is not the result of the company’s size, it is that the size is the result of the prevailing economic conditions over the last 30 or 40 years. Poorly orchestrated companies have been permitted to grow to large sizes because what they produced did not have to be produced well.

Neoliberal economics, Reagonomics, Thatcher’s policies, the disengagement of USD from Gold in 1971, all led to a situation where investment was not driven according to the requirements and constraints of capital, but according to the requirements and constraints of debt. Since 1971 the world has been inflating the amount of fiat currency in the world, building up larger and larger quantities of debt (and therefore money). The US has been funding a trade deficit for decades, and this has resulted in an exponential rise in volume of USD since the late 60s.

Under these conditions efficiency and optimisation were no longer paramount concerns. Large Western manufacturers for example could afford to shift production to the East while preserving large numbers of semi-redundant office workers in the West. Banks and financial institutions suddenly found themselves responsible for much higher percentages of GDP than ever before, and with their fractional reserve license to print money became bloated and disorganised.

For over 30 years the West has experienced a debt fueled bonanza that caused bubbles all around the world. From the Japanese and Asian bubbles, to the dotcom bubble, to the housing bubble, Worldcom, Enron and other, large organisations are just overinflated examples of how production can become divorced from reality when access to cheap and unsustainable financing is the prime cause of success.

It is tempting to speculate then that the current global depression could lead to the extinction of these dinosaurs as deleveraging progresses, and if the world adopts a change for the better in global finance, trade and economics.